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The promise of mining contributing to national development by joel netshitenzhe
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The promise of mining contributing to national development by joel netshitenzhe


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The Promise of mining contributing to the National Development Plan (NDP) by Joel Netshitenzhe, Executive Director, Mapungubwe Institute for Strategic Reflection (MISTRA) at the 2013 Mining Lekgotla. …

The Promise of mining contributing to the National Development Plan (NDP) by Joel Netshitenzhe, Executive Director, Mapungubwe Institute for Strategic Reflection (MISTRA) at the 2013 Mining Lekgotla. 29 August 2013

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  • 1. Joel Netshitenzhe: Executive Director: MISTRA August 2013 THE PROMISE OF MINING Contributing to national development
  • 2. 2 MAIN THEMES ❶ Background: the national strategic environment ❷ Industry significance: opportunities for sunrise ❸ Policy discourse: the logic and the challenges ❹ Towards a long-term vision for mining
  • 3. BACKGROUND  National Development Plan – beyond ‘political miracle’, opportunity to pursue a national vision and detailed long-term plans (Vision 2030): ► requiring identification of objectives, contribution, benefits, trade-offs and sacrifices – beyond lowest common denominator ► sector leaders & institutions should identify role in implementation and take initiative in partnering with others  Mining Lekgotla 2013 a unique opportunity: ► after adoption of the NDP the Mining Sector has a responsibility to reflect on the role that mining will play in realising the objectives of the plan – Mining Vision 2030 ► on the occasion of the first anniversary of the Marikana tragedy, the lekgotla provides a platform more comprehensively to reflect on the trajectory of mining – beyond just obviating the possibility of a recurrence Opportunities and challenges 3
  • 4. 4 Understanding the NDP growth storyline BACKGROUND ❶ Multiplier effect of infrastructure programmes: ► Over R800bn of rolling investment every three years, with many multiplier effects: jobs, crowd in private sector, supplier industries, Sub-Saharan Africa ❷ Aggregate demand and shared growth: ► Growth (SA and SSA) generates virtuous cycle, with profound opportunities for manufacturing, and measures such as SME facilitation and skills training ► Balance cost and opportunity: forward and backward linkages and job opportunities depending on R&D, regulations, procurement and feed-in tariffs ❸ Opportunities in the Green Economy ► Super-cycle anchored in demand from global growth regions; opportunities for new applications – thus possibilities for mature industrial cluster ❺ Mining as catalyst for new industrialisation drive: ❹ Agriculture and the rural economy (1m jobs by 2030): ► Expand irrigated agricultural land by one-third; expand commercial production; pick sectors and regions with high potential; access to product value chains
  • 5. NDP & ‘decent standard of living’ 5 BACKGROUND Critical argument of the NDP: interventions should address totality of socio-economic needs & guarantee a decent standard of living for all. Beyond a living wage and decent conditions of employment, a decent standard of living should entail: ► Affordable cost of living: including appropriate management of cost of basic necessities such as food, and administered prices such as energy and municipal rates ► Efficient and affordable public services: as with NHI, guarantee floor of basic services for education, housing, water, electricity, sanitation, etc. ► Social security net: covering most vulnerable in the form of social grants and free basic services with quantum increased as resources permit ► Decent human settlements: spatial settlement patterns that promote affordable travel, decent community life with requisite social amenities
  • 6. The real contribution of mining 2005 (2012) data (estimates) Mining’s direct contribution: • GDP: R94-billion or 6.2% (9.2%,CC) • Jobs: 450 000 (500 000,CC) Backward Linkages: • GDP: R35-billion or 2.3% • Jobs: 150 000 Forward linkages • GDP: R25.8- billion or 1.7% • Jobs: 55 000 Total contribution of mining: • GDP: R246-billion or 16% (18.7%,CC) • Jobs: 1 260 000 & 25% of total employment (1 340 000 jobs, CC) The induced effect: • GDP: R91-billion or 6% • Jobs: 600 000 Sources: Chamber of Mines Vice-President, 2006 & CC: Mining Indaba, 2013, Chamsa & dmr Although there have been ebbs and flows over the years, mining remains the most critical sector in the South African economy… 6 A critical sector of the economy INDUSTRY SIGNIFICANCE  18%-20% of total private fixed investments  18.5% of corporate tax receipts  15% of national electricity demand  47% of exports
  • 7. China may be reconfiguring its economy; however the demand for critical minerals will endure, even if somewhat moderated: Global ‘sunrise’ dimension INDUSTRY SIGNIFICANCE Critical to differentiate between cyclical and long-term structural factors ► Urbanisation in China (and globally, some 3-billion more people by 2050) and ‘middle class’ growth to drive demand: $80-tr com/res construction investment (2025); car fleet 2x to 1.7bn (2030) ► India, Vietnam, Bangladesh and Africa: steadily following China in the industrialisation trajectory, incl. infrastructure and low-end manufacturing… ► New energy streams (H2ECO): besides catalytic convertors, if the Hydrogen Economy takes off, demand for PGM-based fuel cells will increase for mobile and stationary applications 7
  • 8. Proportion of reserves, valued at $2.5-trillion, underlines SA’s global positioning ● 40% of gold ● 80% of PGM (73% prod) ● 72% of chrome ore ● 80% of manganese (27% prod.) MISTRA Research – the case for PEMFC (based on PGM): PGM value chain in hydrogen economy (Linkov, 2011) 8 INDUSTRY SIGNIFICANCE Endowment for positive change Components Type of PGM used Platinum to precursors platinum and palladium Precursor to catalysts platinum, palladium, ruthenium, iridium, osmium and rhodium Catalyst to Membrane Electrode Assemblies (MEAs) platinum, palladium, ruthenium, iridium and osmium High purity hydrogen generation iridium and ruthenium Membranes for hydrogen separation palladium Metal hydrides palladium Super capacitors and batteries ruthenium and iridium
  • 9. INDUSTRY SIGNIFICANCE Endowment for positive change: H2ECO  Build knowledge-based networks  Ensure global security of supply  Trading arrangements that minimise disruptive price volatility  Social compacting & stability  Fuel cell demand within SA  Balance self-reliance & global networking  Develop capabilities in recycling of PGM MISTRA Report identifies fundamental decisions required to meet objective of 25% of global fuel cell supply by 2020: 9
  • 10. 10 BACKWARD LINKAGES * Specialized inputs * Machinery and equipment * Specialised services Abundant forestry reserves and plantations SIDE LINKAGES Related activities FORWARD LINKAGES * Roundwood * Wood products * Wood pulp * Paper and cardboard Source: Ramos 1998 p111 (CEPAL Review, #68, 12/1998); a: Generates 25% of Finland’s exports; b: Compared with 25-30m3 per capita in the rest of the world.  Forward value-addition of ferrous minerals and metals, PGM, titanium & pigments, polymers, and mining inputs  Backward value addition in supply of technologies, services and inputs for domestic use and export: equipment, turnkey in mine design & operation  Mining-related capital goods for mining and mineral-processing sectors  Ensure access to raw materials to help unlock downstream industrial projects  Ways of exploiting producer power POLICY DISCOURSE Base logic: cluster development Develop a mature industrial cluster using resource endowments – dti IPAP iteration (objective vs. instruments) e.g. Finland: The mature forestry industrial cluster 1997a
  • 11. POLICY DISCOURSE Despite hyperbole, tendency has been to gravitate towards rationality and synthesis ANC 2012 National Conference ANC National Conference, December 2012 ❶ Approach to state intervention informed by principle of capable and effective state with qualifications: 11 ◙ General: financial regulation & control plus state bank; taxation and wage & income policies; competition, industrial & trade policies ◙ State ownership: in strategic sectors “where deemed appropriate on the balance of evidence” (ref. Ready to Govern, 1992) ❷ Approach to the mining industry is to adopt broad principles in SIMS and leave space for initiative: ◙ Custodianship as in the MPRDA ◙ SMC in strategic sectors & as partner to private sector ◙ Mining as a basis for new wave of industrialisation ◙ Ensure implementation of safety and social & labour plans
  • 12. POLICY DISCOURSE ANC 2012 National Conference ANC National Conference, December 2012 ❸ Approach to the mining industry is to adopt broad principles in SIMS and leave space for initiative: 12 ◙ Resource rent tax for skills, research, geological information & fiscus: only partly a tax – essence is to ensure reinvestment of mining rent for sector regeneration – and issue is whether we can attain objectives without it ◙ Strategic and important minerals: about 20 listed and need to identify the “strategic minerals that require special public policy measures…” and, in so doing, ensure balance between certainty and open-ended prerogative ◙ Vertical integration: creative ways of dealing with challenge e.g. of Eskom coal supply security and costs – shareholding and vertical integration as one of the instruments
  • 13. 13 Tragedies can be a catalyst for all-round self- correction if lessons are appropriately internalised Immediate lessons from Marikana Managing labour disputes and state-societal relations Management and labour regime: hierarchy of wage structure (RDO), consultative platforms at workplace, changing demographics of workforce, era of testing balance of forces and new cost curves The social wage: implementation of social and labour plans and partnership with municipalities & provincial governments Union dynamics: perceptions of ‘sweetheart’ and patronage; exaggerated expectations; inter-union rivalry & fight among powerless for power over one another; closed shop agreements and workplace forums Eliminate violence in protest action and assert role of the state as legitimate bearer of weapons – with professionalism and humane conduct Nip opportunism in the bud – by obviating opportunity, primarily by enhancing legitimacy TOWARDS VISION 2030
  • 14. 14 Crafting a long-term mining strategy ❶ Mature industrial cluster as a basis for new industrialisation drive with systemic forward and backward linkages, incl. global turnkey status in mine design and operations ❷ Lessons from other jurisdictions on management of migratory labour system and job grading e.g. RDO (WSJ, 16/11/2011) ❸ New technology, from rock drills with better damping system, ‘game-changing’ technology with no drill & blast, robotics for narrow tabular reefs & ultra-deep areas to u/g coal gasification ❹ Implications for labour intensity addressed through mining industrial cluster and sustainable development approach? ❺ Transformation of ownership should place greater emphasis than currently on ESOPs so workers feel and become stakeholders Beyond the immediate responses, a long-term vision should seek systemically to reconfigure the industry TOWARDS VISION 2030
  • 15. 15 This requires decisiveness, with all mining partners geared towards tilting the economy and society at large in a positive direction: “There is a tide in the affairs of men Which, taken at the flood, leads on to fortune Omitted, all the voyage of their life Is bound in shallows and in miseries.” Shakespeare (Julius Caesar) Will the sun to rise TOWARDS VISION 2030 Revitalise the process to develop a mining sector strategy in line with NDP, through MIGDETT+ with senior representation across the board
  • 16. 16 END