AMD and the Mining Sector Contribution to the South African Economy

Abstract

Debate on how to make the mining sector in South Africa benefit more people and subsequently enhance the sector’s contribution to national development has tended to ignore that mining activities have negative effects to society. These negative effects, which economists broadly refer to as negative externalities of production, are important in assessing the short term and long term benefits of mining activities. Without taking into account the externalities, the sector’s contribution to the country’s economy is likely to be exaggerated. The chapter discusses the performance and contribution of the mining sector to the South African economy taking into account the negative externality element of the Acid Mine Drainage (AMD). It makes the case that profit and production levels for the sector have been kept higher than the optimal levels as a result of not taking into account the AMD. It suggests that this aspect need to be the acknowledged in national policy debates and in policy formulation aimed at sustaining the country’s benefit from mining activities. Otherwise the current and future contribution of mining to the local economy will remain distorted.