MINING: Mining Â– Nationalisation Uncertainty Hampering Growth
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The overall decline in mining production continues to be driven by negative growth in the three largest mining sectors namely coal, gold and platinum group metals, all accounting for almost 70% of total mining production. Mining contributes 1% less to the countries total GDP than it did a decade ago indicating that the mining sector has been unable to grow as rapidly as other sectors in the economy.
Current Challenges with Nationalism in the Mining Industry
The challenges resulting in decreased production include labour regulations, employment agreements, work disruptions and mining fatalities. Last year the local mining sector was disrupted by strike action and safety stoppages due to fatalities. There were 116 fatalities in the sector compared with 128 in 2010 and 168 in 2009.
The mining industry has also had to contend with rising input costs from electricity prices and wage settlements. Above-inflation wage settlements of between 8-10% have been agreed upon .The slowing global economy presents another major obstacle to the industry due to the Eurozone debt crisis. Demand for commodities is expected to soften in Europe and remain flat in Japan and North America.
2012 should provide clarity on the governmentÂ’s stance on nationalisation. The issue has raised investor concerns and hampered investment in the sector. The call for the nationalisation of mines is fuelled by the belief that only with state intervention will South Africa be able to cure rising inequality, unemployment and poverty.
The SA Government Current Stance on Nationalism
The South African Government has assured investors that nationalisation does not form part of policy, as this was just a proposal to assist with the maintenance of recent mismanagement of smaller entrepreneurial mines and will not be beneficial to the large players who represent the majority of the sector.
In a review of nationalisation commissioned by the ANC, it was confirmed that this is not the best way forward. The report recommended an alternative could be increasing mineral taxes, as well as increased beneficiation.
Provided there are no unforeseen disturbances in 2012, production in the mining sector should stabilise. Increased safety regulations and newly negotiated wage agreements should ensure less disruption than 2011. Confidence in the sector should also return to normal, once the issue of the nationalisation of mines is put to bed, returning foreign direct investment back to previous levels.
Business News Sector Tags: Mining|