The GNU is out of touch with people who are engaged in the real economy, and nowhere is this more evident than with broad-based BEE, says Tumi Tsehlo, chair of the South African Capital Equipment Export Council (SACEEC).
“Everybody knows that we need B-BBEE and we need transformation, but whenever there is somebody that discusses B-BBEE it is immediately perceived by the government as a rejection of transformation,” says Tsehlo, who is CEO of Dynamic Fluid Control.
The government needs to recognise that B-BBEE has not achieved its intended outcomes and must be open to discussing an alternative policy that focuses on economic growth.
“We have to have a deliberate intention to transform what our economy looks like, but B-BBEE has not shifted the needle. We’ve created a middle class but we haven’t made a dent in unemployment.
“The debate about B-BBEE is a red herring. I don’t think the government needs to keep defending itself with B-BBEE, it needs to focus on what are the right policies to stimulate growth.”
The key driver of growth has to be industrial policy, but this requires coherent leadership from the department of trade, industry & competition which under minister Parks Tau has been missing in action.
“I have not heard him express an opinion that gives us in business any guidance on his thinking in terms of policy,” Tsehlo says.
Tau is not the only minister failing the country in this regard, he says. The GNU has been characterised by the absence of coherent political leadership or focused pro-growth policy, which has been hugely damaging in the industrial and mining sectors.
“In terms of industrial policy there is a shift South Africa needs to make in how we think about promoting industrialisation. Nothing we’ve done in the past 10, 20 and 30 years has been effective except the motor industry development programme.”
Without this programme, launched in 1995, South Africa’s auto manufacturers, who employ thousands of people, would long since have moved elsewhere, he says.
“There are many examples in the world that with policies focused on incentives, countries have made progress. In our case we’ve only used incentives in the automotive sector. We’ve never expanded it beyond this sector. We’ve never asked how this could work in mining and more broadly to build a bigger industrial base in South Africa.”
Instead of incentivising the mining industry, which is pivotal to industrialisation, government policies do the opposite, with devastating consequences for jobs and economic growth.
“We have lost huge opportunities with mining falling behind. Exploration has fallen behind, there’s a lack of greenfield projects,” Tsehlo says.
The SACEEC was started in 2000 to service the local mining industry at a time when South Africa was ranked as a top global mining power. Now it is ranked in the bottom 10, and the council is far more active outside South Africa — in the US, Mexico, Brazil, Australia and Canada. In 2021 it exported R178bn of machinery and equipment to these countries, making it South Africa’s biggest exporter of goods after the agricultural sector.
“If you look at each of these countries, the one thing we have in common is that we are rich in mineral resources. The only country among these that lacks a supportive mining policy is South Africa.
“We don’t have an opportunity to leverage mining the way it was leveraged in the last century when mining was the bedrock of South Africa’s industrialisation. It still is.”
Eskom and Transnet are the other major drivers of industrial activity. Mining represents a much bigger opportunity for industrialisation, but it is an opportunity that is “passing us by”, says Tsehlo.
“We are currently failing to participate in the large amount of excitement going on around critical minerals. Why? Because we have not found them yet in South Africa. Why? Because exploration has not been done. As a result we’re already very much on the back foot when it comes to exploiting critical minerals.”
A vibrant mining sector supports innovation that benefits adjacent industries, promoting economic growth and job creation.
“We are failing to strengthen our mining base because of policies that are hostile to creating a thriving mining economy. As a result other countries that are less mineral rich are leaving us behind. Canada, Brazil, Australia, Mexico, the US and so on.”
Tsehlo mentions the long absence of a cadastral system that has seemingly been under development for “a very long time”, and red tape which has also for “a very long time” obstructed the approval of licences.
The result is new mines are not being launched in South Africa at the pace they should be, if at all, he says.
“Imagine if we had the right kind of industrial policies that promote economic growth. In the public sector the infrastructure spend that is supposed to happen to rebuild infrastructure we need such as water infrastructure, has been stagnant.”
The SACEEC provides capital equipment for infrastructure projects, but although many projects are listed, very few of them get off the ground.
“When we do get them off the ground we don’t have the right policies that are focused on stimulating local investment and local production that will absorb local labour.
“We have to get to grips with the nuts and bolts of economic recovery, and understand that you cannot deindustrialise your productive capacity and expect that you are going to be successful in keeping your masses employed. We have to focus on how do we stimulate local industries, particularly mining.
“We need a mining policy that will enable the country to take advantage of the critical minerals boom and drive industrial demand.”
Tsehlo says it “goes without saying” that South Africa’s economic prospects have been harmed by not having an ambassador in Washington.
“And when we did have an ambassador he didn’t do us any favours with the kind of utterances he made about President Trump.
“Every day without an ambassador, somebody who can be heard by the right audience, has cost us. At times we have played to the gallery in a good way. At times we have allowed our politics to get in the way, and that has not always been helpful.”
