Win-win option for mining

Mining, SA’s defining industry, declined under President Jacob Zuma. Extracting minerals from the ground often appeared a business secondary to extracting rents from public office. Optimists hope Cyril Ramaphosa, Zuma’s successor to the leadership of the ANC, will re-energise the stagnant sector.

He should start by rejigging SA’s newish Mining Charter. Mining has lost its pre-eminence within the South African economy. A FTSE index of locally listed miners, including AngloGold Ashanti and Impala Platinum, trails the worldwide equivalent by a long way over three years.

Mining’s contribution to GDP, at 8% in 2016, is less than half its 1980 level. Employment has fallen correspondingly. Most of the drop occurred before Zuma took control, but there is still plenty Ramaphosa, a former mining union leader, could do to lift the sector.

A new charter, which includes increased local procurement, has been challenged by mining groups. One key change that has been mooted but not yet implemented is an increase in the stake black South Africans hold in each mining project to 30%, up four points from the current dispensation. The reforms ostensibly reflect disillusionment among South Africans with the old black economic empowerment set-up.

Ironically, Ramaphosa has been a big beneficiary of this. His investment companies have helped him amass huge wealth. However, his need to bolster his support in the ANC and spur foreign investment should encourage him to seek a compromise that suits both constituencies. A less aggressive Mining Charter might still pass muster with voters if gains were shared across communities.

SA’s output gap, a measure of how far away economic growth is from its potential, wallows at negative 4%, says Goldman Sachs. Emerging markets together have a negative gap of 0.5%. Big mining groups are as complicit as the ANC in the failures of empowerment. They have as much to gain from creating a better system. London, February 13