Beneficiation needs favourable environment

Roger Baxter of the Chamber of Mines says that it's not the cost of materials that inhibits beneficiation but rather the regulatory environment and labour costs that do so. Image: MiningMx

"Contrary to the view promoted by the Department of Trade and Industry (DTI), the cost of raw materials was not the major factor holding back beneficiation," Baxter said.

Common factors raised during the discussions by industry as constraints to business included the shortage and unreliability of electricity, labour relations legislation and regulatory obstacles.

However, the DTI strongly believes that the pricing policies of polymer manufacturer Sasol and steel producer ArcelorMittal SA throttle the growth of a strong manufacturing sector.

Baxter rejected allegations that the mining sector was engaged in profit-shifting through transfer pricing. "Our view is that transfer pricing in the mining industry is not taking place," he said.

"While business supports the concept of growing the downstream mineral beneficiation sector, we all agree that this can only be achieved by creating a facilitating environment that attracts manufacturing companies to invest or expand in SA," he said in a presentation to Parliament's trade and industry portfolio committee.

State must provide right environment

It was the state's job to provide a legislative and regulatory environment that was stable, predictable and competitive, and which encouraged investment and growth.

Baxter urged the government to work collaboratively with industry to facilitate investment in upstream suppliers to the mining industry.

He advised against imposing further obligations on the mining industry to force it to subsidise manufacturing, saying this would undermine investment in the industry.

He said among the preconditions for a successful manufacturing beneficiation industry were a significant base of entrepreneurs, skills, access to markets, low costs of doing business and finance, security of supply of raw materials, and an efficient and competitively priced infrastructure.

Baxter noted that the low growth in value-addition in manufacturing - only 2.9% between 2010 and 2012 - meant the competitiveness gap between SA and its competitors such as China (8.8%), Turkey (5.5%) and India (5.8%) would widen.

In a separate address to the labour portfolio committee workshop on a national minimum wage, Stellenbosch University Associate Professor of Economics Neil Rankin said the implementation of the policy would differ between workers, companies and sectors.

The lowest-paid workers would gain by having a higher wage, but smaller companies would be hard hit by this. Sectors that faced the toughest international competition would also be affected.