You win some, you lose some
We live in a topsy-turvy world. Stock markets soar and dive on investor sentiment, business confidence ebbs and flows with the release of each economic statistic, and our emotions surge and plunge as we scan the headlines accompanying our daily news fix.
In today’s Stokes’ Stage we’re going to unpack the results of two recently-completed global surveys. The first is the oft-quoted World Competitiveness report, which ranks the world’s top economies on their ability to compete on the global stage. Clem Sunter, acclaimed scenario planner and chairman of the Anglo American Chairman’s Fund, compares the ranking system to the English premier football league tables. Countries hunger for a top finishing slot, but must avoid relegation at all costs. The second is the Fraser Institute’s annual survey on exploration in the global mining industry. It offers comment on countries’ effectiveness in unlocking their natural resources. How did South Africa fare? As our catchy title proclaims: “Well, some you win… And then some you lose!”
Climbing up the rankings, for now
We ‘won’ in the World Competitiveness ranking – or at least continued our impressive two-year World Competitiveness recovery. After slipping to 53rd place in 2008 we gained five places to end 2009 in 48th position, and another four places to slot into 44th position this year. China (18th), India (31st) and Brazil (38th) fared better than South Africa. But we managed to ‘pip’ Colombia (45th), Greece (46th) and Mexico (47th) to the post. The ‘survey’ results are taken from the World Competitiveness Yearbook 2010, an annual digest published by the Switzerland-based Institute of Management Development. It ranks 58 economies on four competitiveness factors, including government efficiency, business efficiency, economic performance, and infrastructure. To what can South Africa attribute its recent competitiveness improvement?
Sello Mosai of Productivity SA tells Sake24: “South Africa’s strong competitiveness is linked to the increased level of portfolio investment assets and direct investment moving inward, as investors divert their investments to emerging markets [less] exposed to the financial crises.” He believes improvements in labour market flexibility, the country’s current account balances and lower inflation have played a part too. The country has certainly benefited from its disciplined fiscal and monetary policy in recent years; but we cannot concede on the labour market argument. If anything labour and productivity are the reason South Africa is languishing in the bottom third of the world’s premier league to begin with. Another development in our favour is the recession-linked deterioration in economies that previously ranked above us.
We were rather puzzled by the reports’ conclusions on the individual competitiveness factors too. South Africa scored a disappointing 51st for its infrastructure, despite the massive investments made in energy, transportation and other infrastructure development of late. The country slipped from 30th to 31st for business efficiency, but climbed five places to 21st in government efficiency. This impressive result belies what South Africans are experiencing on the ground. And it contradicts the result from the ‘second’ survey.
Mining on the skids
Before you become teary-eyed over South Africa Inc’s moderate gains on the world league tables, consider the dismal performance from our mining industry. Gold mining – once the cornerstone of the economy – has been in decline far as long as we can remember. A decade ago South Africa produced approximately 451 tons of gold, compared to 234 tons in 2008 and 222 tons last year. There are plenty of reasons for the downward trend. The main factor is the increasing inaccessibility of the country’s remaining gold ore reserves. Gold miners have to burrow deeper into the earth in search of decent yields. And as mine shafts reach depths of four to five kilometres underground, the costs (and risk to life) increase exponentially.
But there’s another problem. The recently released Fraser Institute annual survey on exploration in the global mining industry ranks South Africa as one of the least attractive countries for mineral exploration. And it’s this exploration that contributes to the long-term sustainability of mining! Representatives form 670 global mining companies (which spent a combined $2.9bn on exploration through 2009) were asked for their views on the attractiveness (in terms of legislation) of various mining exploration amphitheatres.
South Africa was ranked 62nd of 72 countries in terms of its attractiveness for exploration. Last year we occupied 49th position. Analysts – perhaps stuck for words – were quick to point out that the Democratic Republic of Congo (DRC), Zimbabwe, Indonesia, Guatemala, Honduras, Bolivia, Mongolia, the Philippines, Ecuador, Venezuela and the American federal state of California ranked below South Africa. On a measure of ‘mature mineral wealth’ South Africa ranked 48th.
Too much meddling
If you strip out the impact to regulation and political meddling the picture is quite different. The DRC, for example, rates 2nd on a ‘wealth of resources’ basis. Whether nationalisation of mines and natural resources is government policy or not, the ranting of African National Congress Youth League leader Julius Malema’s is sending a dangerous message, both locally and abroad. Unless government clearly states its position on mining resources and mining assets the country will slide further in future surveys. And mining production will suffer too.
Editor’s thoughts: Government’s job is to lay the foundation for continued inward investment from private companies. The private sector’s task is to create employment opportunities and contribute to state coffers by paying taxes on annual profits. Is government encouraging an appropriate balance between private industry and matters of state? Add your comment below, or send them to [email protected]
