Abstract
How has the intensity of the ability of commodity-specific output growth to create jobs evolved? We establish that metal ores, platinum group and coal are the biggest contributors to the primary sector output. Combined, the three sectors constitute more than 60 per cent of the primary sector output. Evidence shows that all these sector output-employment intensities are sensitive to the commodity prices in the respective commodity sectors. But, the coal mining sector output generates more output-employment intensity compared to the metal ores and the platinum group sectors. Hence, we conclude that there is a case for a special treatment of coal mining within the mining sector and energy mix policy. This can be supported by the co-ordination of the trade and other macroeconomic policies.
Other sectors which include the diamonds, copper, chrome and manganese are non-negligible and contribute between 2 per cent and 5 per cent to mining employment. The diamonds, chrome and manganese commodity sectors have been making positive contributions to the mining sector post-2009. Combined, these commodity sectors employ more than 50,000 people. Evidence show that the other commodity sector output is employment intensive and compares favourably to the platinum group especially post-2009. The coal, metal ores, platinum group and other commodity sectors will underpin the mining as a “sunrise” industry. In addition, these sectors will play an instrumental role in the employment creation and meeting the unemployment targets set out in the National Development Plan. Furthermore, the fact that commodity prices play an instrumental role in these sectors that will underpin mining as a “sunrise” industry places a sense of urgency on the exchange rate policy, the design of the proposed sovereign wealth fund, the co-ordination of the trade and other macroeconomic policies.
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Notes
- 1.
“The mining sector is another area that has massive unrealised potential for growth and job creation. We need to see mining as a sunrise industry” https://www.parliament.gov.za/state-nation-address-cyril-ramaphosa-president
- 2.
Connolly and Orsmond (2011) refer to this as the period during which mining was dismissed as emblematic of Australia’s “old economy”, with prices for key resource exports at their lowest levels in real terms for a century.
- 3.
Also referred to as the “Okun’s coefficients”
- 4.
The report shows and argues that the electricity sector, the liquid fuels manufacture sector and the basic iron and steel industry are the three industries that will be adversely affected by the implementation and enforcement of strict environmental laws in South Africa. Together, these three sectors account for more than 80 per cent of domestic coal demand in terms of value and approximately 70 per cent in terms of volumes. Indirectly, the coal industry is responsible for creating and sustaining over 170,000 jobs outside the coal industry.
- 5.
Figure 11.12 shows the evolution of the platinum, iron ore and coal prices.
- 6.
For further details, see http://www.chamberofmines.org.za/component/jdownloads/send/25-downloads/535-coal-strategy-2018
- 7.
The South African Chamber of Mines shows that coal export prices are the leading indicator for net investment. A sustained increase in export prices is soon followed by higher net investment. Globally, coal prices are determined by demand and supply, whereas the benchmark price for domestically consumed coal is set by Eskom and has historically always been lower than the export price.
- 8.
We show the evolution of the Okun’s coefficients in log changes in Fig. 11.14 in the Appendix.
References
Connolly, E., and Orsmond, D. 2011. The Mining Industry: From Bust to Boom. Research Reserve Bank of Australia. Discussion Paper 2011-08.
The South African Chamber of Mines. 2018. The National Coal Strategy for South Africa 2018. https://www.mineralscouncil.org.za/special-features/604-national-coal-strategy-for-south-africa.
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Appendix
Appendix
Platinum, iron ore and coal prices. (Note: The grey shaded areas denote the South African recession. Source: International Monetary Fund Commodity Prices database and South African Reserve Bank)
Comparison of coal prices. (Note: The grey shaded areas denote the South African recession. Source: International Monetary Fund Commodity Prices database)
The evolution of output-employment coefficients in equations (log changes). (Source: Authors’ calculations)
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Gumata, N., Ndou, E. (2019). How Has the Intensity of the Ability of Commodity-Specific Output Growth to Create Jobs Evolved? Implications for the Mining Sector as a “Sunrise Industry”. In: Accelerated Land Reform, Mining, Growth, Unemployment and Inequality in South Africa. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-30884-1_11
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DOI: https://doi.org/10.1007/978-3-030-30884-1_11
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