RR

AlternAtive Future ScenArioS For South AFricAn Mining,

MAnuFActuring And FinAnciAl ServiceS

Exploring the business environment

and the subsequent public policy and

business strategy agenda that will define

the economic future of South Africa

Produced by: Future of Business in South Africa Project Centre for Business Analysis and Research

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MANUFACTURING FINANCIALMINING

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EFFICIENCY

INNOVATION

INTEGRATION

COMPETITIVENESS

contentS2 Introduction and Executive Summary

6 Baseline Future Scenarios for Mining,

Manufacturing and Financial Services

8 Mining: “Chinese Partner for State Mine - Contestation

for Ownership.”

10 Manufacturing: “SA Niche Competes – High-End

Move North amid Closures.”

12 Financial Services: “SA Firms Slow to Evolve –

Leapfrogged by African Start-ups.”

14 Alternative Future Scenarios for Mining,

Manufacturing and Financial Services

15 Mining: “Renewed Social Pact Unlocks Mining

Revolution – Deep Tech Funds Secondary Industries.”

16 Manufacturing: “Strategic Commitments Drive

Investment – Ease and Skill Provide Edge.”

17 Financial Services: “Reimagined Service Integration -

Unlocking SMME Potential.”

18 Key Findings and Policy and Strategy

Recommendations

About the project

The Future of Business in South Africa Project is a Future Studies initiative aimed at producing insights about alternative future scenarios for South Africa and South African business in particular. By using various strategic foresight methods, such as scenario planning, environmental scanning, forecasting and strategic planning, the project aims to foster conscientious thought leadership, integrating the strategic as well as ethical imperatives required to assure a preferred future for South Africa. The project was made possible through the generous support of the British High Commission in Pretoria.

Marius OOsthuizen: Faculty, researcher, strategic FOresight

Marius is a faculty member of GIBS and a principle at CUSP Consulting (Pty) Ltd. He teaches leadership, strategy and ethics,

and is the programme manager for the Future of Business in SA Project. The project is funded by the British High Commission in Pretoria and aims to bring together key stakeholders from the public sector, private sector and civil society to foster insights about the strategic opportunities and threats for business in SA. His expertise is in the field of scenario planning, strategic foresight and systems thinking. He holds a Masters in Strategic Foresight from Regent University in Virginia Beach, USA, an Honours Bachelor in Systematic Theology and is a graduate of the Oxford Scenarios Programme at Said Business School, University of Oxford, UK.

KagisO “tK” POOe: researcher, Public POlicy

TK is a public policy researcher and practitioner with experience in local government with the Sedibeng District

Municipality, in the Integrated Development Planning (IDP) and Economic Planning Unit and has worked at provincial government level as a consultant for an opposition party in the Gauteng Provincial Legislature (GPL). He is a graduate of the University of KwaZulu-Natal (Howard College), holds a Public Policy Masters in Monitoring Evaluation and Analysis/ Project Management and Implementation and Public Policy Honours and Bachelor of Social Sciences. TK is currently pursuing his doctoral studies, exploring the policy outcomes of the Local Economic Development (LED) and entrepreneurship planning over the last five years by the local and provincial government of Gauteng.

Kerry-lee Durrant: research cOOrDinatOr, gibs

Kerry-Lee is a Research Coordinator for the Centre of Leadership and Dialogue and Centre Business Analysis and Research.

She graduated from Vega School of Brand Leadership specialising in Brand Communications. Her experience ranges from Brand Manager for a consultancy firm SystemicLogic, MBA programme coordinator at GIBS Business School, Events assistant at Ernst & Young and Admin coordinator at Investec.

CONTACT DETAIlS

011 771 4378

084 670 1723

Future@gibs.cO.za

This report is available online at gibs.co.za/future

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In order to move from ‘isolation’ to ‘collaboration’, key interventions relating to the component of “stakeholder relations” are required from government, business and civil society. There is an overarching need to recognise the interdependence of all parties and to collaborate. This would necessitate a transparent roadmap and mutual understanding to address the pervading current trust deficit between the parties. It requires responsible leadership and engagement that is proactively oriented and constructive, uplifting and positive as a point of departure. It requires moving beyond self-interest and having frank and robust engagement so that a shared national vision, common values and ethical standards can be attained and all parties act in the national interest.

An approach marked by ‘collaboration’, ‘inclusive wealth creation’ and ‘efficiency’ is, in some ways, a return to the late 1990s when optimism and partnership marked the national discourse. However, there is a need to move beyond the intangible components, such as trust, to address the concrete economic and business realities that form part of the developmental trajectory of a middle-income country such as South Africa. To achieve the necessary level of dynamism and capacity, it will require a firm commitment by the public sector to political reform, by the private sector to the prioritisation of domestic needs and by civil society to fulfil the role of arbitrator and custodian of the national future.

v Large scale skills development is required in the labour market through internships as well as an emphasis on higher productivity and technological proficiency. An innovative, internally efficient environment must be created with investment in R&D, as well as strong enterprise development, support of SMMEs and BOP investment. In addition, sector-wide coordination and global connectedness must be sought.

w Pay inequalities must be resolved and addressing social inequality be considered a national priority across the board by all parties. A broad movement towards active citizenship must be created to mobilise existing resources to address social and development needs.

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In order to move from ‘distribution’ to ‘inclusive wealth creation’ and from ‘incapacity’ to ‘efficiency’, key interventions are required relating to the components of (1) “policy and governance”, (2) “labour and competitiveness” and (3) “social inequality”.

u There is a need to move beyond the “BEE” policy paradigm and create an environment that is enabling and one of policy certainty, conducive for investment. This entails co-creating enabling regulation with the private sector and ensuring strategic policy coherence across sectors and supply chains. Infrastructure development must be accelerated. Accountable, transparent and excellent service delivery standards must be attained.

“Instant City” Democratisation

Global Financial Meltdown

Digital & Saturation

Unionisation Democratisation

Commodity Boom 2000-2009 Financial Crash

Militancy / Profit Sharing

Isolation Democratisation

IPAP &NGP PolicyGlobal Financial Meltdown

Costly & Uncertain

As a democratic South Africa enters its third decade of existence, key political, social and economic questions are being asked about whether the ‘miracle nation’ can become a ‘democratically and economically equitable’ State for all. The last four years have been an economically-testing period for South Africa1 and the projected immediate future2 does not appear to be positive. It is against this backdrop that this project explored the ‘Future of business in south Africa’, with particular emphasis on the future of the mining, manufacturing and financial services sectors. Through the use of strategic foresight methods3 such as environmental scanning, scenario thinking and stakeholder dialogue, a systematic and nuanced assessment was made of the projected and alternative (preferred) prospects for three of South Africa’s crucial sectors.

It is proposed that South Africa has a choice between two sets of scenarios. In the first, continued decline sees the economic landscape worsen with South Africa falling further behind global competitors. In the second set, achieved through a comprehensive public policy and business strategy response, South Africa’s mining, manufacturing and financial services are repositioned and evolve to capitalise on new opportunities.

ThE MINING SCENARIO: “Chinese Partner for State Mine - Contestation for Ownership”, sees South African mining operations bear the brunt of political realignment, infrastructural inadequacy and a lack of appetite from historic investment partners. The alternative scenario: “Renewed Social Pact Unlocks Mining Revolution – Deep Tech Funds Secondary Industries”, sees stakeholder relations improve, enabling the sector to harness key capabilities to service a growing global mining sector and contribute to the development of peripheral industries.

ThE MANUFACTURING SCENARIO: “SA Niche Competes – High-End Move North Amid Closures”, sees only a select group of manufacturing operations retain viability by shifting their locus of operations north, into the growing African markets as domestic affordability is eventually strangled. The alternative

scenario: “Strategic Commitments Drive Investment – Ease and Skills Provide Edge”, sees policy coherence and sectorial coordination attract investment that harnesses a large labour force and proximity to Africa to unlock SMME growth potential and compete successfully.

ThE FINANCIAl SERVICES SCENARIO: “SA Firms Slow to Evolve – Leapfrogged by African Start-ups”, sees South Africa’s leading financial services institutions fall behind the evolutionary curve as new technologies and asymmetrical competitors challenge their monopolistic and inefficient business models. The alternative scenario: “Reimagined Service Integration - Unlocking SMME Potential”, sees service integration and higher risk appetite develop a broad-based BOP and SMME market, enabling adjacent sectors to thrive and positioning the sector as the financial hub of the African continent.

Having assessed the current trajectory of the South African mining, manufacturing and financial services sectors, having explored the preferred visions and alternative scenarios for each of the sectors, and having identified the public policy and business strategy agenda that would alter the current trajectory of the sectors, we propose three broad shifts are required domestically;

executive SuMMAry And recoMMendAtionS

Ê

Êfrom Incapacity to efficiency

from Isolation to collaboration

from Distribution to Inclusive Wealth creation 1 2 3

. . . continued decline SeeS the econoMic lAndScApe worSen with South AFricA FAlling Further behind globAl coMpetitorS . . .”

the 1980s ForMed A period chArActeriSed by wideSpreAd proteStS FroM AFricAn townShipS And counter violence by the ApArtheid governMent.”

For Mining, MAnuFActuring And FinAnciAl ServiceS

SOUTh AFRICA’S hISTORIC DEVElOPMENT (1980’s TO PRESENT)The history of South Africa’s post-British colonialism and National Party rule, from the perspective of its political economy, can be argued to encompass four broad time periods (eras) and themes; the 1980’s “Risk” period; the 1990’s “Partner” period; the 2000’s “Redress” period; and the present-to-2020’s “Muddle” period.

1980’s “RISK” PERIODThe 1980s formed a period characterised by widespread protests from African townships and counter violence by the Apartheid government. This eventually led to the State of Emergency in 1988. During this period, major strikes were undertaken, the largest being the National Union of Mineworkers’ strike in which 250 000 workers participated. It was during this period of heightened instability that the United States of America’s Congress passed the Comprehensive Anti-Apartheid Act (1986) and the Budget Reconciliation Act (1987). These Acts played a major role in curtailing Apartheid South Africa’s economic activity.

1990’s “PARTNER” PERIODThe 1990s were marked by partnership and consensus building, leading to settlement and constitutional democracy. This period saw major political actors like Nelson Mandela, F.W. de Klerk, Cyril Ramaphosa and Roelf Meyer attempt to create new forms of political consensus, involving various groups of South Africans representing diverse interests. Some of the key markers of this period were the Convention for a Democratic South Africa (Codesa), where Joe Slovo’s Sunset Clause for civil service

and the adoption of the 1996 South African Constitution were milestone achievements.

2000’s “REDRESS” PERIODThis period of redress saw the South African economy take centre stage and the government commencing to seek to address pressing questions about whether the private sector − in the form of Black Economic Empowerment − was adequately assisting blacks (Africans in particular) and leading to socio-economic development. In addition to the above, numerous South African private sector firms such as Sanlam, Old Mutual, Liberty Life, South African Breweries (SAB) and others started listing outside South Africa’s Johannesburg Stock Exchange ( JSE) in a process of globalisation and integration into international financial markets. Despite currency instability during the period of 2001 and 2008, the economy grew at around 4.5 percent. However, this growth did not adequately counter rising unemployment which grew to above 25 percent.

PRESENT TO 2020’s “MUDDlE” PERIODIn the “muddle-through” period, key markers were the 2008 global financial crisis; the ousting of President Thabo Mbeki by Jacob Zuma; a growing breakdown of trust between voters and government; the formation of numerous opposition parties such as the Congress of the People and the Economic Freedom Fighters; the resurgence of left-leaning ideologies and policies; and the rise of the Peoples Republic of China’s influence on the African continent amid declining growth in the South African economy. This period speaks to the fact that numerous variables were at play and that reactions to them by the public and private sectors, have yet to define what the direction is that South Africa will move in by 2020.

The research conducted brought into focus known characteristics relating to these key sectors in the South African economy. This included highlighting the capacity of the mining sector to hire non-formally educated workers. It also emphasised the deeply complex socio-economic challenges faced by the sector. It brought to the fore the sector’s worrying reliance on global markets and the domestic pressures to create an equitable mining culture, pointing to the need for courageous leadership that will be needed to preserve and advance the sector. Research into the manufacturing sector revealed the vestiges of old models in manufacturing (e.g. a race to the bottom based on low wages and production costs), leaving South Africa unable to compete with East Asian nations. However, the future of the sector could be secured by gearing it heavily towards previously underfunded niches and technologically-oriented firms/streams. In the financial services sector, it was found that the potential exists to be an enabler for growth on the African continent, given the sector’s high skills levels and global renown for governance. Despite this competitive/historical advantage, it was found that the sector faces growing discontent from local consumers in relation to poor affordability, which has helped to usher in new legislative precautions and safeguards. To explore these and other trends shaping the future of these sectors, it is helpful to outline the broad historical context within which they developed.

BASeline Future ScenArioS

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. . . it will be plAuSible to expect thAt South AFricA’S Mining Sector could See heAdlineS Such AS ‘chineSe pArtner For StAte Mine’ becoMing the new norMAl.”

BASElINE SCENARIO FOR SA MINING 2020 Taking the historical evolution of South Africa’s mining sector into account as well as the eighteen major trends and stakeholder inputs, the major theme for the baseline scenario 2020 is: “Chinese Partner for State Mine - Contestation for Ownership”.

In this scenario, it will be plausible to expect that South Africa’s mining sector could see headlines such as ‘Chinese Partner for State Mine’ becoming the new normal. Continued pressure by interest groups and political uncertainty, combined with slow infrastructure roll-outs and rising costs undermine the profitability of the sector. The State intervenes, both for pragmatic and ideological reasons, opening the door for a form of quasi-nationalisation. Chinese investors seize the opportunity to secure resources and anchor their influence in Africa through investment in undervalued mining assets. These types of partnerships, where Chinese companies (both private and public sector businesses) become involved in South Africa’s mining sector will see the development of new types of business practices and, in some cases, policy (labour, environmental and other) conundrums.

Politicised labour;

New worker formations;

Rising input costs, e.g. labour, electricity;

Frail capitalist system;

South Africa is a leader in patents and mining services;

Infrastructure bottlenecks;

Poor water management, e.g. Gauteng acid drainage problem;

Rising demands due to inequality;

Pay inequality between executive, management and general labour force;

Ideology (capture), new left ideologies and actors;

No-change volatile demand;

Competition from new mining areas in South America/Asia;

Restructuring policies and institutions;

Mistrust between all stakeholders;

Settlements hard to reach;

Localised expertise;

patent/labour laws, dispute resolution, technology (being exported).

ThE hISTORIC EVOlUTION OF SA MINING The South African mining sector has long been the focal point of South Africa’s economy, beginning during the British colonial era and sustaining its prominence well into the 21st century. In the late 1800s, diamond and gold mining transformed South Africa from a mere colonial outpost into a global hub for mining4. The diamond and gold mining sector played a key role in the development of areas such as Kimberley, the Witwatersrand and also saw development of port areas into mega shipping and export facilities such as Durban and the Cape5.

In addition to these developments, the South African mining industry led to the birth of mining conglomerates such as De Beers (diamond mining) and Anglo-American (precious metals mining). The structure and operation of mining in South Africa from the early 1880s to the 1990s centred on the use of cheap labour (often African labourers migrating from coastal and other African countries) and, over time, developed the technology and skills to mine ever deeper and into the Earth’s surface6. This model helped South Africa establish itself as the mining capital of the world, and resulted in the establishment of mining cities like Johannesburg (on the Witwatersrand) that developed into a financial hub for other non-mining related industries7.

However, with the advent of multi-party democracy in 1994, the mining sector in South Africa had to contend with vast challenges and new realities. To begin with, the mining industry had to compete with newer and foreign mining operations from as far afield as South America and Asia8. Secondly, the mining model employed by the sector came under tremendous pressure by both unionised workers and government legislation in the form of Black Economic Empowerment.

Both these post-1994 realities have called into question whether the mining sector in South Africa can sustain operations. One of the darkest events that brought this question to the fore was the 16 August, 2012 Marikana mining strike which resulted in a massacre by police of 42 miners9. This event brought into focus the challenges faced by modern-day mining firms and the frustration of miners at the slow pace of transformation expected to enable them to share in the value created by the sector.

“chineSe PArtner For StAte Mine - conteStAtion

For ownerShiP.”To construct the baseline scenario for mining, we explore; the historical evolution of the mining sector in South Africa; major current trends likely to influence the sector’s future and inputs by mining stakeholders.

CURRENT TRENDS ShAPING SA MININGCurrent trends range from political factors to cost structures, market factors and technological developments. They include:

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the Structure And operAtion oF Mining in South AFricA FroM the eArly 1880S to the 1990S centred on the uSe oF cheAp lAbour . . .”

BASeline ScenArio For Mining

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ThE hISTORIC EVOlUTION OF SA MANUFACTURINGThe manufacturing sector in South Africa, much like other business sectors in the country, was heavily influenced by the developments in the mining sector. During the early 1920s, mining was seen as having too strong a monopolistic influence on South Africa’s economic trajectory and that secondary industries or alternatives were needed to counter the strong mining sector10. A number of individuals tried to advance manufacturing (steel and precious metals) as a viable alternative; one such notable person was Lionel Philips (owner of Central Mining Company).

One of Philips’ long-lasting legacies relating to manufacturing in South Africa was the establishment of the Industrial Development Corporation (IDC)11. This move by Philips also resulted in new manufacturing thinkers coming to the fore; key among them was H.J. van der Bijl who assisted the South African manufacturing sector by creating two catalyst institutions, namely Eskom (the State electricity utility) and ISCOR (steel manufacturer)12. These entities and others, beyond only assisting the manufacturing sector, empowered unskilled white labourers in particular, and combated poverty and unemployment in the segment13. However, due to the State’s continued policy of Apartheid, international sanctions and isolation curtailed manufacturing’s growth substantially. Paradoxically, an unintended consequence of international isolation was that the South African manufacturing sector experienced a boom in innovation. This innovation led to niche manufacturing in areas such as chemicals, arms and weapons as well as steel technological manufacturing product development. Key entities in this arena include Sasol and the Armaments Corporation of South Africa (now Denel).

However, during the early 2000s, the South African manufacturing sector began to be severely harmed by lack of support by the State in more science-based manufacturing in particular14. The manufacturing segment that fared the worst in the wake of growing Asian manufacturing and continuous globalisation of manufacturing was that of textiles and clothing. This sector had unwittingly previously been partially shielded by South Africa’s isolation and employed numerous black women, many of whom had then been made redundant15. In addition, the post-1994 era saw government policies (monetary and fiscal) and labour union dynamics (uncontrolled internal union politics) make competition impossible against cheaper imported Asian goods and directed investment strategies by Asian governments.

BASElINE SCENARIO FOR SA MANUFACTURING 2020Taking the historical evolution of South Africa’s manufacturing sector into account as well as the 23 major trends and stakeholder inputs, the major theme for the baseline scenario 2020 is: “SA Niche Competes – High-End Move North Amid Closures”.

In this scenario, South African manufacturers leverage their proximity to African markets and historic advances in technology to retain a meaningful foothold in the market and capitalise on Western and Asian nation’s consumer demands. However, constrained by domestic instability and rising costs, only the high-end manufacturers are able to survive the decade and make the pragmatic decision to move the focus of their operations north of South Africa to more attractive environments emerging on the continent.

To construct the baseline scenario for manufacturing, we explore; the historical evolution of the manufacturing sector in South Africa; major current trends likely to influence the sector’s future and inputs by manufacturing stakeholders.

Proximity to Africa;

Coal dependence;

Emerging market demand;

Fragmented sector (trade-offs);

Stagnation;

Labour absorptive;

Lack of strategic leadership;

Competitive SMMEs;

Competition;

Rising input costs, e.g. electricity, wages;

Policy incoherence (lack of integration/focus);

Specialised engineering;

Skills shortage (science/engineering and management);

Falling profitability;

Increased regulation;

Poor government support;

Few information services regarding funding;

Low regional integration;

Constrained capital markets;

Infrastructure bottleneck (NDP);

Poor EU demand;

Low Research and Development investment;

Growing FDI (Africa).

. . . South AFricAn MAnuFActuring Sector begAn to be Severely hArMed by lAck oF Support by the StAte . . .”

CURRENT TRENDS ShAPING SA MANUFACTURING

h

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h“SA niche coMPeteS – high-end Move north

AMid cloSureS.”

BASeline ScenArio For MAnuFActuring

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BASElINE SCENARIO FOR SA SERVICES 2020Taking the historical evolution of South Africa’s financial services sector into account as well as the 17 major trends and stakeholder inputs, the major theme for the baseline scenario 2020 is: “SA Firms Slow to Evolve – Leapfrogged by African Start-ups”.

While the South African financial services sector is one of the most dynamic and fast-changing in the economy, and has managed to become internationally competitive, as more and more business and financial services start to demand a more customer-focused approach and product/s, the South African financial services (especially banking, insurance and medical) will face great opportunities as well as challenges.

The opportunities − as previously set out by the trends − relate to close proximity to one of the fastest growing consumer groups (African peoples and citizens). Over the last two decades, South African actors such as Standard Bank, MTN, Vodacom, Discovery, Multichoice and many others have established firm business ties on the continent. Yet, at a local level, South African customers increasingly complain about the spiralling cost of services, one of the key complaints being the failure or lethargy of South African banks towards supporting small to medium enterprises. As such, a scenario may evolve where the slow pace of reform sees more agile actors, less invested in legacy systems and cost structures, take advantage of the same proximity to dominate the market.

Encroaching policy (on pensions and the proposed NHI);

Cluster effect;

Rating downgrades;

Sophistication;

IT (Inf. & HR) bottlenecks;

Low savings rates;

Unsustainable advantage;

Lack of competition;

Pocketed skills;

Costly policy;

Growing FDI (Africa);

Brain drain;

Limited SMME services;

World-class governance;

Risk averse (calls for reform);

English usage advantage;

Proximity to Africa.

CURRENT TRENDS ShAPING SA SERVICES

ThE hISTORIC EVOlUTION OF FINANCIAl SOlUTIONSThe South African financial services sector, particularly banking, insurance and, in more recent times, consulting and medical services, constantly rank as some of the best-run, innovative and good value-for-money investments by both local and international investors16. This hard-won reputation, especially for sectors like banking and insurance, is particularly interesting due to the fact that the sector owes its rise largely to the evolution of mining as the primary driver in the South African economy17.

As the South African mining industry began to operate on a global stage, the local industry required services such as banking, insurance and other related products to help it grow beyond a colonial appendage of the United Kingdom18. This need to have a physically present financial services sector resulted in the establishment and growth of such entities as the Johannesburg Stock Exchange (in 1887)19, which was followed by other financial services actors such as retail banks.

The post-1994 dispensation of African National Congress rule has seen numerous financial services in South Africa rise to becoming major international players, such as; Standard Bank, FirstRand Limited and others like Discovery Health. South Africa’s financial services actors, including banks and insurers, have not only led or assisted various developments in their fields, but have been models with regard to corporate governance legislation and policies such as the King reports20.

However, the financial services sector (banking and insurance in particular) is currently confronted by ongoing challenges from international crises such as; (a) the 2008 financial crisis and recession; (b) the tightening of regulations due to frailty of the international financial services sector, as seen in Basel (for banking entities) and the Solvency Assessment and Management regulation (for insurance entities); (c) in addition to a growing negative sentiment among members of the public towards the way financial services companies have priced their services and dealt with risk21.

BASeline ScenArio For FinAnciAl ServiceS

To construct the baseline scenario for financial services, we explore; the historical evolution of the financial services sector in South Africa; major current trends likely to influence the sector’s future; and inputs by financial services stakeholders.

while the South AFricAn FinAnciAl ServiceS Sector iS one oF the MoSt dynAMic And FASt-chAnging in the econoMy, And hAS MAnAged to becoMe internAtionAlly coMpetitive.”

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“SA FirMS Slow to evolve – leAPFrogged By

AFricAn StArt-uPS.”

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“renewed SociAl PAct unlockS Mining revolution

– deeP tech FundS SecondAry induStrieS”

PreFerred ScenArio For Mining

It was felt that to achieve this alternative scenario for mining, it was necessary that the following policy and strategy initiatives be taken:

POlICY AND STRATEGY AGENDA FOR MININGTo achieve a scenario where firstly, respondents said, the time has come for the private sector to move “beyond BEE” and that alternative ways be sought of labour sharing in the benefits of the sector. Simultaneously, that “pay inequalities be addressed” as a matter of principle and urgency and the private sector show leadership in addressing the need for “skills development” in communities affected by mining. These, it was argued, would only be possible through a recognition by all parties of the “interdependence” between them and the creation of a “collaborative, innovative environment” and a commitment to a “transparent stakeholder roadmap”. Importantly, that the “trust deficit” be addressed, “productivity be improved” with haste and investment be made in “R&D” to drive innovation.

It was said that the public sector must “work to understand the private sector” and to create an “enabling environment” in conjunction with their private sector partners. That the “investment climate” be improved as a matter of urgency and that “internal efficiency” relating to service delivery be made a top priority. Also that “regulation be made more enabling” and the “infrastructure bottlenecks” be rapidly resolved in recognition of the role and importance of adequate infrastructure for the sector.

Civil society, it was said, needed to make “responsible use of their voice”, taking a “proactive role” as opposed to mere criticism, and finding “more aspects that were positive”. “Collaborative” ways to “build up” the institutions and structures were required to sustain success. This would in turn require demonstrating “responsible leadership” “insisting on excellence” from other spheres, and moving beyond “narrow self-interest” to a new form of “active citizenry.”

} Moving rapidly towards a “mining without

people” capability.

Mining Sector

PREFERRED VISION FOR ThE SOUTh AFRICAN MINING SECTOR

The ideal future scenario for the South African mining sector,

respondents said, would be marked by the following

characteristics:

} The ability to harness deep mining technology

domestically and abroad

} Adjustment of business models

through cost structure innovation

} The ability to maintain

returns throughout business

cycles

} The establishment of sound,

harmonious stakeholder

relations

} Achieving a stable climate insofar as FDI

and industry-wide stability is concerned

} Having a skilled workforce and

transformed labour component

} Demonstrating leadership

in the sector

} The development of good

policy through

consultation and review

} Achieving the highest

ounce per pound in extraction

} Innovative solutions to

industry needs

} General industry growth

} Exercising control of the sector’s

value chain

} Participating in a formation for mining such as the “OPEC” board

} Having the requisite infrastructure

required to maximise outputs and exports AlternAtive Future ScenArioSIn view of the research findings and baseline scenarios, stakeholders from the sectors were invited to contribute as participants in a scenario thinking workshop, and given an opportunity to articulate an alternative (preferred) vision for each of the sectors.

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} The development of cross-sectorial technology

PREFERRED VISION FOR

SOUTh AFRICAN FINANCIAl

SERVICES SECTOR The ideal future scenario

for South African Financial Services, it was said, would be marked by the following

industry characteristics:

It was felt that to achieve this alternative scenario for the financial services sector, it was necessary that the following policy and strategy initiatives be taken:

POlICY AND STRATEGY AGENDA FOR ThE FINANCIAl SERVICES SECTORThe private sector, it was said, has an important role to play in developing “innovative BOP services” and “investing in internships” to develop the workforce. Crucially, business was said to have to “give policy inputs” to ensure integration and focus, as well as drastically raising R&D investment (in IT in particular). Furthermore, that the private sector collaborate with other spheres for “enterprise development” and “coordinate development efforts” in the area of CSI while supporting a move towards a “performance-based tax system”.

The public sector, it was said, needed to “collaborate with the private sector”, adopting a “transparent policy development” process and critically ensuring “policy certainty”. That government adopts aggressive “performance based” measures internally, and specifically enhances “service delivery” standards. Finally, that a “global network” be developed to learn and apply best practices in governance and public services.

Importantly, civil society was urged to take a “more constructive” role, going beyond acting as a mere watchdog, and holding out the “national interest” while “demanding accountability” from other spheres and being “robustly engaged”, such as by aiding with “access to information” and fostering the requisite “common goals” between the private and public sectors to move forward coherently.

PreFerred ScenArio For the FinAnciAl ServiceS Sector

“reiMAgined ServiceS integrAtion - unlocking

SMMe PotentiAl”

Financial Service Sector

} A sector that is both global and multi-skilled

} Providing SMME support

} Having a flexible risk management

approach

} Providing a range of services

} Maintaining the current JSE

standards

} An environment

conducive for skilled

workers and development

} Ready to harness

Africa’s growth

} Developing the skills

required for and by Africa

} Generally innovative, particularly technologically

} Being focused on education

and training

} Enhanced accessibility to the rest of Africa

} Providing enabling practical

training

} Enjoying predictable variation

in performance

} Enjoying institutional support

} Developing seamlessness

across services

} Demonstrating efficient execution

} Having a networked reach to other markets

} Collaboration within and between sectors for problem solving } Capacity to “bank the unbanked”

PreFerred ScenArio For MAnuFActuring

PREFERRED VISION FOR

SOUTh AFRICAN MANUFACTURING

The ideal future scenario for South African mining, it was said, would be marked by the following industry

characteristics:

It was felt that to achieve this alternative scenario for manufacturing, it was necessary that the following policy and strategy initiatives be taken;

POlICY AND STRATEGY AGENDA FOR MANUFACTURINGIt was said that the private sector needed to “use their power for good”, such as by providing effective “on-the-job training” and the “promotion of technology-related training”, and proactively “engaging government”. In addition, that “SMMEs be supported” and considerable investment be made in R&D. Possibly, that a “common fund” be formed for the development of the sector and that an “interest be shown in the real economy”. Also, that innovative ways be developed for delivering training to the workforce.

The public sector, it was said, had a role to play in creating a “positive environment” for the sector, ensuring that “strategically coherent policies and institutions” are created and that a “frank and robust engagement” with the private sector be welcomed. For these, it was said, new forms of “collaboration” must be sought.

Civil society, it was felt, had a key role to play in the communication of “shared vision and values” among stakeholders. In addition, it was necessary that a role be played in “building trust” between the sectors and “active responsible citizenship” be modelled and fostered. This included the need for “accountability insofar as education” and other services are concerned, and the establishment of “ethical foundations” for society at large. Importantly, these goals be pursued in “cooperation with the private and public sectors”.

“StrAtegic coMMitMentS drive inveStMent – eASe And SkillS Provide edge”

Manufacturing} Enjoying strategic domestic investments

and FDI to develop the sector

} Having the requisite incentives to

attract investment

} Achieving higher levels of

innovation

} Widespread and robust

management skills

} Raising affordability

through reduced input costs

} Leveraging ports to assist

landlocked countries

} High levels of education and

skills among workers

} Having the requisite infrastructure

for output and export

}Identifying and leveraging quality niches

} General stability

} A marked reduction in logistics costs

} Achieving optimised efficiency

} Producing competitive

products

} Growing appreciation, by other sectors

and spheres, of the skills in the sector

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PHASe 1 eNvIRONMeNTAL SCANNINGThe research method utilised an interdisciplinary form, combining approaches from the fields of futures studies, strategy and social change. As such, a combination of environmental scanning through desk research, scenario thinking, multi-stakeholder dialogue and eliciting expert opinion through an iterative process, were consolidated into a coherent process to produce insights that address the research questions. This study employed a qualitative approach in the main, yet did make reference to secondary quantitative analysis through desktop research.

FIRST STEPEnvironmental scanning was first used to study the contextual environment of three sectors in South Africa. The arena of politics, economics, society, technology, demographics and other such dimensions of the environment of business were explored. Observations were collected from academic publications, popular press and the media in general, in addition to industry publications and industry analysts commenting on the status of the sectors in question. These insights, arising from the environmental scanning process, constituted a collection of baseline inputs into what would later be consolidated into broader baseline scenarios of the current state of the three sectors. The design was largely informed by Bishop’s (REF) framework forecasting method, arising from the field of Strategic Foresight, which constituted the overarching theoretical approach to the study.

SECOND STEPHaving consolidated the input from environmental scanning into a set of key trends and drivers (change factors) affecting the future of each industry, scenario thinking was used to articulate the baseline future. This process was informed by a systems thinking approach to contemplate the interrelationships between the factors, their bearing on each other, as well as contemplating the historical developments that form the background against which new developments are emerging. These were graphically presented to create an emotive caricature of what the probable future of each sector is likely to consist of.

These insights were captured in report form and used as an input to the design of a multi-stakeholder dialogue process which was intended to explore the accuracy of the assessments made, their current relevance to the industry and to obtain a more nuanced perspective on what the research had discovered up to that point.

PHASe 2 SCeNARIO THINkING WORkSHOP ThIRD STEPThe structured multi-stakeholder dialogue was designed to include 30 stakeholders from across the three industries. The dialogue was structured in two parts, Part 1: a 90-minute presentation of the research findings (based on research to date), and Part 2: a 90-minute explorative discussion of alternative prospects for the industries. The presentation of the research consisted of an interview-based presentation by the lead researcher in order to convey the highlights of the research in a reflective manner, followed by a presentation of the major identifiable trends and factors, as they relate to each industry and as consolidated into baseline scenario for each sector.

For each scenario, the question was put to the participants; “What are we missing and how accurate is the assessment of current trends and factors affecting the industries?” A facilitated approach to dialogue enabled stakeholders currently working in the respective industries to contribute to the assessment, testing the validity of the findings against their experience as industry insiders. Greater attention was thereby placed on particular factors, and additional factors were identified on the basis of stakeholder experience. The dialogue thereby served both as a learning and review process to strengthen the research. The inputs from this first portion were then captured and consolidated into the primary assessment of industry trends and factors.

FOURTh STEPIn the second half of the workshop, delegates were given an opportunity to develop and articulate an alternative vision for each of the sectors. This was done in syndicates of five or six participants each, working on a particular industry. Each sector thereby had a set of two syndicates working on developing an alternative future.

A visioning22 questionnaire was utilised enabling the syndicates to brainstorm what an alternative vision for the various sectors would look like. Inputs from the visioning exercise were then captured visually, allowing all participating delegates to review the inputs. In reflecting on the inputs received, the question was put to the delegates; “Which of these elements (relating to a preferred future) are within the control of the actual stakeholders of the sectors?” This addressed the question and enabled the dialogue to transition from a descriptive analysis of the state of the sectors, to a strategic exploration of what can (or would) need to be done to improve the prospects of the sectors.

FIFTh STEPA normative approach was introduced to the second part of the dialogue, without being prescriptive, but allowing the stakeholders to co-create a shared vision of an alternative and preferred future. These alternative visions were again shared with the entire group and briefly discussed to enable broad-based input and review. Thereafter, using the consolidated ‘visions’ for the various sectors from each of the two syndicates, the syndicates were asked to develop a “policy and strategy agenda”, that would be necessary to lead to the realisation of the alternative futures. This was done by posing the questions; “What would government (then business and then civil actors) need to do now to achieve these alternative futures for the sectors? Yet again, the inputs from the policy and strategy agenda were shared, captured visually and discussed with the group, using the previous question; “Which of these are within the control of the stakeholders within each of the sectors?”

SIxTh STEPThe inputs from the second part of the workshop were captured and synthesised, similarly to the prior research, using systems thinking and scenario thinking to produce and articulate alternative scenarios for the mining, manufacturing and financial services sectors in South Africa.

DAtA collectIon methoDThe entire research process was documented and formatted to accommodate the expectations of a reader receiving it as a policy brief on the “Strategic and Policy Agenda for an Alternative Future for SA Mining, Manufacturing and Financial Services”.

Ê

Êfrom Incapacity to efficiency

from Isolation to collaboration

from Distribution to Inclusive Wealth creation 1 2 3

key FindingS And Policy And StrAtegy recoMMendAtionSHaving assessed the current trajectory of the South African mining, manufacturing and financial services sectors, having explored the preferred visions and alternative scenarios for each of the sectors, and having identified the public policy and business strategy agenda that would alter the current trajectory of the sectors, we propose that three broad shifts are required domestically

of (1) “policy and governance”; (2) “labour and competitiveness”; and (3) “social inequality”.

u There is a need to move beyond the “BEE” policy paradigm and create an environment that is enabling and one of policy certainty, conducive for investment. This entails co-creating enabling regulation with the private sector and ensuring strategic policy coherence across sectors and supply chains. Infrastructure development must be accelerated. Accountable, transparent and excellent service delivery standards must be attained.

v Large-scale skills development is required in the labour market through internships as well as an emphasis on higher productivity and technological proficiency. An innovative, internally efficient environment must be created with investment in R&D, as well as strong enterprise development, support of SMMEs and BOP investment. In addition, sector-wide coordination and global-connectedness must be sought.

wPay inequalities must be resolved and addressing social inequality be considered a national priority across the board by all parties. A broad movement towards active citizenship must be created to mobilise existing resources to address social and development needs.

An approach marked by ‘collaboration’, ‘inclusive wealth creation’ and ‘efficiency’ is in some ways a return to the late 1990s when optimism and partnership marked the national discourse. However, there is a need to move beyond the intangible components, such as trust, and address the concrete economic and business realities that form part of the developmental trajectory of a middle-income country such as South Africa. To achieve the level of dynamism and capacity necessary, it is likely to require a firm commitment by the public sector to political reform, by the private sector to the prioritisation of domestic needs and by civil society to fulfil the role of arbitrator and custodian of the national future.

RESEARCh APPROACh AND METhODOlOGY The research project utilised a multi-stage process to answer two guiding questions, namely; (1) What is the future of mining, manufacturing and financial services in South Africa, given current trends and factors in the environment of business? (2) What could be the alternative (preferred) future of mining, manufacturing and financial services in South Africa, given an alternative strategic and policy agenda for the present?

Importantly, civil society was urged to take a “more constructive” role, going beyond acting as a mere watchdog, and holding out the “national interest” while “demanding accountability” from other spheres and being “robustly engaged”, such as by aiding with “access to information” and fostering the requisite “common goals” between the private and public sectors to move forward coherently.

In order to move from ‘isolation’ to ‘collaboration’, key interventions relating to the component of “stakeholder relations” are required from government, business and civil society. There is an overarching need to recognise the interdependence of all parties and to collaborate. This would necessitate a transparent roadmap and mutual understanding in order to address the pervading trust deficit between the parties. It requires responsible leadership and engagement, which is proactively orientated and constructive, uplifting and positive as a point of departure. It requires moving beyond self-interest and having frank and robust engagement so that a shared national vision, values and ethical standards can be attained and all parties may act in the national interest.

In order to move from ‘distribution’ to ‘inclusive wealth creation’ and from ‘incapacity’ to ‘efficiency’, key interventions are required relating to the components

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