Where the mining sector does offer opportunities, however, is in the products and services it needs
Picture: ISTOCK
Busan — Much has been said about beneficiation in SA,
but apparently being a producer of raw materials does not necessarily
equate to having an advantage in moving up the value chain, according to
University of Cape Town economics professor David Kaplan.
"In Africa it’s always said that we produce the iron and steel — why
don’t we produce the pots and pans? We produce the gold, why do we not
produce the jewellery?" Kaplan said on Thursday." The fact that you
produce raw materials very often doesn’t give you any real advantage to
any further activity downstream.
"I think this area has been exaggerated as an area for Africa’s production."
The possibilities for forward integration were hardly low-hanging fruit, he said.
However, where a country produces scarce resources with high levels
of demand, there is room for bargaining — as Botswana did with De Beers
in the sale, sorting, and cutting and polishing of diamonds.
Kaplan was speaking in Busan, Korea’s second city, where the annual
meeting of the African Development Bank (AfDB)’s board of governors is
taking place.
The governors are mainly finance ministers of the bank’s member states.
The
theme of the week-long meeting is industrialisation in Africa, and
Korea was chosen to host it, in the hope that it would provide
inspiration and lessons from its own industrialisation path. In the
space of a generation, Korea has become the 11th largest economy in the
world, despite a lack of natural resources.
Kaplan said much of Africa had been de-industrialising, and its share of manufacturing had declined in the past 30 years.
The resources sector and supermarkets offered opportunities for the localisation of production, he said.
Examples were the Ahafo mining project in Ghana and the Mozal aluminium smelter in Mozambique.
Ahafo, one of the largest gold mines in the world,
had produced a whole range of new products and services for the mining
industry, from materials to the re-treading of tires.
"What’s
happening is that in each of these sectors there is a need for local
input and the mining houses themselves want to acquire things locally.
They don’t necessarily want to ship things from Sydney or Johannesburg
or somewhere else."
Kaplan emphasised the uniqueness of every
situation. "All of these activities are based in knowledge. Every
resource sector is different, every mine is different, every
agricultural production activity is different."
Engineering skills were critical for mining and infrastructure projects, yet were in short supply, he said.
On
supermarkets, Kaplan said there was now a recognition of the role they
could play in the development of value chains, if they procured more of
their products locally.
"We are starting to see a whole range of
countries that are working with their supermarkets, saying ‘buy more
locally’ and trying to enter into activities whereby supermarkets
purchase more locally."
Kaplan singled out Shoprite’s relationship
with the Zambian authorities and also referred to a retail charter in
Namibia that "aims to raise the amount of manufactured products that
supermarkets buy locally from 6% to 20%, and that seems to be working
effectively".
In SA, Walmart’s arrival was approved partly on condition that it committed to sizable local procurement.
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