Shunning of SA private sector a huge mistake

Mining risk management company Eunomix,
which is on the cusp of publishing a crucial
study on African economic advancement
through resource development, warns that
South Africa will pay a heavy price if it spurns
the opportunity to leverage off its well-
established private sector.
Shunning the private sector and clamping
down on its growth is “a huge mistake” that
will result in a heavy price for decades to
come, Eunomix MD Claude Baissac warns in
a videoed Mining Weekly Online interview.
“Private-sector development is what it’s about
in Africa. It’s not about big States any more.
We’ve been there in the 70s, we’ve seen the
price. It was staggering,” Baissac says, adding
that South Africa’s private sector is arguably
better developed than the private sectors of
some Latin American and Asian countries.
While enormous amounts of money are being
devoted to private-sector development in
other African countries, South Africa’s ruling
African National Congress (ANC) continues to
mistrust South Africa’s “incredible private
sector”, which has the wherewithal to put an
end to South Africa’s oft-cited ‘evil triplets’ of
poverty, unemployment and inequality.
Eunomix’s soon-to-be-completed study makes
use of 40 years of World Bank data to show
the huge benefits that accrue to countries that
manage mining well, and the huge
opportunity costs countries suffer when their
resource endowment is mismanaged.
Baissac urges the ANC to understand that the
oft-cited ‘evil triplets’ of poverty,
unemployment and inequality are
consequences rather than causes.
“Don’t fix the consequences, fix the
underlying causes, and there are three very
evil triplets in South Africa that remain
unaddressed, and they are low growth, low
investment and low trust,” he says, adding
that developmental institutions like the World
Bank, the International Finance Corporation
and the African Development Bank devote
enormous sums of money to private-sector
development in all the African countries in
which he works.
He believes that the country should move
away from its developmental-State obsession
and embrace the private sector.
South Africa, in his view, does not have the
fiscal capacity to be the kind of developmental
State that can advance society and achieve
the required economic growth.
While some in the ANC acknowledge that the
government’s lack of trust of the private
sector is the main impediment to economic
growth, until the relationship with the private
sector is fixed, South Africa will be burdened
by lower growth, lower investment and lower
business confidence, “and that’s going to lead
to a perpetuation of poverty, unemployment
and inequality”.
He is convinced that the correct government
policy will restore the South African mining
industry to the country’s main engine of
economic growth.
“It’s down to policy,” he says.
While he is sympathetic to government
wanting to capture more rent from mining, he
sees no point in more taxes going to a State
that is dysfunctional and incapable of using
the money to develop cost-competitive
He sees no point in developing uncompetitive
infrastructure that creates private-sector
“If we can learn from 40 years of mistakes in
Africa and 40 years of successes in Africa, we
can really turn mining around,” he adds in the
videoed interview (see access icon in
accompanying picture).

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