For more than a century, South Africa has built its fortunes on mineral wealth, but we must get used to a future without being dependent on mining. This is a conversation that cannot be avoided, but it has yet to start. What’s next after mining? How do we minimise the effect on other sectors when mining winds down? Will we be ready or found wanting? Is there a plan for a “post-mining South African economy”?
China’s recent stock market meltdown had me thinking of Frederic Bastiat’s Parisian visit, of which he wrote: “Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage. And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by the idea of so frightful a prospect.”
Mining is a finite industry and, given the current trajectory, activity on some of our mines will have ceased in 10 years’ time.
Yet, somehow, SA is sleeping like those Parisians, oblivious to the disaster such a prospect poses to the economy.
In the late 1970s, the downward pressure on manufacturing output prices and profit rates in the US had a seismic effect on major industrial economies locally and abroad. At the same time, the four Asian Tigers entered the world-production market, further engorging the manufacturing sector. The effects of the downward pressure on manufacturing output prices reached everyone, including SA, killing off our textile industry and other key sectors of the economy.
What followed in the 1990s was an almost total collapse of SA’s manufacturing industry. Industrial areas throughout the country began to shed jobs seasonally and incessantly.
Eventually, industry-dependent urban areas became ghost towns.
By the time the government reacted to what had happened, it was too late. Reviving SA’s manufacturing sector to what it once was is now almost impossible.
But what does this have to do with mining? It is an old truth “those who fail to learn from history, are doomed to repeat it”.
Much of the passionate discussion of mining in SA is about labour, law and wages, each driven more by self-interest than a common goal. Underneath the arguments, however, lies a component equally critical to the economic scene – the decline of output and profits and eventual mine closure.
So it is essential for policy makers to consider mining’s future by looking deep into the past.
To put things into perspective, once the cost of extraction exceeds the return on selling the product, the mine operates at a loss, and if this continues for long enough, the mine will close.
A time will come when major mining activities will cease in SA – it might not be now, or in the next 10 years, but it will come. The huge job losses at Anglo American could be evidence of the company’s awareness of this looming demise.
For some reason, the end of the mining supercycle season has thrown the industry into confusion, perhaps more the government than other stakeholders.
The mining boom is over; even worse, instead of stagnating slowly, the industry is facing a serious decline.
One of the prevailing themes in contemporary narrative and discourse of the broader mining industry in SA is the language positive self-presentation and the negative presentation of others.
History has made this industry one that has an “us versus them” outlook.
Apportioning blame has become the tool of choice: business has continued to be complacent and whiny, the government has become reactive and authoritarian and labour continues to fight for social justice.
South African mining stakeholders are suffering from self-induced amnesia.
It is as if what happened to the manufacturing sector will not come to pass in their realm. This is made even worse by the blindness of those who have their hands on the steering wheel of policy.
These blind drivers are responsible for the lack of clarity and forward planning, especially where the country’s economy has to move away from the resource sector.
Similar to the complacent neglect of infrastructure in Africa, we see in SA this tendency of letting things break down completely before attending to them.
Consider the death of the manufacturing sector, the Eskom crisis and the looming water shortage.
Why do we still come up with solutions that are temporary and hatched in haste?
There are lessons to be taken from the effects of the 1970s growth and 1980s collapse of the US coal industry and how the effects of shocks on local labour markets influenced local economic policies.
As with any resource-extraction activity, it is often argued that new jobs in one sector will increase demand for local goods; however, the potential negative effects on other sectors are often ignored. Specifically: how the closure of coal plants resulted in devastating ripple effects throughout the non-mining sector and the economy.
In areas such as Kentucky, Ohio, Pennsylvania and West Virginia, it is estimated that for every 10 jobs lost in the coal industry, 3.5 were lost in the construction, retail and services sectors.
Those non-mining sectors are still struggling to recover compared to areas that never had mining activities.
The long decline of production output, the cost of labour, the flooding of the markets and hence the declining investment have reached a point where sales and possible closure of some mines is not far away.
Business and labour can no longer be complacent with comfortable practices.
In order to achieve their economic miracle, the Asian Tigers had to review their conditions, put into perspective their strategies and analyse their policies.
It is important to see how they achieved their economic growth and define the lessons SA can learn from their accomplishment as we look beyond mining.
From time immemorial, politics has always held the upper hand over the economy simply by virtue of the power to make laws. Perhaps now is the time for a judicious choice of future planning development strategy and policies initiated by the Department of Mineral Resources and the business sectors involved.
It seems those at the steering wheel of SA’s mining are blindly heading for a cliff, depending on inappropriate cruise control settings that will result in mining plunging to its death.
So far, I have not seen proactive steps aimed at curbing the knock-on effects should mine closures happen, accompanied by catastrophic job losses that will filter through to other industries.
Conversely, the mining supercycle bust throws the doors open to a reality so impossible to comprehend, for now, that even the state cannot bring itself to think about it – a SA with little or no mining activity.
What will the answer be when we are asked, “Why did nobody see it coming?”
Mamokgethi Molopyane is Creative Voodoo Consulting research analyst on mining and labour.
SA sleeps, oblivious of huge disaster in mining’s demise
China’s recent stock market meltdown had me thinking of Frederic Bastiat’s Parisian visit, of which he wrote: “Here are a million human beings who would all die in a few days if supplies of all sorts did not flow into this great metropolis, if its inhabitants are to be preserved from the horrors of famine, insurrection, and pillage. And yet all are sleeping peacefully at this moment, without being disturbed for a single instant by the idea of so frightful a prospect.”
Mining is a finite industry and, given the current trajectory, activity on some of our mines will have ceased in 10 years’ time.
Yet, somehow, SA is sleeping like those Parisians, oblivious to the disaster such a prospect poses to the economy.
In the late 1970s, the downward pressure on manufacturing output prices and profit rates in the US had a seismic effect on major industrial economies locally and abroad. At the same time, the four Asian Tigers entered the world-production market, further engorging the manufacturing sector. The effects of the downward pressure on manufacturing output prices reached everyone, including SA, killing off our textile industry and other key sectors of the economy.
What followed in the 1990s was an almost total collapse of SA’s manufacturing industry. Industrial areas throughout the country began to shed jobs seasonally and incessantly.
Eventually, industry-dependent urban areas became ghost towns.
By the time the government reacted to what had happened, it was too late. Reviving SA’s manufacturing sector to what it once was is now almost impossible.
But what does this have to do with mining? It is an old truth “those who fail to learn from history, are doomed to repeat it”.
Much of the passionate discussion of mining in SA is about labour, law and wages, each driven more by self-interest than a common goal. Underneath the arguments, however, lies a component equally critical to the economic scene – the decline of output and profits and eventual mine closure.
So it is essential for policy makers to consider mining’s future by looking deep into the past.
To put things into perspective, once the cost of extraction exceeds the return on selling the product, the mine operates at a loss, and if this continues for long enough, the mine will close.
A time will come when major mining activities will cease in SA – it might not be now, or in the next 10 years, but it will come. The huge job losses at Anglo American could be evidence of the company’s awareness of this looming demise.
For some reason, the end of the mining supercycle season has thrown the industry into confusion, perhaps more the government than other stakeholders.
The mining boom is over; even worse, instead of stagnating slowly, the industry is facing a serious decline.
One of the prevailing themes in contemporary narrative and discourse of the broader mining industry in SA is the language positive self-presentation and the negative presentation of others.
History has made this industry one that has an “us versus them” outlook.
Apportioning blame has become the tool of choice: business has continued to be complacent and whiny, the government has become reactive and authoritarian and labour continues to fight for social justice.
South African mining stakeholders are suffering from self-induced amnesia.
It is as if what happened to the manufacturing sector will not come to pass in their realm. This is made even worse by the blindness of those who have their hands on the steering wheel of policy.
These blind drivers are responsible for the lack of clarity and forward planning, especially where the country’s economy has to move away from the resource sector.
Similar to the complacent neglect of infrastructure in Africa, we see in SA this tendency of letting things break down completely before attending to them.
Consider the death of the manufacturing sector, the Eskom crisis and the looming water shortage.
Why do we still come up with solutions that are temporary and hatched in haste?
There are lessons to be taken from the effects of the 1970s growth and 1980s collapse of the US coal industry and how the effects of shocks on local labour markets influenced local economic policies.
As with any resource-extraction activity, it is often argued that new jobs in one sector will increase demand for local goods; however, the potential negative effects on other sectors are often ignored. Specifically: how the closure of coal plants resulted in devastating ripple effects throughout the non-mining sector and the economy.
In areas such as Kentucky, Ohio, Pennsylvania and West Virginia, it is estimated that for every 10 jobs lost in the coal industry, 3.5 were lost in the construction, retail and services sectors.
Those non-mining sectors are still struggling to recover compared to areas that never had mining activities.
The long decline of production output, the cost of labour, the flooding of the markets and hence the declining investment have reached a point where sales and possible closure of some mines is not far away.
Business and labour can no longer be complacent with comfortable practices.
In order to achieve their economic miracle, the Asian Tigers had to review their conditions, put into perspective their strategies and analyse their policies.
It is important to see how they achieved their economic growth and define the lessons SA can learn from their accomplishment as we look beyond mining.
From time immemorial, politics has always held the upper hand over the economy simply by virtue of the power to make laws. Perhaps now is the time for a judicious choice of future planning development strategy and policies initiated by the Department of Mineral Resources and the business sectors involved.
It seems those at the steering wheel of SA’s mining are blindly heading for a cliff, depending on inappropriate cruise control settings that will result in mining plunging to its death.
So far, I have not seen proactive steps aimed at curbing the knock-on effects should mine closures happen, accompanied by catastrophic job losses that will filter through to other industries.
Conversely, the mining supercycle bust throws the doors open to a reality so impossible to comprehend, for now, that even the state cannot bring itself to think about it – a SA with little or no mining activity.
What will the answer be when we are asked, “Why did nobody see it coming?”
Mamokgethi Molopyane is Creative Voodoo Consulting research analyst on mining and labour.
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