The pricing of commodity raw materials to the South African gold mining industry

Abstract

The object of government is the welfare of the people – Theodore Roosevelt Commodity prices in the South African economy has become a topic of much debate with suppliers, consumers and government involved in a struggle to address issues of monopolies, market dominance and claims of excessive pricing. This document aims to explore to what extent commodity prices affect the gold mining industry, the theory and practicality of monopolistic supplier pricing models, the responses to such behaviour and the role that the competition authorities play in facilitating a free market. By obtaining industry information, studies of market theory and the review of competition legislation, an understanding of the issues was obtained. After discussion with industry role players (suppliers, mining companies and independent third parties) both qualitative and quantitative data was obtained to answer questions around competition and market dominance. <p.The findings of the study include: •Gold mining companies have considerable exposure to Import Parity Pricing for commodities such as steel and chemicals. •Monopoly suppliers exercise considerable market power over these products. •Consumers believe that they are being treated unfairly by suppliers and this raises high levels of emotion. •The competition authorities appear to be unable to manage these issues effectively. •Government sees this as a problem and is intent on addressing these issues.