BD Letter to Editor: Cape Town Mining Lekgotla

Prof. Turok writes to Business Day regarding the Cape Town Mining Lekgotla. 

Sir,

The report on the legislative proposals discussed at the Cape Town Mining Lekgotla (11.2.2015) raises many concerns. The mining industry has consistently stuck to its determination to sell minerals in the South African market at import parity prices and this has been contested by local manufacturers and the Department of Trade and Industry.

My Institute has collaborated with the Industrial Development Corporation and the United Nations Economic Commission for Africa in two major conferences debating these issues in the context of examining the mineral value chain in all its aspects including beneficiation. We have also engaged with the Chamber of Mines and chief executives of large mining houses in order to ascertain why a factory in Johannesburg should pay the same price for a mineral, or steel, or polymers as a customer in Japan. Indeed I have on several occasions asked them what price I would have to pay if I built a factory next door to a producer of a primary product and the answer has always been, import parity price, the world market price, which is the same as that for Japan, not mine or factory gate price. No wonder the Competition Tribunal fined SASOL and ruled that they must sell at factory gate price to local manufacturers.

It seems that some agreement has been arrived at on factory gate prices but it is not clear that this has been implemented which is why DTI is now seeking a developmental price. What is obvious is that our manufacturers cannot compete if import parity prices remain in place.

This whole issue is exploding in a manner that is unhelpful to our economy. True there are many difficulties facing the mining industry, not least serious deficiencies in government services such as energy and freight and silos within government departments. And these deficiencies have to be overcome. There are also technological issues in dealing with the whole mineral value chain and in the legislation.

But a step by step approach to solving problems is more desirable than the present confrontation. My Institute is heavily committed to further research on the mineral value chain and we are doing this in partnership with the U N Economic Commission for Africa. The same problems are due to arise across the continent and we need to anticipate this. We have already published many papers in this area.

For further reading, please see the following:

“Experts’ consultation on mineral beneficiation convened”, New Agenda, Issue 48, Fourth Quarter 2012

“The Interface between mining and manufacturing”, New Agenda, Issue 52, Fourth Quarter 2013

“Stirring up the pot of gold: Import Parity Pricing in South Africa” by Zunaid Moolla, New Agenda, Issue 56, Fourth Quarter 2014

Yours

Prof. Ben Turok

Director

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