Ramaphosa faces a brave new world in the mining sector
But there are some early and welcome signs that his presidency will find ways to deal with it
Last Wednesday, on the flight back to Cape Town from Johannesburg – the tail end of a long haul journey which commenced two days before in Sydney, Australia – I bumped into an old political acquaintance.
Pravin Gordhan, the correctly heralded anti-hero of Zuma’s lost decade, asked where I had been while the great South African political melodrama – complete with a happy ending – was unfolding here.
I advised him I had been in Australia when our unloved ex-president fell, noting that if I had stayed away longer perhaps the entire government might have disappeared. On Tuesday night this week, anyway, it changed its appearance, though not yet its overblown size, somewhat.
In fact I spent the first and last days of my Australian visit in Perth, Western Australia, a city at the very edge of that massive faraway continent. It is so remote from the rest of the country that American writer Bill Bryson noted: “Perth is closer to Bali than it is to Sydney but it is far from everywhere.”
When I commenced my old career, in 1986, as a Johannesburg city council candidate for the Progressive Federal Party (a political ancestor of today’s Democratic Alliance), the organisation used the acronym “PFP”. My National Party opponent sneered, with painful accuracy, that the real translation of the initials was “Packing for Perth”.Commencing in the 1980s, either to avoid military conscription or out of fear of the future or despairing of peaceful change in SA, or a combination of motives, many middle-class white South Africans did precisely that: packed up and left – either for Western Australia or the larger coastal cities Down Under in Sydney, Melbourne and Brisbane. That emigration has continued in the decades since, but has recently slowed, largely a consequence of economic conditions – some of which contain future, painful lessons for South Africa.
On this visit to Australia, I had a first look (not for emigration purposes, let me disappoint my critics) at Perth to catch up with old friends and board a cruise ship in nearby Fremantle, on which I delivered some lectures.
Decades back in the late 1950s, this once sleepy, farming-based backwater was transformed into an ultra-modern, skyscraper-fringed and infrastructure -rich city by the very factor which powered the rise of South Africa’s wealth and economy more than a century back: the discovery and exploitation of vast mineral and resources treasures.
Rio Tinto and BHP Biliton dominate the iron ore operations here centred in the Pilbara region, which provides China with this crucial raw material – leaving Australia crucially reliant on the Asian dragon for its economic wellbeing.
By comparison to Western Australia, a state which is physically twice the size of our country, South Africa is a mining laggard. The authoritative Fraser Institute 2017 Survey, the bible for minerals’ investors, rates Western Australia (in that county mining operations and rights are the jurisdiction of the individual states or provinces) as the fifth-best place in the world in terms of investment attractiveness in mining and minerals.
By contrast, and here the lying Guptaite Mosbenzi Zwane can take a bow – South Africa comes in 43 places later at 48th position. Perhaps his successor, old mining union boss Gwede Mantashe, will do better; he clearly cannot do any worse.
Of the 15 policy factors which determine the outcome of the survey, the first issue is “uncertainty concerning administration, interpretation and enforcement of existing regulations”.
The completely arbitrary, cack-handed manner in which Zwane and his Minerals Resources Department have initiated and handled the controversial mining charter weighs heavily against our country as a destination for mining investment.
Yet, even in policy-excellent Western Australia, which consistently features in the top 10 of the Fraser Institute benchmarking surveys, major challenges face the mining sector, the most acute of which no government or mining policy can control: the ebb and flow of commodity prices.
Thus, while South Africa’s bad policies meant we missed the opportunities and investment flows which followed the commodity super cycle, before the global recession of 2008, Western Australia surged in that period – hence the skyscrapers, massive infrastructure and gleaming First World appearance of Perth.
But when the commodity prices collapsed, real distress followed, including significant unemployment and a huge downturn in the property market, where the oversupply of homes is estimated at around 70% and office space in Perth is about 30% empty.
Back at home, two early and welcome signs of the Cyril Ramaphosa presidency offer some glimpses into how the one-time boss of the mine workers’ union and now country president might deal with our own distressed mining sector.
The most obvious was his signal that he will intervene in the dispute between Zwane’s department and the Chamber of Mines over the contested charter. The response of the industry, to pend its legal challenge to the department, suggests an amicable outcome is now possible.But the second sighting is more indirect: as part of his early morning charm offensive, Ramaphosa was photographed on a power walk in Sea Point alongside former Finance minister Trevor Manuel.
Some years back Manuel offered this essential wisdom: “Jobs are bloody difficult to create, and the more adjectives we put in front of them the harder they are to create.”
Indeed, and here Western Australian mining companies’ response to the commodity price reversals of recent years suggests a future in mining exploitation and exports which offers a whole set of new challenges to our own beleaguered mining sector.
Because, assuming Ramaphosa’s formidable negotiation skills create a better, more Australian-style mining model for our country, this could guarantee future investment, but not crucially needed job-creation.
Back in the heyday of the minerals super cycle, Western Australian truck drivers, essential to get the ore from remote Pilbara to the ports of export hundreds of kilometres away at Port Hedland, Demper and Cape Lambert, were among the best paid workers in the country. At around Aus$160,000 per annum, the truckers were, in rand terms, multi-millionaires.
But precisely because mining is as much an exercise in logistics (getting the minerals to export) as in cost containment and prices, the advent of robotics, artificial intelligence and advanced automation has now gutted those jobs.
Today, three-storey-high trucks, literally, drive themselves from Pilbara’s three Rio Tinto mines to the seaports – and the company is the first in the world to move its ore using fully automated, driverless haulage vehicles.
The trucks were first introduced eight years ago as part of Rio Tinto’s “Mines of the Future” programme. In addition to the trucks, the company also uses autonomous drills and drones as features of its worker-light cost-containment efforts.
Michael Gollschewski, MD of Rio Tinto mines at Pilbara, says that technology has transformed ore operations and allowed the company to mitigate the effects of the highs and lows of the commodity price cycles and positioned his company as the lowest-cost iron ore producer in the region.
Of course, human truck drivers can be hazardous and require regular breaks and hefty overtime payments: autonomous trucks can run 24 hours a day, 365 days a year and outperform the manned fleet by an estimated 14% and reduced operating costs by 13%. So the investment in technology fairly rapidly pays for itself.
Here at home, Cyril Rampahosa holds the promise for an adult relationship between government and industry and a sophisticated understanding of the current business cycle.
But the real test of his future leadership – and the fate of employment creation in South Africa – will be his and our adaptibility to the new world of work and a realisation of how light on traditional workers that future will be.