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Don’t make our economy so reliant on mining

Speaking at Kumba's stakeholder day on Friday, Godfrey Oliphant (deputy mineral resources minister) stated that salvaging the reputation of South Africa's mining industry is his number one priority. While this expression is commendable, surely a better idea would be to make the South African economy not so dependent on the mining sector so that if and when another wage strike – as we saw in the platinum sector earlier this year – happens again the SA economy won't be brought to the brink of a recession?

Figures from Stats SA indicate that in the first quarter of this year, when the platinum sector strike was getting going, South Africa's gross domestic product dropped by 0.6%. This indicates that the loss of earnings in this sector – occasioned by the strike – made a huge contribution to the SA economy. "The main contributors to this decrease in economic activity were the mining and quarrying industry (-1,3 percentage points) and the manufacturing industry (-0,7 of a percentage point)," said the organisation in a statement.

What is the current contribution of mining to the SA economy?

Professor Brian Kantor: chief economist and investment strategist in the research division at Investec Securities gives the following answer: "It all depends on how the share is measured"

He continues: "Lower levels of mining production, particularly if they are the result of strike action, threaten the trade account of the balance of payments and justify a weaker rand. The weaker rand then implies more inflation that makes it harder for the Reserve Bank to offer relief to the economy in the form of relief – e.g. - lower interest rates - that would make every economic sense.

"The SA economy remains highly dependent on the export of minerals and metals. Directly exported minerals and metals account for as much as 60% of all export revenue. Hence the sensitivity of the foreign exchange value of the rand to mineral and metal prices and their production."

The message that I take out of what Professor Kantor is saying is that the economy is circular and fluid, with each sector's contribution necessarily affecting all the aspects of the economy in some respect. Thus, if one were to take some contribution out of the flow of the economy, the other sectors wouldn't be influenced in the same way.

From what the professor says, I understand that mining forms an integral part of the economy – how much influence it has depends on a number of factors. If the influence of the mining sector is removed, the other parts of the economy will be affected – the question how much it will be affected depends on the factors I spoke of at the beginning of this paragraph.

Thus, there's no cut and dried answer.

Lia Marus is the editor of HR Pulse. She has a BA in French, Italian and Linguistics from UCT, an MA in translation from Wits and a Postgraduate Diploma in Management from the Wits Business School. She is currently studying towards her LLB through Unisa. Lia started her career off in corporate communications, where she worked as a sub-editor, researcher and marketing coordinator. She then heeded the call of the publishing world and went into the business-to-business publishing field. She worked as a sub-editor as well as a chief sub-editor. Before joining ITWeb, she managed an HR guidebook at a leading international publishing company.