Our big problems

Pete Bower

Somebody needs to offer President Ramaphosa a new brand of tobacco, because whatever it is he’s smoking is doing nothing for his views on a certain sector of the economy.

Either that, or he’s unclear about the difference between a “sunrise” and a “sunset”, and how those two words are used in management-speak to describe an economic sector or an industry.

Or, perhaps, he really DOES believe that mining has a future in South Africa, in which case one wonder whether he is indeed the right man for the job.

The fact is that, historically, the wealth of the country has been realised through the mining houses who, by employing hundreds of thousands of workers, not all South Africans, it should be added, and investing many millions of pounds and then rands, made the South African economy the largest and most vibrant on the African continent, not to mention making the country the largest producer of precious metals and minerals in the world.

But the fact is also that the gold mines of the Witwatersrand began to be mined out at workable depths many decades ago. First, to remain profitable and in business they had to go deeper, developing an expertise in ultra-deep-level mining that made those mines world leaders in the field. Then, when even this became unprofitable the mining houses started looking elsewhere for business, and gradually shafts were closed, operations changed hands and were reduced, and investment made in the new mining countries such as Brazil, Peru, Australia and north America. And there’s where the sunrise mining industries are to be found today. From the 70s it became obvious that the writing was slowly being written on the wall: it was a sunset industry as long ago as that.

The government of the day was not the ANC, of course, but its response to the inevitable decline was hardly spectacular. For it was faced with its own challenges, including international sanctions, which made the development and encouragement of a vibrant export-led industrial and manufacturing sector difficult. But the response of the ANC government, when sanctions were lifted, has hardly been any better, with restrictive labour laws, uncertainty over investment policies and the constraints imposed by BEE regulations on free investment (and not mentioning the bribery and corruption that accompanies the awarding of many municipal, provincial and national infrastructure tenders). Far from growing, our manufacturing sector has also been in decline for years.

But there’s more to our economy than mining and manufacturing. To replace a waning mining sector the government could have done far more to encourage agricultural production, but it didn’t, because, at least since 1994 there has been no fruitful voter constituency for it to exploit there: farmers were, and still are (for the moment at least) conservative whites.

Or, another replacement for the mining sector could have been to encourage tourism. But then Mr Zuma appointed Malusi Gigaba as home affairs minister and the introduction of stupid visa regulations put paid to that.

So what has the government actually done? In response to widespread unemployment, the government has its Extended Public Works Programme (EPWP), which employs many thousands in basic construction and maintenance and affords them the ability to acquire basic skills which, arguably, they should have been taught in school. The problem is that the EPWP is, like the social grant system, not funded by the additional revenues generated by an expanding and thriving economy. It’s paid for by the taxes of those already being taxed. The revenue pumped into both programmes results in direct consumption expenditure. It doesn’t result in wealth creation. There is very little multiplier effect in direct consumption expenditure, at least nothing like what one would get if those jobs and that revenue had been generated by a vibrant and growing agricultural, manufacturing or tourism sector.

And now the government chooses to chase away any new industrial international investment by tinkering with property ownership and expropriation of land, in the belief, rather, that handing out parcels of land to the indigent will turn them into instant farmers and lead to a huge expansion of the agricultural sector and the much-vaunted but little-understood holy grail of “food security”.

Clem Sunter said it years ago. We need an “Economic Codesa” at which a coherent approach to these issues can be thrashed out. Sunter’s suggestion has now become urgent. Leave it any longer and it may be too late for us all.

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