Mining expert Peter Major warns of potential economic disaster in South Africa due to the ailing industrial sector, primarily citing high electricity costs and detrimental government policies as key factors. He urges for urgent intervention and a long-term strategy to revitalize the sector.
Mining expert Peter Major warns that South Africa faces potential disaster if its struggling industrial sector is not urgently revitalized. Smelters, heavily reliant on electricity, are particularly vulnerable due to soaring energy costs that have eroded their competitiveness. Major highlights that despite a prior agreement offering a 40% reduction in electricity prices for smelters, facilities like Boershoek and Vonnekop smelters remain on the precipice of closure.
Recent negotiations with Eskom have provided a temporary reprieve, granting a three-month extension, in hopes of reaching a sustainable agreement. While cautiously optimistic about this immediate development, Major expresses broader concerns, noting the interconnectedness of various industries. He emphasizes that sectors like aluminum extrusion, copper refining, and steel production are closely monitoring the situation, anticipating similar support and interventions. Major argues that government policies, specifically, have significantly crippled the steel industry, contributing to its decline. He criticizes the government’s reactive, short-term approach, advocating for stable and well-defined policies, particularly regarding electricity pricing. The foundation of a competitive industrial sector lies in affordable, dependable, and readily available electricity. Major points out that the current efforts to assist smelters might inadvertently create imbalances, potentially shifting the cost burden onto consumers or other industries. China is presented as a model, where the consistent reduction in electricity costs is a cornerstone of its industrial strategy. The primary goal should be to lower electricity costs consistently, as it is crucial for beneficiation. Major emphasizes the necessity of reducing electricity prices instead of increasing them to bolster the competitiveness of South African industries. Beyond electricity, Major underscores the broader challenges undermining South Africa’s industrial capabilities. He identifies various crucial inputs, including infrastructure like roads, railways, and ports, along with effective bureaucratic processes and licensing systems, as integral components. A cohesive vision is essential to establish South Africa as a global leader across all sectors, from agriculture and mining to tourism. Major attributes the collapse of South Africa’s mining powerhouses to detrimental policies, including inconsistent implementation, proposals for nationalization, and requirements for specific shareholder structures mandated through empowerment policies. He recalls a period in the 1980s when South Africa’s dominance was unparalleled, with entities like Anglo American being the largest investor in the United States. He warns of a concerning trend, with South Africa now mirroring the decline witnessed in countries like Zambia and Zimbabwe, and it is still going down. Major points to the 1990s as a pivotal turning point, marked by significant alterations to mining legislation and the implementation of transformation policies by the ANC government. He highlights that these policies, while often conceived with good intentions, have yielded adverse effects, leading to dire consequences. He criticizes the government’s failure to adapt and correct these policies, contributing to the sector’s persistent challenges. The absence of a long-term strategy, coupled with inconsistent policy implementation, has created an environment of uncertainty and instability, further hindering industrial growth and competitiveness
South Africa Industrial Sector Electricity Prices Mining Government Policy
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