'Bankrupt SA' warning if business is sidelined

THE private sector needs to lead SA’s reindustrialisation and minerals beneficiation strategies, as a drift towards nationalisation will eventually bankrupt the country, says Iraj Abedian, CEO of Pan Africa Capital Holdings.

He joins a growing chorus of concern that South African business needs to engage in the development of a strategy to extend its manufacturing capacities at home and across the borders.

At a forum on Monday night, hosted by the Centre for Japanese Studies at the Gordon Institute of Business Science, Mr Abedian was supported by business leader Michael Spicer in warning that the government was made responsible for too much planning and policy making.

"The reindustrialisation of SA requires a close integration of mineral beneficiation and manufacturing expansion. If this is not led by the private sector, a drift towards nationalisation will bankrupt the country," Mr Abedian said.

SA needed a "multistakeholder implementation and co-ordination forum" to develop a "binding roadmap for a synchronised action plan" for the economy.

This would allow minerals beneficiation and manufacturing capacities to be extended into the rest of Africa. But it required an "urgent" removal of infrastructure bottlenecks in energy, water and other regulated areas.

Mr Abedian, who had been a part-time economic adviser to Mineral Resources Minister Susan Shabangu until last month, said that SA’s business community was reluctant to lead alongside the government.

This left too much risk in the hands of the state, despite opportunities for companies to benefit from globalisation and growing urban populations in Africa.

While parastatals had a big role to play, the government had to facilitate the capacity of private enterprise for beneficiation across all economic sectors, including energy, water, communications and logistics networks, he said.

Mr Abedian said SA had the potential to reindustrialise faster than it had in the 1950s and 1960s, but this would require "inspired and sustained leadership of both business and government".

The country needed to extensively develop supply chain industries providing equipment and services to the mining sector, with extractive industries processing products for industrial applications and downstream activities.

This would further generate related industries and have multiplier effects, he said.

"Left to market forces, SA’s mineral beneficiation and reindustrialisation are unlikely to materialise," Mr Abedian said.

But he also said this process could not be left "to a political party to sort out". The revitalisation of SA’s heavily resource-biased economy needed to be driven by industrialists able to structure appropriate financing.

State-owned enterprises such as Transnet were locking out the private sector, preventing it from fulfilling its role in maintaining and developing SA’s rail networks, Mr Abedian said. However, that parastatal was now also leading the way in slowly opening doors to joint ventures with private firms.

Michael Spicer, former CEO of Business Leadership South Africa and now a vice-president of Business Unity South Africa, said although the private sector was "more than willing" to invest in its own logistics, or part-fund this by reaching some arrangement with Transnet, SA had an "acute case of silo ministries".

This meant the government was focused on engendering competition in the steel industry at a time when the global "steel space" was reeling, rather than creating "policy certainty".

The government did not have the broad vision that could integrate "commercially feasible" forward and backward linkages across industries.

Instead, Mr Spicer said, the state had told miners to go downstream and make "pots and pans", or "subsidise" someone else to do it for them. He said this was "ludicrous" and that miners "can’t and "won’t" beneficiate.

Alan Richard, Deloitte director and global construction leader of the Capital Projects Consulting Group in Washington, said last week SA’s government did not have the capacity to manage infrastructure projects on an integrated basis, where the state and contractors both took funding risks.

This meant SA would increasingly come under pressure from foreign developers, especially China, Japan and South Korea.

Mr Abedian said the Department of Trade and Industry’s latest iteration of the Industrial Policy Action Plan did not give a significant role to mining, and the New Growth Path of the Department of Economic Development saw it as a "sunset" industry.

"There is a mismatch between the Industrial Policy Action Plan and the New Growth Path."

Mr Abedian said integrated minerals beneficiation was a necessary platform for human resources development in SA.







Copyright © 2004-2014 Africagrowth Institute. All rights reserved