Beneficiation seems to be top of the government's list to move SA forward
THE five priorities of the South African government are outlined succinctly as education, health, crime prevention, rural development and creation of decent work. Of the five priorities that underpin the South African strategy, education and health feature high up on the list. However, while education and health are the fundamental building blocks of any society, the creation of decent work and an upward trajectory in economic growth are the bedrock.
Without a stable economic background it becomes exceptionally difficult to put in place measures to develop an education structure and a sustainable health care system. It is therefore imperative for any nation that aspires to be economically competitive to have a solid base off which to work. One of the key areas where South Africa can maximise its potential for economic growth is the beneficiation of its extracted minerals.
Beneficiation by basic definition is the treatment of raw material such as ore to improve physical or chemical properties in preparation for further processing. Unfortunately, South Africa and arguably the African continent at large are lagging behind in terms of beneficiation of minerals. For instance, gross revenue from sales of all minerals in South Africa in 2008 netted the country nearly R300bn. Of that amount only R86bn was generated through the processing of base and precious metals and other minerals within the country. The R86bn equates to just 11% of the total volume of minerals produced in South Africa.
Delving deeper into the definition of beneficiation, the process is the transformation of a mineral, or a combination of minerals, into a higher-value product, which can either be consumed locally or exported. The majority of Africa's mineral-rich states are not only earning the minimum from their resources, through the export of unprocessed ore, but are also limiting employment benefits, wealth diversification and leaving themselves vulnerable to the fluctuations of the global resource markets. The status quo in South Africa and the broader African continent depicts a picture whereby there is little benefit derived from the mineral resource.
In essence, Africa does not benefit from the comparative advantage it has as a result of being host to large deposits of mineral resources. The lack of benefit for the continent is a chorus that has been heard many times before and this begs the question: what is the most productive approach to enable effective and efficient beneficiation? To succinctly arrive at outcomes that stand to enhance the value-add of beneficiation, it is key to understand that beneficiation is strategic and should be driven through a concerted political will.
As the continent's largest and most mature mining market, SA has made beneficiation policies a central pillar of its "New Growth Path" economic development policy. While the government may be of the opinion that beneficiation is the way to go, does the industry and owners of capital see same? In order to maximally benefit and not hamper beneficiation, a solution for the local beneficiation of minerals hinges mainly on policy decision and orientation. The mineral resources are an input factor that the settings have a comparative advantage in. A proper utilisation of the minerals for optimum input relies on policy decisions and orientation towards beneficiation.
Continentally, the African Mining Vision (AMV) as set out by the AU Conference of Ministers responsible for Mineral Resources Development of 2011 in Addis Ababa sought to shift mineral policy beyond a focus on extracting minerals and sharing revenue. The AMV relates such policy to the demand for structural transformation of Africa's economies. The vision premised on the abundance and significance of its minerals, proposes an industrialisation strategy anchored on minerals and other natural resources as critical for achieving the Millennium Development Goals, such as eradicating poverty and securing sustainable growth.
In 2011 Zimbabwe banned the export of chrome in an effort to develop internal refining capacity. Zambia allows companies to deduct the costs of refining and smelting from the 6% mineral royalty and only applies its 15% export tax to copper and cobalt concentrates, not more refined products. The beneficiation activities that have been carried out have concentrated in the capital- and energy-intensive areas of the mineral value chain. What should be concerning is that South Africa continues to import a variety of finished products from countries in the developed world and emerging market giants such as China.
This is a significant opportunity loss in export revenue and employment creation possibilities. South Africa possesses some strength that gives an advantage to the local beneficiation of minerals. These include a natural monopoly on certain mineral reserves; competitive advantages in some mining and smelting activities, experience in the beneficiation of certain minerals at the firm level, and a range of research and development programmes focussed on mining sector. Furthermore, the country has developed some capacity for value-adding processing through the creation of facilities for mineral processing and manufacturing.
By: Bongani Coka - CEO of Productivity SA