President Cyril Ramaphosa’s first State of the Nation Address after the election was received with some scepticism. Some of his political opponents questioned his dreams and urged him to face reality.
Sceptics aside, the president made commitments with far-reaching implications.
What is required now is for ministers to provide detailed implementation plans and bureaucrats to adjust their work ethic in line with the president’s expectations.
Those of us in the business sector have to analyse what the president’s messages mean and develop initiatives to play our part in economic growth and job creation.
He undertook to “bolster the mining industry by developing markets for South African minerals through targeted beneficiation, reduced costs of inputs, and increased development”.
These are welcome, important and urgent undertakings particularly in the platinum and coal sectors. Innovations in car manufacturing, including the growing prominence of electric cars, are steadily reducing demand, thus weakening platinum prices.
Hopefully, the public and private sectors will respond to the president’s message by increasing spending in research and development. South Africa spends an equivalent of 0.8% of GDP on research and development. We have to more than double this if we want to catch up with developed countries with strong manufacturing bases.
Although research and development outcomes are typically long term, reducing input costs in mining can be achieved relatively faster.
The major cost factor in recent years has been the increase in electricity tariffs and erratic supplies.
These have had a double effect on the mining sector. They have driven up mining costs and made beneficiation such as smelting less competitive, and exports to China of beneficiated chrome have been affected negatively. It is therefore important that affordable tariffs and the reliability of supply are addressed.
We cannot afford to lose such an important aspect of manufacturing. Fortunately, the president and industry players know this.
Indeed, solving the problems will require the implementation of the president’s other important priority highlighted in his speech: pursuing lowest cost electricity generation options. I would add reliable into the lowest cost.
South Africa has abundance of coal to deliver low-cost and reliable energy while sustaining more than 700000 direct and indirect jobs in coal mining.
If the president’s commitment to low-cost energy is combined with the priority for research and development in the mineral sector, then South Africa could develop new or improve on existing technologies to burn coal in an environmentally friendly manner.
The advantageous effect of this would be that we make full use of our resource endowment in the form of coal and its reliability as an energy source, as well as the massive capital investments the government has already deployed in Eskom and the freight rail network.
Despite Eskom’s leadership challenges, the company is still an important asset for South Africa. We dare not waste investments made in Eskom and Transnet, both of which employ thousands of people.
Let’s use them wisely to develop our economy further.
* Bayoglu is the executive chairman of Canyon Coal.
** The views expressed here are not necessarily those of Independent Media.