Please stand up if you have ben­e­fited from ben­e­fi­ci­a­tion

The Star Early Edition - - OPINION & ANALYSIS - Dean Macpher­son Dean Macpher­son MP is the DA’s spokesman on Trade and In­dus­try.

BEN­E­FI­CI­A­TION has quickly be­come the new buzz word th­ese days, in both the ANC and in par­lia­ment. It is be­ing sold to the pub­lic as the an­swer to all our prob­lems, a sim­ple in­ter­ven­tion by the state to force those cap­i­tal bo­gey­men who con­trol all the wealth in South Africa to play fair and cre­ate jobs by hand­ing out price dis­counts to man­u­fac­tures.

The prob­lem is that the the­ory be­hind ben­e­fi­ci­a­tion is be­ing ma­nip­u­lated to such an ex­tent that it has now all but be­come a pol­icy of na­tion­al­is­ing a per­cent­age of the coun­try’s min­er­als, de­ter­mined by an ANC min­is­ter un­der the guise of a “price dis­count”.

When the case is put to the Depart­ment of Trade and In­dus­try (dti) that price dis­count­ing is un­work­able and would cause job losses, it is sim­ply ig­nored as a pre­dictable de­fence of “mo­nop­oly cap­i­tal”.

How­ever, this could not be fur­ther from the truth.

To dis­count min­er­als as pro­posed by the DTI would in fact cause thou­sands of jobs to be lost in the min­ing sec­tor, coun­ter­ing any such sell­ing point of job cre­ation through value ad­di­tion.

Over the last six months in Par­lia­ment, I have got to un­der­stand Min­is­ter Rob Davies quite well, and while he is an in­tel­li­gent man who no doubt wants to cre­ate jobs, he is one, ad­vised by some very ques­tion­able ad­vis­ers in terms of eco­nomic pol­icy and two, sees the so­lu­tion to in­dus­tri­al­i­sa­tion and job cre­ation in an ex­tremely sim­plis­tic, gov­ern­ment-led man­ner, which is his and the econ­omy’s great­est un­do­ing.

Dur­ing a col­lo­quium held by the Port­fo­lio Com­mit­tee on Trade and In­dus­try over a three-week pe­riod, time and again key play­ers from across in­dus­try came to the ta­ble to tell the com­mit­tee it was not them that ham­per ben­e­fi­ci­a­tion, but in fact gov­ern­ment and its con­tra­dict­ing poli­cies.

What was even more sur­pris­ing was to see how far the pri­vate sec­tor has ac­tu­ally ben­e­fi­ci­ated, but has now hit a wall be­cause of high ad­min­is­tered prices such as wa­ter, elec­tric­ity and tax­a­tion.

It is cer­tainly not the pri­vate sec­tor’s re­spon­si­bil­ity to give price dis­counts and nei­ther for the min­is­ter to de­ter­mine such a dis­count as this would amount to price ma­nip­u­la­tion. Rather it is the gov­ern­ment’s re­spon­si­bil­ity to lower costs for busi­nesses, and invest in the pro­mo­tion of trade and ex­ports. It is true to say that value chains are highly com­plex with many in­di­vid­ual com­po­nents of which gov­ern­ment un­der­stands very lit­tle.

The gov­ern­ment has failed to com­mis­sion any study to iden­tify op­por­tu­ni­ties in the value chains that cur­rently ex­ist in man­u­fac­tur­ing, and so any so­lu­tion that seeks to ob­tain dis­counts on min­er­als with­out gov­ern­ment com­ing to the ta­ble with such an­swers is highly mis­guided and in fact counter-pro­duc­tive.

The dti is us­ing ben­e­fi­ci­a­tion as a red her­ring to di­vert at­ten­tion away from its fail­ures – par­tic­u­larly the In­dus­trial Pol­icy Ac­tion Plan.

In the col­lo­quium pre­vi­ously al­luded to, pro­fes­sor of eco­nomics and ANC veteran Ben Turok strongly sug­gested that re­search and in­ves­ti­ga­tions are con­ducted into value chains, in or­der to find op­por­tu­ni­ties for lo­cal man­u­fac­tures. Both sides must be thor­oughly ex­am­ined be­fore a decision is made, fail­ing which the decision is es­sen­tially mis­in­formed.

I re­call a meet­ing with Davies where he put it as sim­ply as this – “if we achieved a 20 per­cent dis­count on plat­inum, we could cap­ture the worlds cat­alytic con­ver­sion mar­ket”. This best il­lus­trates the depart­ment’s view on ben­e­fi­ci­a­tion, which is – of­fer a dis­count on min­er­als and the world will come and invest in the mar­ket.

But what about in­fra­struc­ture? What about labour sta­bil­ity? What about lack of elec­tric­ity sup­ply? And what about the 500 000 jobs in the min­ing sec­tor that would be at risk? Some­one is go­ing to have to sub­sidise such dis­counts, and ul­ti­mately it will be work­ers. The worst ex­am­ple of gov­ern­ment fail­ure to come to the ta­ble to al­low in­dus­try to lead ben­e­fi­ci­a­tion is found in the forestry in­dus­try.

Ten years ago, gov­ern­ment was to make 100 000 hectares of land avail­able to ru­ral com­mu­ni­ties in the East­ern Cape as feed­stock to the saw-mills.

This would have cre­ated jobs in com­mu­ni­ties that strug­gle to make ends meet, yet to this very day only 9 000ha, or 9 per­cent, of land has been made avail­able to the peo­ple of the East­ern Cape. This has not only af­fected their chances of earn­ing a liv­ing, but has also ham­pered the forestry in­dus­try from grow­ing and ben­e­fi­ci­at­ing.

There is only one rea­son and one rea­son only as to why the dti has be­come the cham­pion of ben­e­fi­ci­a­tion, and that is be­cause it has failed to drive in­dus­tri­al­i­sa­tion and man­u­fac­tur­ing growth and now needs a “get out of jail” card – which is ben­e­fi­ci­a­tion.

The dti is us­ing ben­e­fi­ci­a­tion as a red her­ring to di­vert at­ten­tion away from its fail­ures – par­tic­u­larly the In­dus­trial Pol­icy Ac­tion Plan, and thus is try­ing to rewrite the na­tional de­bate on job cre­ation.

What is abun­dantly clear is that price dis­counts on min­er­als will cost jobs. The DA un­equiv­o­cally sup­ports small busi­nesses own­ers and bud­ding en­trepreneurs, es­pe­cially in the man­u­fac­tur­ing sec­tor, and will con­tinue to ad­vo­cate for the re­duc­tion of ad­min­is­tered prices, tax in­cen­tives and ex­port pro­mo­tion.

This is the only sus­tain­able way in which we can simultaneously grow the in­dus­try and tackle our high lev­els of un­em­ploy­ment.


Impala plat­inum min­ing op­er­a­tions in Rusten­burg. The Min­is­ter of Trade and In­dus­try Rob Davies said: ‘If we achieved a 20 per­cent dis­count on plat­inum, we could cap­ture the world’s cat­alytic con­ver­sion mar­ket.’

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