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South Africa’s latest industrial policy plan is deepening a row between the government and the country’s biggest mining companies over who should be responsible for mineral beneficiation.Advocates of the revised industrial development strategy, approved by the cabinet last week, see it as an important step in getting South Africa on the path to 3% GDP growth and establishing a “whole-of-government” approach to industrialisation.But mining majors see the plan as misguided and a threat to investment.Certain proposals in the document shift more of the country’s beneficiation burden onto the mining sector. In particular, the policy advocates for introducing taxes and quotas on chrome ore exports and for placing beneficiation requirements on new mining rights.Restricting chrome exports has been a hotly contested but central component in the government’s policy reform discussions for several years, and the mining sector’s opposition to the idea is well documented.The government’s hope is that restricting raw ore exports will encourage local miners to work more with South African smelters and less with Chinese ones, but miners are concerned that imposing export restrictions will raise costs for smelters at home.More broadly, the mining companies see export bans as a blunt instrument that misses the real problem for ferrochrome smelters — electricity. Since 2008, tariffs have risen more than 900%, a cost burden that smelters say renders them uncompetitive.The new industrial development strategy also suggests that mining rights, which all companies must obtain before they can explore, extract or profit from underground minerals, should only be issued if the company meets “conditions that must facilitate beneficiation”.‘Further uncertainty’The Minerals Council argues that could damage future investment in exploration and mining. CEO Mzila Mthenjane described the proposal as an “unfortunate policy intention from the department of trade, industry & competition which, while not yet law, adds to the incessant policy uncertainty constraining investment and growth” in the industry.The council, which represents South Africa’s largest mining companies, said in a statement this week that the government is unfairly shifting its beneficiation burden onto the mining industry.“Mining and beneficiation are separate and distinct economic sectors. Beneficiation cannot, and must not, be imposed on mining,” Mthenjane said.Still, the authors of the strategy document argue that their policy proposals are necessary to achieve annual GDP growth of 3%.A “whole of government” approach may come at the expense of some industry-specific needs, but sector-based master plans run by various government departments have done little to revive struggling sectors, they say.The strategy document does provide some welcome signs for mining companies, including affirmation of the role of preferential electricity tariffs. In recent months, those power discounts have been used to restart smelters owned by Glencore and Samancor, offering much-needed relief to the sector.
