JOHANNESBURG (miningweekly.com) – 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 infrastructure.

He sees no point in developing uncompetitive infrastructure that creates private-sector losses.

“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).