Mining’s long-term value: not only below the ground
How can South Africa ensure that its mining industry ‘works’ for it in the long term? This is an important question, posed in numerous policy documents and by numerous policy makers – and increasingly by politicians for whom mining is an avatar of all that is wrong with the country. Surely, as a country sitting atop a multi-trillion dollar trove of minerals, South Africa can do better than merely pulling ore from the ground, and shuttling it off to be worked abroad?
The short answer for some years has been beneficiation: South Africa must process its minerals locally. Economic Development Minister Ebrahim Patel put in these terms back in 2011, ‘in order to achieve the greatest employment and development benefits, we cannot rely simply on selling raw materials to the rest of the world.’ Not only would beneficiation of our minerals stimulate the overall economy, but it would generate work in the manufacturing sector – creating the ‘decent jobs’ that are the gold standard in government policy.
However, like the minister’s New Growth Path, beneficiation has proven more challenging in the implementation than in the conception. Receiving less attention is the idea of ‘upstream’ industries – those supplying inputs and services to the mining sector. But, as the Oxford economist Paul Collier has argued, this probably makes a lot more sense. Indeed, the National Development Plan thought there were great possibilities in this.
Unlike the sort of beneficiation being contemplated in South Africa – largely a case of establishing local industries to process local minerals, with a generous dose of political support behind it – upstream industries need a solid commercial rationale. They will succeed if they are serving the needs of a robust mining industry. Moreover, mining demands engineering and manufactured goods. This presents a rare opportunity to stimulate South Africa’s manufacturing sector, and all that it implies: ‘decent jobs’, skills development and so on.
And if upstream industries can develop useful expertise in supporting mining operations, there is no reason why they should not become a significant players beyond national borders and even outlive a decline in the country’s mining operations.