9.6 MINING EQUIPMENT MANUFACTURERS SEE SUBSTANTIAL OPPORTUNITIES IN SUB-SAHARAN AFRICA AS WELL AS SOUTH AFRICA. The dtic and the DMRE must align on this campaign. Due to Southern Africa’s exceptional minerals endowment, SA and the rest of SADC have a larger mining capital goods market demand than Europe, potentially allowing for scale economies for the bulk of these inputs. The SADC import displacement opportunity is around $4 billion / year (about R70 billion / year). However, building the mineral backward linkages (supply chain) is critically dependent on building a strong mining RDI capacity (and STEM HRD), which SA once had (COMRO and SA “Mining Houses” R&D capacity), but by 2015 this had dissipated. The Mining Phakisa (2015) recognised the crucial importance of rebuilding SA’s mining RDI capacity in order to (1) develop new technologies to be able to safely and viably extract our huge ultra-deep (gold) and narrow reef hard-rock resources (mainly gold & PGMs) and (2) in order to realise the enormous supply chain industrialisation opportunity in capital goods manufacture. The mining/processing capital goods included here are also used in other sectors, such as earth-moving and construction, materials handling, water treatment, chemicals, etc. These add to local demand and the opportunity for establishing local manufacturing industries for inputs. The $4 billion / year excludes capital goods where mining is not the biggest market: e.g. commercial trucks/bakkies, road building equipment, generators/motors, et al. 9.6.1 The dtic will collaborate with the Mining Equipment Manufacturers of SA (MEMSA) and the OEM Forum to develop a concept plan for the manufacture of mining equipment and the development of partnerships and plants in the SADC region. 9.6.2 The focus at first will be on the SADC region. The SADC Council of Ministers has approved a mining strategy which emphasizes backwards and forwards linkages into manufacturing, especially looking at opportunities in the manufacture of mining equipment. There are several South African OEMs in the industry. They are keen to develop partnerships with firms in the region, where those firms could form part of the value chain. Discussions have taken place with the African Development Bank and others for the creation of a venture capital or similar fund to assist the development of plants (such as machine shops and foundries) in other countries in the region. The regional (SADC) market outside of SA is about the same size as the SA market, but is growing faster than that of SA, and is even more reliant on imports than SA. The SADC Regional Mining Vision calls for “regional-local content”, where all members would recognise value addition in other member states, weighted to advantage poorer states, to increase the market and scale economies. The RMV recognises that access to capital is a major constraint to taking advantage of the huge supply-chain opportunities and consequently proposes the creation of a regional fund to co-invest in supply-chain plants. 9.6.3 Foreign OEMs often have home-country Export Credit Agencies (ECAs) to provide cheap credit for the leasing of their capital goods, which cannot be matched by SA OEMs and has contributed to their losing market share. The IDC has been asked to develop a competitive leasing system. The IDC has already developed a leasing instrument for SA rolling stock manufacturers, with a local company. 9.6.4 SA has mining OEMs that manufacture, or can potentially manufacture, almost all of SA’s mining supply- chain requirements at international standards, using locally developed Intellectual Property. Although most mining capital goods were bound at zero tariffs in December 1993 (HS 843031) there is some mining equipment that is applied at zero, but bound at 10% to 50%, such as Articulated Dump Trucks (ADTs) and tractor loader backhoes (TLBs). The SA manufacturers claim that they could possibly double their sales if the 10% tariff was applied on selected imports. The dtic will engage ITAC concerning these tariffs and their WTO bound rates. The National Treasury notes as follows: “Tariff protection will reduce the volume of low priced imports by increasing the cost of imported yellow metals for both government and the private sector, making the local producers more competitive. As such, ITAC should prioritise the tariff investigation for mining construction vehicles”. 9.6.5 Three interventions (leasing, PPPFA designation & tariffs) are practical and could dramatically increase the market share of South African OEMs by displacing imports and should be urgently implemented. The SA mining OEMs and elements of their supply chains are at a tipping point after years of increasing challenges that have led to a well-documented trend of de-industrialisation. Further delays in action will ultimately lead to an irreparable loss of capacity.
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The South African Steel and Metal Fabrication Master Plan 1.0
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