DR MSINGATHI SIPUKA | African states must step up to unlock the value of their minerals

A couple of weeks ago, this publication ran an article penned by this author. The argument made was that the turn for Africa in the global chain of manufacturing centres has not arrived. As such, any meaningful attempt to drive a radical programme of industrial development remained at the mercy of this broader context of the global structure of industry.

This was explained using the latest shift of production from China to its neighbours in the ASEAN region, namely Cambodia, Indonesia, Phillipines, Thailand and Vietnam.The argument was largely based on the understanding of how industrial capacity and complexity has evolved within national economies based on past experience.

Our modern-day points of reference for late industrialisation, for example the cases of China and South Korea, have seen this "natural progression" from low-value manufacturing to progressively higher-value manufacturing. This process of industrial upgrading is a function of ever greater capacity being built in the national manufacturing sector through investment of profits into research and development. In the case of South Korea, they started off with a simple industrial output based on textiles, plywood and wigs.

Over time, the basket of goods they manufactured increased in sophistication. This is the "order of things". We have already established this and the above summation serves purely to establish a link between the previous text and the current. With prospects of the traditional path towards industrialisation seemingly limited for African countries, there is possibly one pathway available to it.  Value addition to its vast wealth of mineral resources that are currently exported in almost raw form.

Of course, the economic and social returns of value addition or mineral beneficiation are quite simple. Adding more value to a raw material generates far greater economic activities as compared to selling it in its raw form.

This creates opportunities for greater job creation, increasing the value of exports, reducing trade deficits, expanding the fiscus, growing the share of manufacturing to GDP and broadly enhancing development prospects for the country where value is added. These are certainly outcomes that African countries are working towards.

The political economy of colonialism found expression in various facets of Africa's development framework, including the development of national, regional and continental infrastructure. This is best evidenced by the glaring gap in the patterns of intra-African trade relative to trade of African countries with the rest of the world.

It is well-established that this is, among other factors, a function of infrastructural development which reflects the priority of moving minerals from the colony to the industrial centres in Europe for the purposes of value addition. By design, the economic infrastructure you find today in a mineral-rich African country with a port is from the mines to the port to facilitate the export of minerals.

Equally, if the country is mineral-rich and landlocked the economic infrastructure would be directly from the mines to the nearest neighbouring country with a port to export the minerals. Therefore, African economic infrastructure historically has not developed beyond the colonial political economy. That is the infrastructure burden of connectivity that Africa confronts today.

How do we construct a continental infrastructure network that reflects a contemporary desire to reconstruct the political economy of Africa. Connecting Africa for increased intra-continental trade and development. Critical for this discussion is developing national, regional and continental infrastructure networks that promote minerals beneficiation.

Understanding the varied industrial capabilities of African countries, it may be necessary to design a value addition ecosystem that connects different national industrial capacities and this needs connectivity to allow minerals to move across the continent to achieve optimal beneficiation using cross-country capabilities.

So, the infrastructure question and redesigning it for value addition/beneficiation becomes absolutely vital. However, it goes beyond infrastructure to connect markets and capabilities of countries. It entails investments in actual mineral processing infrastructure which includes plants, equipment, technology and the likes.

To a large extent, the investments required for establishing these plants are commercial and dependent on foreign direct investments because of the limitations of continental capital. Without state investments and subsidies, local capital in most African countries is constrained to invest at this level.

So, again we are dependent on the very same Western economies to develop the capabilities that would unlock local value addition that is bound to compete with their own downstream activities linked to mining.

There is a second and important constraint, that being the benefit of technical expertise, skills and efficiencies that Western countries have accrued over decades, if not centuries, in their value-addition activities. Which translates into cost competitiveness of the more established value-addition markets in the West.

Simply, it is cheaper and more efficient to undertake the process in established zones of beneficiation.

Dr Sipuka is chief of staff at the African Union Development Agency – Nepad. He writes in his personal capacity