Miners’ trajectory relies on team work by private and public sector
• State’s coffers will keep filling if it aids competitiveness while the industry grabs market share
The recent record earnings reported by SA mining companies are a cause for national celebration. They should be an incentive for the private sector and state to collaborate and expand market share for SA’s minerals.
The mining sector has been a shot in the arm for muchneeded corporate taxes during the economic downturn.
Finance minister Tito Mboweni’s 2021 national budget acknowledged this. “A surge in the provisional corporate tax payments in December exceeded expectations. This was primarily driven by the mining sector, with companies benefiting from high commodity prices and favourable exchange rate,” reads the Treasury’s
document.
High commodity prices also augur well for employment in light of the more than 40% (expanded definition) unemployment rate and the negative effects of Covid-19. Not only will the mining sector retain existing jobs, but additional jobs are likely to be created as a number of miners have announced plans to expand operations.
But for SA to benefit fully from high commodity prices mining companies would have to appreciate the importance of acting together quickly to capture new commodity markets and expand in existing ones.
We have to be adept at understanding global market dynamics and geopolitics. The private sector has demonstrated the ability to respond to global market dynamics and geopolitical environments. The state should, for its own good, do more to support the private sector’s competitiveness.
SA’s entry into China’s coal export market in the second quarter of 2020 shows the importance of collaboration for quick wins. The coal sector is one of the largest foreign exchange earners and employers in the country.
We should be doing our best to benefit from our coal endowment — while it lasts, as coal sceptics might add.
One of the geopolitical developments that affected SA’s coal revenues in recent years has been the frosty relations between China and Australia.
Whatever the reasons for the cold diplomatic relations, the effect has been to prevent Australian coal producers from exporting to the Chinese market. In response, Australian producers have diverted their products to India, SA’s major export market. For most of 2020 Australia’s diversion of product to India put pressure on coal prices and suffocated SA’s high-cost mines.
SA coal producers have since entered the Chinese market, which had been dominated by Australia. It was encouraging to see a number of SA producers shipping to China through Richards Bay Coal Terminal.
However, we are not the only suppliers vying for that market share. Russian and North American producers have also increased their shipments to China. For SA to compete sustainably, Transnet Freight Rail should play its part and show agility as well as efficiency. Recent rail delays, if not curbed, could reverse the gains.
Now that local producers have found a market in China, Transnet must provide reliable logistical support to ensure ontime shipment. It is unfortunate
SA’s entry into the Chinese market coincided with rail bottlenecks, resulting in significant delays. Undertakings by the new Transnet leadership to change the situation are encouraging.
Transnet has all it takes, including resources, to resolve the issues. High prices across major commodities could prove to be a boon for Transnet itself for as long as it enables producers to fulfil their contractual obligations to various markets.
Due to the expansion plans announced by a number of mining companies across different minerals in SA — including coal, manganese, iron ore and chrome — the pressure on Transnet to increase capacity and improve efficiencies with speed has never been greater or more justified.
SA’s mining sector as a whole will depend much on Transnet to benefit from the global megatrends that point to the continuous demand for the country’s mineral resources. The trends are the increasing manufacturing capacity of electric vehicles, infrastructure-driven stimulus packages and the increased capacity of renewable energy.
These trends need a combination of minerals, many of which are produced in SA and other competitor nations such as Australia.
Other entities that must come to the party in closer collaboration with the mining sector to exploit the opportunities presented by these megatrends are the department of mineral resources & energy, the department of water & sanitation, and the department of environmental affairs.
SA’s global competitiveness depends on the speed with which these regulatory authorities approve licence applications. Case officers — whether junior or senior, handling a water use licence, environmental authorisation or mineral rights application — must understand that they are in charge of the economic fortunes of the whole country; that they stand between job creation and unemployment; that they can help ensure the mining sector thrives and takes advantage of global opportunities.
President Cyril Ramaphosa has often promised speedy processing of applications as part of his economic recovery plan. Ministers Gwede Mantashe and Lindiwe Sisulu have undertaken to comply with the president’s instruction. This must filter through the entire bureaucracy so we all act in sync to score handsomely from favourable global market dynamics and jointly absorb the pain during a downturn.
We owe it to the fiscus, which must fund critical social services. We owe it to those employed in the sector and their dependants to keep existing jobs. And we have to give hope to those desperately looking for employment opportunities.
COMPETITIVENESS DEPENDS ON THE SPEED WITH WHICH THESE REGULATORY AUTHORITIES APPROVE LICENCE APPLICATIONS