South Africa’s economy must realign its core industries, including mining, and rethink existing business models to maintain global competitiveness and avoid a continued economic decline.
If it does not, traditional mining houses are likely to step aside creating a gap for Chinese owned mines to become a reality.
This is one of the main messages generated in The Gordon Institute of Business Science’s (GIBS) Future of Business in South Africa project, which recently launched its inaugural GIBS Alternative Future Scenarios for South African Mining, Manufacturing and Financial Services report.
The report proposes baseline and alternative scenarios for the three key economic sectors, the success of which are paramount for the country’s continued growth and prosperity.
Forming part of a three year study on the future of business in South Africa, the report further affirms that without urgent strategic and policy intervention, South Africa could see Chinese owned mines.
Marius Oosthuizen, programme manager, Future of Business in South Africa Project at GIBS warns: “The government is orientated towards social goals and the strategic focus of business is on success based on existing business models. But South Africa is becoming less and less competitive; the gap is widening and increasing costs are threatening the viability of the very models that our success depends upon.”
Researcher, Kagiso Pooe, says, “The mining industry has long been the economy’s focal point after it transformed the country from a colonial outpost, while both manufacturing and financial services owe their existence and advancement to mining. But these dependencies are changing and cannot be sustained.”
The baseline scenarios proposed by the report foresee continued decline and South Africa falling further behind its global competitors.
The Mining Scenario
Baseline scenario 2020 “Chinese partner for State mine – Contestation for ownership” sees South African mining operations bear the brunt of political realignment and a lack of appetite from historic investment partners.
Under this scenario rising costs undermine the profitability of the sector. The state intervenes, both for pragmatic and ideological reasons, opening the door for a form of quasi-nationalisation. Chinese investors seize the opportunity to secure resources and anchor their influence in Africa through investment in undervalued mining assets.