THREE articles in Monday’s Business Day tell a story about our trajectory as an industrial economy. The first was about private sector mining and energy community objections to amendments to the Mineral and Petroleum Resources Development Act. They see the amendments as an attempt to deprive them of old rights, add new, onerous obligations and, generally, make their investment in South Africa less, rather than more, secure.
Then economics commentator Gavin Keeton reminded us that with capital flowing out of emerging economies such as ours, and especially those with a big current account deficit such as ours to finance, we need to be able to protect the rand should the market really run. This, he pointed out, could only be done by exporting more, an effort being hobbled now by strikes in key export sectors such as mining and the motor industry. The weak rand opportunity is being lost.
Finally, ANC veteran Ben Turok helpfully swept it all into a juicy proposition, at least for this editor. The mining industry cannot, he said, argue that it is just there to mine and refine. It should be required to make minerals available for beneficiation or in actual manufacture in South Africa at prices lower than that which they could achieve by exporting their ores abroad.
"Our national interest requires," he said, "that we build a flourishing manufacturing sector and that means taking advantage of our comparative advantage in being the best-endowed with minerals in the world, in many instances having almost a monopoly of supply of the best quality minerals on earth".
Mr Turok represents the dream the ruling party (across almost all its many factions) has for the country. We have all the minerals, why don’t we have any industry?
The answer is that we don’t have any industry because we don’t have any customers. The people with the customers are the people to whom we already send our minerals.
Of course, there are export success stories in South Africa. Wine is one. Mr Turok wrote of an unnamed local bus maker doing well abroad.
But in the main we have deindustrialised because we have not looked after the mining industry, making of what is still our main industrial activity a political football, despised because of its past. Our mining industry, a Merrill Lynch analyst intoned the other day, is finished. "It’s the slowest train wreck in history," he said.
Yet our ability to manufacture anything grew directly out of the mining industry. And mining, as Mr Turok instinctively feels, is how we’ll save it. But how? The ANC recipe is for the mines to lower the price of what they produce so that factories spring up making stuff from the minerals they dig up.
It is not clear what they would make, but it is clear private sector mining companies could only begin to even contemplate such a vision if they were able to maintain their margins. They would have to cut their costs. We will offer Mr Turok space again to suggest where they might start. He will say executive pay, but he has billions to find.
Our three stories have a common root. This economy needs reindustrialisation. But the investment can only come from the private sector. It will not happen when ministers micromanage industries such as mining. The money needed to secure us a mining future doesn’t exist in South Africa, It’s in New York, London, Zurich.
And to make managing or stabilising the rand even faintly possible, the state must play a more even-handed role between business and the unions.
And Mr Turok and the ANC must at some stage acknowledge that smart investors make rational decisions. Yes, we must rebuild our manufacturing base and make more things. But instead of being prescriptive to the people with the money, we should be asking them what they need in order to invest and, where possible, give it to them.