Programme Director,
Mr Cho Seok, Vice Minister of Knowledge Economy
HE, Ambassador Hilton Dennis
The President and CEO of KOTRA –Young HO
Co-Convenor of PBF, Mr Darryl Swanepoel
Esteemed Business Delegates from the Republic of Korea and RSA
Ladies and Gentlemen,
I am delighted to be here together with my colleagues to experience your hospitality and witness the remarkable economic and industrial development of South Korea. As one of the most remarkable stories of modern economic development in modern times, South Korea and its industrialisation path have much to be proud of. We in South Africa are keen to learn from the practical lessons of your industrious nation, and at the same time explore all avenues for collaboration and cooperation for mutual benefits. South Africa, under the leadership of my government, is currently focused on fine-tuning our policies and strategies towards the country‘s next phase of industrial expansion and mineral beneficiation. To this end, we are alert to the reality that our success will, to a large extent, depend on our smart global partnerships with the industrial groups and industrialised nations. We are equally aware that the global economic
conditions are highly volatile, unpredictable and riddled with structural complexities.
Over the past few weeks, the global economy has experienced yet another bout of extreme volatility, rising uncertainty, and considerable financial losses. Unlike the 2007-2009 recessionary upheavals in the financial markets, this time around the root causes of financial and economic concerns have been almost entirely founded in the public finance and fiscal conditions of some of the members of OECD ; ie Spain, Greece, Italy, and USA! Over the past year or so, the unsustainable pan-European public debt has been a growing concern for the global financial markets. And as if this was not bad enough, recently the USA government debt and its potential financial limitations culminated in an unprecedented down-grading of the US Government by the rating agency Standard and Poor.
Understandably, this has opened up a new chapter in the unfolding process
of global integration, with considerable and immediate adverse effects on the entire global economy.
The world over, economic growth expectations have been down-scaled. The IMF has revised down its world GDP estimates, as has done OECD and nearly all of its member countries. Mr Ben Bernanke, the Chairman of the US Federal Reserve Bank, has committed to unprecedented policy position by keeping the US interest rates at the current level of near-zero for at least two years until 2013, and possibly beyond. The European Central Bank (ECB) has bought considerable Italian government bonds at low rates, and has in effect committed to do so for others- if and when the need arises. This is an effective ‘quantitative easing’ by the ECB.
Whilst these policy interventions have helped calm the nerves in the global financial markets, they have by no means addressed the root causes. Much deep and wide structural adjustments in Europe and USA are yet to be politically agreed upon and implemented before the world economy can find its new stable path. In the meantime, all economic and strategic analyses point to a period of relative instability and low growth in the G7 economic zone. All eyes are therefore on the rest of the global economy, and most importantly, on the emerging market economies to cushion the world growth. In this context, the newly formed economic bloc, BRICS, is expected to play a critical role. As importantly, countries such as South Korea, Indonesia, Turkey, Mexico and the like are integral to the global economic performance.
As is widely known, South Africa is the latest member of BRICS. Whilst the size of the SA economy is much smaller than all other member countries, the SA macroeconomic and institutional architecture remain remarkably robust with well-established capital and financial market institutions. It is stating the obvious that the SA political economy landscape is saddled with massive structural challenges of wide-spread poverty, structural unemployment and systemic economic duality. At the same time South Africa has much to boast about and build upon.
In terms of World Economic Forum 2010 Global Competitiveness rankings of 139 countries, South Africa is amongst the top 10 in the following categories:
Category Ranking
Auditing Standards: 1
Regulation of the Securities
Exchange: 1
Efficacy of Corporate
Boards: 2
Soundness of Banks: 6
Equity Market Financing: 7
Financial Services: 7
Financial Market
Development: 9
These impressive rankings are the result of over hundred years of development based on a mixed economy experience. Furthermore, over the past 18 years, and with the dawn of democracy, the ANC-led government has exerted every effort to ensure a stable political economy environment with sound macroeconomic and financial stability. As a result, our constitutional democracy has deepened systematically and considerably. Our peaceful national and local elections have become part and parcel of socio-political life. By global standards this has been no small achievement; something that testifies to our nation’s determination to progress peacefully in line with sustainable norms of constitutional democracy.
As importantly, the macroeconomic management of our economy has been guided by our government’s commitment to ensure sustainability, stability and predictability in our investment and financial markets. The recent financial and banking crisis of 2007-2009 bear a strong testimony to the success of our strategy. South Africa did not have to rescue any financial institutions, nor was it hit by any need for substantial fiscal restructuring. Far from it, in order to cushion the blows of the global financial instability, and as a response to the slowdown of the economy, our government was in a position to introduce a large-scale- well over US$100 billioninfrastructure investment financing without facing fiscal difficulties. It is important to note that despite such public sector investments, the SA government’s total debt to GDP is below 50% at present. In a world where many G7 member countries have government debt in excess of 100% of their GDP, and some like Japan reaching 250% of the GDP, our situation in SA augurs well for the stability of the investment environment and fiscal
conditions.
The pattern of economic growth likewise has been fairly stable. Whilst our economy experienced a sharp slowdown during 2009, the recession was short-lived. The economy has registered sustained recovery ever since the first quarter of 2010. No doubt the recent global upheavals will impact our growth adversely, but all indications are that the SA economy will end the year with over 2.5% growth rate. Our economic analysis suggests that the resources sector will remain a key anchor for the growth and development of the economy for now and for years to come.
In this context, I am happy to confirm that my ministry has led the establishment of a mineral beneficiation framework for South Africa, and our Cabinet approved the policy framework. At present we are in the process of developing an action plan for its implementation. After considerable interactions with the industry players and experts, we are scheduled to complete the process of a beneficiation action plan later this year.
This is an important step in ensuring that our country’s mineral wealth becomes, once again, a source of further industrialisation of the economy, the creation of all associated infrastructure, and most importantly the creator of large scale and sustainable jobs. We have no doubt that given the recent estimates of South Africa’s considerable resources base, estimated at over US$2,5 trillion, and coupled with well over 100 years of mining technology, the country is well-placed to create decades of opportunities for investment and development in South and Southern Africa.
In order to boost the process of mineral beneficiation and the industrialisation strategy more broadly, our Government has also approved in excess of R22 billion of incentives for the industrialists and private sector investors.
South Africa’s mining sector is regulated by the Mineral and Petroleum Resources Development Act of 2002. After 10 years of implementation, we have established that the overall architecture of South Africa’s regulatory regime is sound and relevant, although we have also noted that there are few ambiguous provisions within the law that have created room for multiple interpretations. This is further corroborated by a number of litigations recently leveled against my department. Nevertheless, such litigations confirm the depth and breadth of democracy in South Africa. Any juristic or natural person who feels aggrieved in the process of law implementation, may not only appeal such within the provisions of the law, but have an option of pursuing an independent judicial process. There are not many mining jurisdictions that are characterised by such elements of democratic prowess.
Having said that, we have embarked on a robust process of overhauling our entire mining regulatory process in order to further enhance both predictability and certainty. This process began in earnest some two years ago through our well established multi-stakeholder task team known as Mining Growth, Development and Employment Task Team (MIGDETT), which is constituted by Government, organised business and organised labour.
The work of the task team has recommended a handful of critical areas of regulatory provisions that require attention in the process of amendments.
These areas include, albeit not limited to:
- strengthening the construct of legislation to remove identified
- weaknesses such as ambiguities in some of the provisions,
- clarifying the consultation process precedent to submission and
- processing of right application,
- streamlining the licensing processes to a virtual “one-stop-shop” for
- all mining requirements, including environment and water use
- licensing,
- strengthening provisions that sanction non-compliance appropriately,
- strengthening provisions to improve working conditions (mine health and safety) and our performance in this regard,
We have also published the amended mining charter in September 2010, with improved clarity on requirements as well the scorecard. I am pleased to also announce significant progress we have made in streamlining our administrative process in order to shorten the time it takes to process prospecting and mining right applications to six and three months, respectively.
Even after a century of active mining, South Africa remains the wealthiest mining jurisdiction, with a minimum in-situ valuation of US$ 2.5 trillion, with an economically exploitable lifespan in excess of a century. The mining skills developed in South Africa’s mining industry in the past 100 years have contributed immensely towards building and strengthening the global mining industry, with a number of global, mid-tier and junior mining companies benefiting from such skills. At the same time, our cash costs remain in the lowest quartile, with the exception of gold production which is being extracted from depths of up to 4 000 meters.
Importantly, it is our aim that the minerals mined in our shores need to be processed in our country as far as it is practicable to do so. Beneficiation is a natural progression from a resource-based economy to a secondary and tertiary economy. This is in line with the developmental path of many developed economies in the world. Moreover, this will present enormous investment opportunities in the country for both South African and foreign investors. In this regard, South Korean, and the Korean industrial houses have much to offer to South Africa and more specifically to the field of mineral beneficiation with all its associated industries.
It is common knowledge that ever since the discovery of diamond and gold back in the late 19th century, the mining sector in South Africa has been the cornerstone of the development of a number of industries that either supply the mining sector or use its products. This cluster of industries includes: energy, financial services, water services, engineering services, specialist seismic, geological and metallurgical services, etc. that are world class in their own right and that owe their very existence to the mining sector.
Eskom, Mintek, SASOL, Transnet, ISCOR (now Arcelormittal SA) and AECI are but some cases in point.
Significantly, the emergence of SA’s capital markets, via the Johannesburg
Securities Exchange (JSE), was originally established on the basis of funding the mining sector in the late 19th century. The mining sector still accounts for a significant 35 percent of the market capitalisation of the JSE and continues to act as a magnet for foreign investment to the country.
Once established, the JSE was able to provide the basis for capital raising for other sectors of the economy. This cluster of industries has gone on to service other parts of the economy and provided a significant export base to service the global mining industry.
The work of mining stakeholders seeks to ensure that “South Africa Incorporated” is positioned to leverage optimal benefit from the emerging cycle of commodities demand. The mining industry’s development requires both local and foreign direct investment. It is within this context that I sincerely hope that our visit to your lively country will advance the participation of South Korea, its industrial and investment houses in the vast opportunities that South Africa offer.
I look forward to exploring such options during our visit and follow them up upon return to South Africa.
I thank you.
