Issued by: The Minister of Mineral and Energy Affairs
Pretoria, Wednesday 17 September 1995
CABINET DECIDES ON
Evaluation Criteria for Deciding on the Future of Mossgas
The Cabinet today decided that, since the strategic considerations which led to the establishment of Mossgas no longer apply, the Project should in future be evaluated purely according to economic and socio-economic criteria.
In September 1994, the Parliamentary Joint Standing Committee on Public Accounts (the Committee) heard evidence on Mossgas and made the following recommendations:
Appeal to Lift Restrictions on the Competitiveness of the South
The Cabinet today decided that all government institutions, in particular the Departments of Mineral & Energy Affairs, Finance, Trade & Industry and the Reserve Bank, be requested to urgently reconsider all restrictive legislative and policy measures that currently prevent the local gold jewellery industry from becoming internationally competitive.
Although, despite falling output, South Africa is still the world's largest gold producer, beneficiation of our own gold by way of jewellery design and manufacture has been paltry. A decade ago it represented one ton (0,15%) out of our 670 tons annual production at that time. By contrast, Italy dominated world jewellery manufacture and Far East countries like Hong Kong, Thailand and Taiwan developed vigorous and growing jewellery industries.
South Africa, for so long the giant of world gold production, has been a dwarf when it comes to gold jewellery manufacture. Some reasons have been: an ad valorem tax of 35% on the value of locally manufactured jewellery, a ban on jewellery exports having an added value of 25% or less, and ironically limited local gold supplies.
The tax was first reduced and then abolished in 1990. The added value requirement has been lowered to 15% and, in special cases, 10%. Probably as a result of these measures, gold use by the local jewellery industry has crept up to 4,5 tons per year - a negligible 0,2% of the estimated 2 500 tons of world gold jewellery manufactured.
In addition South Africa, the world's largest gold producer, provides its own gold to its own jewellery makers at a rate not yet in line with world jewellery manufacturing nations like Italy - the world's largest jewellery manufacturer which produces no gold at all - despite the low basic charge from the Reserve Bank.
Discussions will have to be held with the various stakeholders on ways and means of making gold available to the South African jewellery industry at as competitive a rate as possible - preferably at least the same rate which the Italian industry enjoys.
If our local industry could expand to using 100 tons of gold annually, with an average added value of 25%, it would earn R1 000 million in foreign exchange and create 50 000 jobs. Additional jobs would be created in marketing, sales and distribution. The industry would be ideally placed to benefit from the growing number of tourists coming to South Africa.
It takes a relatively short time - 12 to 18 months - to establish small to medium jewellery manufacturing ventures. Foreign investors have already shown an interest in financing them, but are put off by the higher raw gold price. The industry is labour-intensive and is ideal for small-scale entrepreneurs.
The major obstacle preventing this scenario becoming reality is the availability and price of gold to local jewellery makers. Hence the Cabinet's decision today. Our local industry can only grow if gold is supplied to it as required and at an internationally competitive price.
Appointment of Trainee Mine Inspectors
My proposal that the Department of Mineral & Energy Affairs initiate a programme to appoint and train fifty mine inspector candidates, described in a previous Media Release today, was also approved by Cabinet
Enquiries: Roland Darroll Phone: (o) (012) 322 8695; (h) (012) 43 3394; (cell) 082 552 7994