Issue No. 65 - June/July 2012
Mining – and avoiding ‘Dutch Disease’
by Derek Meates
South Australia is poised for transformational growth in the next decade on the back of significant mining projects in this state.
The resources sector and its value chain offer tremendous growth opportunities for businesses and will shape South Australia’s future.
It’s a game changer for the State but one that must be approached strategically and sustainably if we are to avoid catching the “Dutch Disease”.
The Dutch Disease is an economic term given to the relationship between the exploitation of a country’s natural resources and a subsequent decline in its manufacturing sector.
It is based on the theory that boosting economic activity within natural resources will lead to appreciation of the national currency which will, in turn, impact negatively on the global competitiveness of the local manufacturing sector.
It was originally used to describe a manufacturing slide in the Netherlands following a large natural gas discovery in 1959. Given SA’s mining strength and manufacturing tradition, it’s a concept that is topical. More than $60 billion worth of projects is planned or committed in SA, across a range of commodities from copper, uranium and iron ore.
Traditional global responses to pursuing a resources boom and avoiding the threat of the Dutch Disease have focussed around slowing the appreciation of the currency and developing competitive advantage within the manufacturing sector.
For SA industry, it will be important to create world class, locally-based mining services providers by fostering innovation.
There is already strong appetite within the manufacturing sector to expand into mining but many are unclear on how to carve out their niche.
Slot into the value chain
Pinpointing your correct place in the value chain could mean the difference between a business participating in SA’s resources boom or watching it from the sidelines.
Identifying the right target client...