South Africa Plans Rail Projects to Boost Jobs, Lure Miners

South Africa is planning a “massive” spending on railways and ports to boost exports and attract investment in mining, President Jacob Zuma said.

State-owned Transnet SOC Ltd. will spend 300 billion rand ($39.5 billion) over the next seven years to expand capacity on iron ore, coal and manganese export lines, Zuma told lawmakers in his state-of-the-nation speech in Cape Town today.

“The massive investment in infrastructure must leave more than just power stations, rail-lines, dams and roads,” he said. “It must industrialize the country, generate skills and boost much-needed job creation.

Zuma, 69, is betting that increased spending on infrastructure projects will help offset slower growth in Africa’s biggest economy and reduce the highest jobless rate among 61 countries tracked by Bloomberg. Improving rail and port capacity may help to encourage investment in mining and counter demands from the youth wing of the ruling African National Congress to nationalize the country’s mines.

The mining industry ‘‘plays a critical role in the socio-economic development of the country,” Zuma said. “We remain committed to the creation of a favorable and globally competitive mining sector and to promote the industry to attract investment.”

Growth Slows

A study commissioned by the ANC recommends the government raise taxes on the industry and warned the Youth League’s proposal for the state to take over mines would be “disastrous.”

South Africa is the world’s biggest producer of platinum, chrome and manganese. Anglo American Plc (AAL), Xstrata Plc, Rio Tinto Group Plc (RIO) and BHP Billiton Ltd. (BHP) have operations in the country.

Economic growth will probably slow this year to below 3 percent from 3.1 percent in 2011 as Europe heads toward recession, Finance Minister Pravin Gordhan said on Jan. 26. The economy expanded an annualized 1.4 percent in the third quarter, close to a two-year low.

The government estimates the economy needs to expand 7 percent annually to cut the jobless rate to 14 percent by 2020 from 23.9 percent currently. The International Monetary Fund on Jan. 24 lowered its forecast for South African growth to 2.5 percent from 3.5 percent.

Rail, road and water systems in the northern Limpopo province will help unlock coal, platinum, palladium, chrome and other mineral deposits and encourage investment, Zuma said. Rail systems in the eastern Mpumalanga province will also be expanded to connect coal fields to power stations, while transport links between the central Gauteng province and the eastern port of Durban will be improved, he said.

Port Costs

Transnet will spend 200 billion rand on rail projects, including links that will enable it to transport 82 million metric tons of iron ore a year, up from 60 million tons currently. The rail operator will build a new line to carry 16 million tons of manganese to the Coega port on the country’s south coast.

The government will reduce port costs for exporters of manufactured goods, amounting to 1 billion rand, Zuma said. Eskom Holdings SOC Ltd., the state power producer, has also been asked to curtail planned electricity price increases, he said.

Last year, Zuma announced a new jobs fund and 20 billion rand’s worth of incentives to promote industrialization. To date, the jobs fund has allocated more than 1 billion rand, while seven projects qualified for incentives, worth 8.4 billion rand, Zuma said.

South Africa’s rand weakened 0.7 percent to 7.6014 against the dollar as of 8:24 p.m. in Johannesburg, trimming the gain for the year to 6.4 percent.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Andrew J. Barden at barden@bloomberg.net

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