P Mlambo-Ngcuka: Opening of Lion Ferrochrome Smelter

1 March 2007

Premiers Moloto, Makwetla,
Kgosi Sekhukhune,
Queen Mother Molotlegi
Director-Generals,
Executive Mayors,
Councillors,
Business Leaders,
Traditional Leaders,
Ladies and Gentlemen,

It is a pleasure for me to be here on this significant day. It is great a
moment when we can gather for a memorable occasion for South Africa and for
Limpopo, one of our neediest province when we officially open the Lion
Ferrochrome Smelter project. We pay special recognition to Xstrata Alloys and
Merafe Resources for putting together such an essential development project. We
are glad that a significant industrial project also responds to our
legislation, the Mineral and Petroleum Resources Development Act (MPRDA), which
called for such partnerships as far back as 2002.

Where we called for black participation not only in ownership, but also in
management control of the joint operations in all aspects of the mining
business. We further introduce the social and labour plan for the benefit of
the workers and communities, which is a significant contribution towards a
shared bright future and for practising good corporate governance. All these
objectives are meant to enhance the relationship between the mining industry
and the mining communities and for the benefit of South Africa, also
shareholders all of whom benefit when their company has positive relationships
in its location.

The Lion Ferrochrome comes at a time when we have declining investments in
the mining sector of South Africa against the backdrop of a commodity price
boom. This project adds to manufacturing jobs and diversification from mining
to beneficiation, which is indeed a highlight for us and what we have been
advocating for. It is a contribution to both mining and manufacturing. We have
also seen a marked growth in mining in the last quarter of 2006 of 4,6%. We
note with interest the increase in the level of processed minerals year on year
which this operation will add on and this is in line with our industrial
strategy and the Accelerated and Shared Growth Initiative for South Africa
(AsgiSA); this we welcome. Mineral processing is an area of high priority for
the Department of Minerals and Energy (DME) and governments.

Our key objectives as government is to further stimulate economic growth,
alleviate poverty and enhance job creation avenues. We seek programmes that are
geared towards reducing poverty and halving poverty and unemployment by 2014.
That is indeed attainable if there are more practical economic initiatives like
those of Xstrata Alloys and Merafe Resources. The two came together in 2004 as
pooling and sharing venture (PSV). Both companies came together with
significant operating assets and with a growth potential that is boundless. We
praise your joint vision that has also provided significant building blocks for
increasing our human resources and skills development spheres. Xstrata and
Merafe are young companies possibly with one of the very impressive growth
history. It feels like yesterday when Mr Davies came to brief us about the
birth of Xstrata.

The Lion Ferrochrome project is opportune for several reasons. From a purely
business point of view, it is set to enhance overall cost competitiveness of
the chrome produced in South Africa for the local and international markets. It
will and must yield benefits not only for the province of Limpopo, South Africa
and the Southern African Development Community (SADC) region.

This Lion Ferrochrome enterprise will go a long distance in providing a
major injection into the first and second economy. For proof, one has only to
look at the background that went into making Xstrata Merafe joint venture
efforts were to make it a win-win venture. It is true that success of our first
economy also has to be measured through changes in the new Black Economic
Empowerment (BEE) campaign as the persisting second economy is in part a
consequence of an un-transforming first economy.

We also see a relationship between such key projects and the success of our
industrial strategy, especially in minerals such as chrome, where South Africa
is so dominant and is endowed with large reserves for the future. In such cases
we have a chance to make long-term projections for growth and a growth-path
that responds to broad economic objectives, unlike in cases where we are
running out of reserves or we are a small player.

South Africa has the largest known reserve base of chrome ore at 72,4%. And
we are also number one producer of the world's ferroalloy at 40,5% of the
world's production. This means as a world leader in this commodity we can also
lead the world in diversifying our benefits. In the new policy context the
future of mining in South Africa is measured also by its long-term impact in
the quality of life of affected communities in the same way as value to
shareholders. In countries like Canada and Australia it has been shown that
whole communities can benefit from vertical and horizontal economic activity
induced by mining only if government and private sector work together. We in
South Africa are also determined that mining in South Africa does not leave us
with the same legacy left by mining in Welkom, Newcastle and in the
dense-labour-sending-areas such as the old Transkei, where thousands of
ex-mineworkers who were migrant labourers are trapped in grinding poverty.
After almost a century of supplying mines with highly exploited labour and
sweat. In the new dispensation we want to build a predictable better life for
all affected and to change the destiny of affected communities and workers who
must not exit the industry as sick, old, poor and broken souls.

Our country with all its robust growth now at 5,5% of the Gross Domestic
Product (GDP), has 12 million people who live on government grants. In addition
we have 7 million young people between ages of 20 to 35 who have never had a
job and have no likelihood of ever getting formal employment; they mostly have
less than 12 years of schooling, are destined to poverty. However, they are
trainable able-bodied and they hold a key to the future of this country, its
stability and productivity. It is to them that our shared growth path depends
because it is them we must share growth with. It is in these second economy
citizens that need to benefit from our industrial strategy soonest while we
also invest in absorbing the skilled minority and increase the number of skills
and expertise. The lower than desirable volumes of manufactured and exportable
goods has also been identified as a setback for faster and shared growth with
job creation.

I am aware that some of your competitors here in South Africa are exporting
ore and not beneficiating in the country. This is a matter on which we have
asked DME to act on in accordance with our policy without delay. In this regard
the Minister of Minerals and Energy will, sometime this year, gazette the
beneficiation base levels which everybody will have to comply with and as we
all know for chrome it is ferrochrome. Those who are not complying I would urge
them to work with us to prepare themselves to comply. Moreover, doing so will
augur well for our well-earned status as a world-class mining country.

It is encouraging to learn that this endeavour of Lion Ferrochrome has
resulted in employment of 2 700 people during the construction phase while
securing 'employment opportunities' for well over 450 people. As Xstrata Merafe
brief confirms: "This and other benefits confirms the value of beneficiation to
the economic growth of South Africa, as well as the sustainability of
communities in which mining takes place." I am also told that the Lion
Ferrochrome projects stands to boost skill expertise through its
state-of-the-art centre that offers various skills and qualifications in line
with the National Qualifications Framework. This is also significant as skills
are a binding constraint for growth in South Africa; hence we have the Joint
Initiative for Priority Skills Acquisition (JIPSA) and thanks to Xstrata also
for supporting JIPSA initiative by investing in our students and trainees.

In the development of human capital we can ensure our resources, human and
material, are used for sustainable economic and social development. We need all
of you to help to look at how we can create exit paths; long and short
staircases to move people out of the second economy. The proposed employment
subsidy for first entrants into the labour market as announced by the State
President in his State of the Nation Address provides one such facilitated
entry into the world of work hopefully for millions who at 35+ have never had a
job. We need the private sector in this regard to work with us in this
ambitious plan.

Together we must end dualism in the economy. The key features of second
economy include low skills, inability to contribute to GDP, burden of diseases,
unaffected by the prosperous growing economy, no possibility to escape, plus
the possibility that poverty will be passed on to the next generation. This is
the reality we have to change. One of the main aims of AsgiSA is to stop
intergenerational poverty and to do it predictably. This is something
government and the private sector cannot leave to chance. Our choices of
interventions in that regard include:

* provision of quality public education
* opportunities for employment creation with employment subsidy to push large
numbers into labour markets soonest
* provision of comprehensive support of Small, Medium and Micro Enterprises
(SMME) including micro-credit venture capital and institutions with appropriate
capacity and contribution of private sector
* provision of basic services, schools, clinics, roads, Information and
Communications Technology (ICT), energy, water and public transport
* acquisition of skills
* efficiency and capacity of the state
* spatial planning and location of human settlements of poor people in relation
to economic activity
* partnership between community, government and being able to dealing
conclusively with all these challenges must remain work in progress for the
whole nation.

These are some of the vexing issues of our national interest. We are however
in a positive growth path, our infrastructure and construction sector are
booming although we have challenges of cost capital goods, and tourism is
booming; our ICT industry is highly performing and has very good prospects; our
agriculture can do much better, and there is significant growth opportunities
in forestry. Our Business Process Outsourcing (BPO) industry also has good
prospects.

All of these need skill. Our energy challenges will be overcome but we need
you in the interim to be pro-active and save energy and make your own back-up
plans.

Our public transport has a very ambitious plan that will change the lives of
many communities. By 2010 we will be in a different place and it is not only
the Gautrain but a countrywide plan. Our Expanded Public Works is also set to
escalate and expand beyond infrastructure to include home-based care, early
learning and health.

In conclusion, I would like as well to commend the venture of Xstrata Merafe
for the role it will play in skills acquisition again. I do not need to tell
you if this country is to grow and reach its maximum potential, our efforts
together must yield results and together we must define this future which must
speak to communities.

We also have to increase tradable manufactured goods. We also do our best to
encourage a competitive currency and exchange rate and lower volume of imported
capital goods and cost of doing business in South Africa are all under
consideration. All of these we hope support your growth and sustainability.

Thank you for your hard work.

Good luck to you and to the community.

I thank you.

Issued by: The Presidency
1 March 2007
Source: SAPA