Mining, South Africa’s defining industry, declined under President Jacob Zuma. Extracting minerals from the ground often appeared a business secondary to extracting rents from public office. Optimists hope Cyril Ramaphosa, Mr Zuma’s successor to the leadership of the African National Congress, will re-energise the stagnant sector. He should start by rejigging the country’s newish mining charter.
This industry has lost its pre-eminence within the South African economy. A FTSE index of locally listed miners, including AngloGold Ashanti and Impala Platinum, trails the worldwide equivalent by a long way over three years. Mining’s contribution to GDP, at 8 per cent in 2016, is less than half of its 1980 level. Employment has fallen correspondingly. Most of the drop occurred before Mr Zuma took control. But there is still plenty Mr Ramaphosa could do to lift the sector.
A new charter, which includes increased local procurement, has been challenged by mining groups. One key change that has been mooted, but not yet implemented, is an increase in the stake black South Africans hold in each mining project to 30 per cent, up four percentage points from the current dispensation. The reforms reflect disillusionment among South Africans with the old Black Economic Empowerment set-up.
Ironically, Mr Ramaphosa has been a big beneficiary of this. His investment companies have helped him amass huge wealth. However, his need to bolster his support in the ANC and spur foreign investment should encourage him to seek a compromise that suits both constituencies. A less aggressive mining charter might still pass muster with voters if gains were shared across communities, instead of commandeered by an elite.
A rising rand, up more than a tenth since Mr Ramaphosa became leader, has lifted dollar-based costs at a time when oil prices have run up even faster. But slack in the economy will damp the impact. The country’s output gap, a measure of how far away economic growth is from its potential, wallows at negative 4 per cent, says Goldman Sachs. Emerging markets together have a negative gap of half a per cent.
The upbeat mood is reflected in the rising shares of Anglo American, still heavily exposed to South Africa. Big mining groups are as complicit as Mr Ramaphosa in the failures of BEE. They have as much to gain from creating a better system.
Can Cyril Ramaphosa balance the demands of industry with populist political forces? Please tell us what you think in the comments section below.