JOHANNESBURG (miningweekly.com) – The Marikana tragedy and the events that it sparked have re-inflicted a 1970s-type stagflation on the South African economy, which is now poised to be downgraded yet again by a third sovereign ratings agency, says Webber Wentzel’s Africa mining head Peter Leon in a Chamber of Mines- (CoM-) sponsored mass-media article published on Thursday.

In the fourth of a five-day CoM-funded print campaign made up of two-page broadsheet no-holds-barred advertorials on South Africa’s beleaguered mining industry, Leon says that while media attention is understandably focusing on the leadership outcome of the African National Congress’s (ANC’s) upcoming elective conference in Mangaung, far more attention needs to be paid to what Mangaung will mean for South Africa’s all-important mining industry.

In the same two-page advertorial spread, CoM president Mark Cutifani, who is also AngloGold Ashanti CEO, says that the South African mining industry stands ready to play its part in seeking fair outcomes, while ANC secretary-general Gwede Mantashe, who is a former National Union of Mineworkers head, says that the embryonic State mining company African Exploration Mining and Finance Corporation (AEMFC) will be the vehicle for the State’s involvement in the mining sector “over the next while” and not the nationalisation of mines.

Leon points out, against the background of mining representing 60% of South Africa’s exports, that the R10-billion ($1.2-billion) post-Marikana production loss has resulted in South Africa’s trade deficit reaching a dangerous level of 6.4% of gross domestic product.

This is, in turn, leading to ongoing currency weakness, higher bond yields and declining 2012 economic growth, now estimated at only 2.5%.

“In other words, all the characteristics of 1970s-style stagflation”, on top of endemic poverty, inequality and record 25.5% unemployment.

Leon expects ratings agency Fitch to follow Moody’s and Standard and Poor’s in imposing another sovereign ratings downgrade on South Africa in January – the country’s third in as many months.

Instead of the resolution advocating “strategic nationalisation… on the balance of evidence” being placed on the upcoming ANC conference’s agenda along with a greater AEMFC role, the inclusion of the recommendation of the ANC's 'State Intervention in the Mining Sector' report that an independent minerals commission take over the functions of the Department of Minerals Resources would have been far more constructive.

He says that as a result of warnings going unheeded about the Mineral and Petroleum Resources Development Act’s lack of objective licensing conditions and its complete absence of decision-making time limits, the average period for the granting of a prospecting right in 2011 extended out to 284 days - compared with the Botswana target of 60 days - and investment fell 43% in the first half of 2012.

“An appropriately resourced, technically competent and independent regulator could help South Africa’s mining industry back on the path of economic growth,” says Leon.

Cutifani concedes that single-sex hotels and skewed management demographics continue to afflict the industry and that the social compact entered into after the last major strike in 1987 is now seriously damaged and in need of repair.

For the industry, reinforcing the dignity of the workforce is an absolute necessity; for migrant-worker-dependent operations, the complex challenge of developing an understanding of what solutions there might be to the unnatural way of life that the migrant-labour system has spawned over the past century is being faced; for organised labour, there are questions regarding worker alienation from their traditional representatives; for new worker leadership, there are questions about violence and intimidation; and for the State, hard questions need to be asked about local government responsibility and the education system.

A clear understanding needs to be developed about the trade-offs between better wages and working conditions on one hand, and jobs on the other, and the industry, Cutifani says, “cannot and does not” seek to justify minimalist conditions.

But everyone needs to understand that job loss results when increased costs are not matched by increased productivity.

Mantashe advocates that AEMFC, which is currently mainly coal focused, partners with the private sector, and he reserves Mangaung's right to be able to pronounce on minerals that are regarded as strategic. Uranium has already been declared strategic and coal has also been mooted as a strategic mineral candidate.

Mantashe alleges that fuel-from-coal producer Sasol, a former State-owned enterprise, was rushed into privatisation, and alludes to the need for both steelmaker Arcelor Mittal South Africa, also a former State-owned enterprise as Iscor, to be re-nationalised.