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Godongwana: Nationalisation talk has hurt mining

Oct 06 2016 05:00
Lameez Omarjee

Johannesburg - The ANC has influence over mining sector policy but has not been helpful in this area, ANC official and former economic development minister Enoch Godongwana said at the Joburg Indaba held in Sandton on Wednesday.

Godongwana was highlighting the role of the ANC government in making the mining industry a key driver of the economy.

“[The ANC] spent two years debating the nationalisation of the mining industry. We allowed the debate to continue for two years, to the detriment of the industry,” he said. “We all have agreed that a lack of common vision for the industry creates challenges.”

Godongwana said that a way to grapple with the challenges facing the industry is to develop a strategic vision. This forms part of government’s Vision 2030, National Development Plan (NDP), he said. “We should not be lukewarm when it comes to the NDP,” he added.

The mining charter is expected to be finalised by the end of October.

In the past, the industry dominated the economy for decades, said Godongwana. Now it is one of the smallest sectors in terms of gross domestic product contribution.

Power problems have hit competitiveness

The decline in gold production has contributed to this, as well as electricity supply problems.

Pricing and loadshedding between 2008 and 2015 impacted the competitiveness of the industry, he said.

Godongwana added that progress has been made on the electricity front, which has been acknowledged by rating agencies. However, the price path of electricity may be a challenge.

One of the options to avoid massive price increases is to capitalise Eskom, but this route is limited as there is no fiscal space. Another option is increase borrowings, but South Africa is reaching unsustainable debt levels. A further option is to increase tariffs, but this will choke the economy, he said.

The “most appropriate solution” is to put private sector investment into Eskom, said Godongwana.

Labour stability is another challenge to the industry. Labour has become a major issue following the platinum strike in 2014. Godongwana said negotiations for the establishment of a minimum wage facilitated by the National Economic and Development Council are not likely to have implications for the mining sector and its cost structures. 

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