The obstacle of import parity pricing

Prof. Ben Turok (director) writes on import parity pricing as an obstacle for beneficiation. 

Published in Business Day 12/02/2015

The report on the legislative proposals discussed at the Mining Indaba (Minister goes back on mining agreement, February 11) raises many concerns. The mining industry has consistently stuck to its determination to sell minerals in SA at import parity prices and this has been contested by local manufacturers and the Department of Trade and Industry.

My institute has collaborated with the Industrial Development Corporation and the United Nations Economic Commission for Africa (Uneca) in two major conferences debating these issues in the context of examining the mineral value chain, including beneficiation. We have also engaged with the Chamber of Mines and CEs of large mining houses to ascertain why a factory in Johannesburg should pay the same price for a mineral as a customer in Japan. I have on several occasions asked them what price I would have to pay if I built a factory next door to a producer of a primary product and the answer has always been the import parity price. No wonder the Competition Tribunal fined Sasol and ruled that it must sell at the factory gate price to local manufacturers.

It seems some agreement has been arrived at on factory gate prices but it is not clear that this has been implemented, which is why the department is now seeking a developmental price. What is obvious is that our manufacturers cannot compete if import parity prices remain in place.

This issue is exploding in a manner that is unhelpful to our economy. True, there are many difficulties facing the mining industry, not least serious deficiencies in government services. But a step-by-step approach to solving problems is more desirable than the present confrontation. My institute is heavily committed to further research on the mineral value chain with Uneca.

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