Africa's lack of beneficiation probed
Three high-powered multilateral organisations in Africa - the United Nations (UN) Economic Commission on Africa, the African Union Commission and the African Development Bank - have initiated an expert study into beneficiation on the continent, with a special focus on the role of the private sector.
The study will cover 10 countries, including SA, Egypt, Algeria, Ghana, Nigeria, Kenya and Zambia, and will involve in-depth research into the value chains and linkages in mining, oil and agriculture.
The approach will come as a relief to investors, who have been spooked by growing talk of resource nationalisation and the exclusion of the private sector from involvement in plotting a way forward for Africa.
The research project, which will be published in the 2013 UN Economic Commission on Africa annual report, arises out of a desire expressed by African ministers of finance and economic development at a meeting in Addis Ababa in March to take advantage of the continent's wealth in resources.
Key to the thinking is that too many of Africa's resources are exported without significant value being added and the development of backward and forward linkages in the economy. But while this has frequently led governments to think that the solution lies in state intervention, the study will focus on in depth interactions with the large private sector players in each economy and technical experts rather than dealing exclusively with governments.
The South African leg of the study will be conducted by Prof Ben Turok, director of the Institute for African Alternatives and a senior African National Congress MP, and Dave Kaplan, a senior economist located at the University of Cape Town's Centre for Innovation and Entrepreneurship.
Although SA developed a beneficiation strategy for the mining sector last year, it has been criticised as being weak, not based on empirical evidence and as failing to come up with solutions to problems.
Economist and Pan Africa Capital Holdings CEO Iraj Abedian has criticised the strategy for being too narrowly framed and paying insufficient attention to the backward and forward linkages. He also said unless the private sector got involved in shaping SA's beneficiation strategy, nationalisation would eventually bankrupt the country.
Prof Turok said the approach would be "very different to the nationalisation approach, which says 'let's grab the commodity and then government can manipulate it in some way'. It will break down the mining and manufacturing process and see what capability exists in the value chain and where government should intervene."
In the case of SA, the problem to get to grips with is why, despite its relatively developed economy, more beneficiation is not done. Some beneficiation operations - for example, ferrochrome - have shrunk in recent years with the closure of smelters, says Prof Turok.
"SA has followed the classic model of exporting raw materials without adding value. I want to know what inhibits mining companies from processing minerals," he says.
Source: Business Day
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