TORONTO (miningweekly.com) – The passing on Thursday of former South African President Nelson Mandela – a world icon for peace and reconciliation – on Friday prompted market analysts at SP Angel, in London, to take a pensive look at how South Africa’s renewed legislative environment had helped to boost personal wealth creation when compared with Australia, aided by the country’s immense mineral wealth. In their opinion, South Africa had essentially failed.

Analyst John Meyer wrote in a note to clients that when one compared and contrasted the impact of Australian mineral wealth versus that of South Africa's, taking into account its black economic-empowerment (BEE) policy, there did not seem to have been the same wealth creation, despite BEE and its associated scorecard.

The mining sector in South Africa played a critical role in terms of the country’s economy, in the same way as in Australia, but Meyer explained that the difference was more about policy and the way taxes have been imposed.

“Australian miners have been taxed both on the top and bottom line. South African miners also pay royalties and taxes but no real wealth has been created,” he said.

BEE had not been the solution, with debt structures to create ownership delaying any participation in cash flows, he noted.

South Africa still ranked lowly in terms of gross domestic product (GDP) per capita, at $6 800 per capita, compared with $43 000 per capita for Australia, which is a comparably resource-rich country.

Despite South African mining cost inflation being below global levels at less than 15% in US dollar terms, versus 25% in Australia, the cost structure of South African mining was heavily weighted towards labour at about 26%, and 48% in the gold-mining sector.

Australia’s mining and resource sector contributed about 7.7% to the country’s GDP, or about $121-billion with export income of $138-billion.

In Australia, 187 400 people are directly involved in the Australian mining economy with 599 680 in support industries. Wages and salaries from the industry were estimated at $18-billion, while $125-billion had been invested in Australia in the last decade – 54% of Australia’s goods and services.

In 2011 to 2012, a survey by professional services firm Deloitte of 25 mining companies and contractors showed $34.7-billion was invested in community infrastructure.

By comparison, in South Africa, the mining sector contributed to 8.6% of the GDP or about $33-billion. It had about 500 000 direct employees and 500 000 in support industries.

It accounted for half the country’s foreign exchange and 20% of investment. Mining expenditures totalled about $59-billion in 2010, or R441-billion according to the South African Chamber of Mines, of which $7.5-billion was spent on labour.

Despite some of South Africa’s mining-sector critics pointing out the negatives, South African Deputy President Kgalema Motlanthe, who was on an official State visit to Canada, last week endeavoured to foreground the positives, saying a lot of progress had been made in transforming the sector from a “sunset business” into a “sunrise industry”.

Flanked by Labour Minister Mildred Oliphant and Mineral Resources Deputy Minister Godfrey Oliphant, Motlanthe – in an interview with Mining Weekly Online in Toronto – said South Africa was indeed ready and open for business, citing the achievements of almost 20 years of democracy having helped to transform archaic industry practices, which had been designed to benefit employers at the expense of the poor.

“While some people would want to say that South Africa’s mining industry is a sunset industry, it’s in fact a sunrise industry,” he said.