Can Ramaphosa rescue mining?

John Kane-Berman says investment in new mines has halved in the last few years

Will Cyril Ramaphosa rescue his "moribund" old industry?

An early indication of Cyril Ramaphosa's convictions and power will be whether he is willing and able to rescue mining, the industry in which he made his name as a trade unionist in the 1980s. With lower output now than when the African National Congress (ANC) came to power, South Africa's mining industry is, in the words of the Chamber of Mines, "moribund".

No sector of the economy, not even agriculture – the focus of frequent threats and hostility by the ANC – has been damaged as much by ministerial and bureaucratic intervention and corruption as has mining.

Although rising costs, militant unions, and fluctuating commodity prices all play their part in confronting the industry with major challenges, a document published by the Chamber in mid-December highlighted six other reasons for the "moribund' state of the industry. They were: the lack of a nurturing environment for long-term investment, policy and legislative uncertainty, poor governance in the Department of Mineral Resources, infrastructure constraints, failing local authorities, and the uncertain political outlook.

The Chamber also identified "inappropriate" enforcement of mine stoppages in the event of accidents and "serious allegations of corruption and state capture" as having contributed to the "malaise that has resulted in the South African mining industry putting a freeze on investment in new projects".

The Chamber then worked out some of what has been lost as a result of these policies and this malaise. Gross fixed investment in mining has been stagnant since 2009 and has declined by 5% over the course of the last three years. Over the next four years, mining companies are planning to invest some R145 billion. Much of this is "stay-in-business" investment. Investment in new mines has halved in the last few years – even before the third version of the Mining Charter was published in June this year.

The Chamber is asking the High Court to review and set aside the Charter, which, it says, "will significantly exacerbate the decreasing trend in investment". The case will be heard in February.

The R145 billion in planned investment could be R122 billion higher, however. This additional expenditure – 84% more than the planned R145 billion – is what mining companies could spend over the next three years, provided that there was a "more certain and conducive environment". The higher figure is based on a survey of Chamber members representing "a cross-section of the various commodities and making up the overwhelming bulk of mining production in South Africa".

The additional capital expenditure would bring about the employment of 48 000 more people. The Chamber has previously stated that one miner's income feeds ten people, so that almost half a million would benefit from the additional investment. At a current average monthly mine wage of R23 147, this would yield R13.3 billion a year in extra (pre-tax) earnings. Some of this money would be spent in communities where the mines are located. Some would be remitted to rural areas, where many miners still have their homes and leave their families.

The employment benefits of R122 billion in additional investment would be even greater, for the Chamber says that indirect jobs generated would bring the total of new jobs up from 48 000 to 150 000.

Shortly before his election as president of the ANC, Mr Ramaphosa wrote in Business Day of "a new deal capable of unleashing the country's competitive and entrepreneurial energies". He also said South Africa "urgently needs to break the deadlock over the regulation and transformation of the mining sector".

He added: "The country enjoys world-class mineral resources, but these resources are not being properly utilised. It is imperative that the country begins to achieve increased levels of mining exploration and investment."

These are fine words. Whether Mr Ramaphosa means them is not clear. Only a month previously he spoke in Soweto of the need to "accelerate the transfer of ownership and control of the economy to black South Africans". This is supposedly one of the objectives of the third version of the Mining Charter – which is killing the industry he supposedly wishes to stimulate.

* John Kane-Berman is a policy fellow at the IRR, a think-tank that promotes political and economic freedom.