Elements of the SADC Regional Action Plan

IMPROVING INDUSTRIAL PERFORMANCE AND PROMOTING EMPLOYMENT IN THE MINERALS PROCESSING INDUSTRY Seth Akweshie

Overview Southern African region produces significant quantities of major metals and minerals Contributes to world production - about 53% of vanadium - 49% of platinum - 40% of chromite - 36% of gold % of diamonds - 20% of cobalt

Other minerals: - Steel (carbon and stainless) - Aluminium - Brass - Copper - Lead - Tin - Zinc - Salt - Sandstones - Precious stones etc Also, scrap metals

Value chain Value-added processing, or beneficiation, involves the transformation of the raw material using local factors (labour and capital) into a more finished product that has a higher value than the sale of the raw material. Stage 1 – Mining and producing ore or concentrate Stage 2 – Converting concentrate into intermediate product (ie metal or alloy) Stage 3 – Transforming intermediate good into refined, semi-fabricated product Stage 4 – Further transformation into finished product

Employment opportunities Stage 1- High Stage 2- Low Stage 3- Very high Stage 4- Very high

Benefits of value addition Increased revenues; higher GDP Additional employment creation Reduced exposure to fluctuations in world primary commodity prices Improved sustainability Possibilities for further downstream manufacturing industries (eg machinery; motor vehicles; construction, etc)

Result: Underdeveloped downstream mineral products industries Poor employment from minerals processing Low competitiveness Vulnerable to cyclical trends & price fluctuations Relatively low contribution to revenues & GDP Increasing imports of finished products Ever worsening Balance of Trade situation

SWOT Analysis

Strengths Rich endowment with various minerals deposits Conditions for its production Strong capabilities in upstream industries Support at all Governmental levels Primary production being done Limited production at downstream levels Existing processing plants/capacity

Weaknesses Unintegrated industrial development structures (ie weak linkages) Limited value addition in downstream industries Poor quality of products General lack of QC & QA => no common quality standards Slow speed of delivery due to poor/indequate, unitegrated transport infrastructure (ports, rail, road) Low investment in minerals processing Shortage of skills – artisan, technical, engineering, managerial levels => low production capabilities in downstream industries

Weaknesses continued Lack of technology support structures Low R&D (infrastructure and spend) Inadequate marketing and export market access Lack of external trade strategy (strategic protection, promotion, market intelligence, etc) Lack of credit facilities

Opportunities Growing global demand for finished mineral products Growing global trade in scrap & recycling Growing African market Labour-intensive production processes Under-developed downstream industries (electronics, industrial machinery and equipment, transportation, construction, automotives, etc) Growth opportunities in Asian market (esp. China and India)

Threats Import-parity pricing of basic metals by upstream minerals processing companies who are very few, but have significant price-setting power Interventionist policies (e.g. subsidies) in scrap importing countries Increasing emphasis on environmental, health and safety standards => higher costs Differential pricing of inputs (e.g. electricity: pre- negotiated prices for upstream companies; municipal rates for downstream companies) High transportation costs Aging workforce

Threats continued Existence of TBTs, NTBs HIV/AIDS

CHALLENGES (based on SWOT Analysis) Enhanced and broadened skills base Increased importation of manufactured goods Improved production capabilities and benchmarking Improved manufacturing and technological capabilities Improved competitiveness and industry upgrading

STRATEGIES Skills development and training Improving logistics to reduce cost of manufacturing Facilitating import replacement - Enhancing production capabilities - Encouraging advanced manufacturing and technologies - Building a competitive foundry industry - Provide information/data on imports to industry (Early Warning System)

ACTIONS 1.Enhance and broaden the skills base - Regional collaboration in HRD (esp: technicians & engineers - Tackle the HRD pipeline bottlenecks (esp. maths & science) - Harmonize HRD accreditation systems - Assess regional HRD capacity to produce requisite skills for value-addition - Address the HIV and AIDS pandemics to minimise impact on skills availability 2.Promote beneficiation of minerals & scrap metals 3.Increase investment in and coordination of R&D

ACTIONS continued 4. Forster innovation (i.e. promote and reward innovation) 5.Develop vibrant and competitive downstream manufacturing industries (mostly SMEs) * Develop strong foundry industry (1 st Stage in beneficiation chain) * Develop of industrial clusters; promote networking & collaboration * Subsidize electricity cost to downstream producers * Provide coordinated technical support services * Improve technological capabilities of downstream industries (- fundamental to increasing competitiveness) * Assist firms to upgrade equipment/Invest in new technologies

ACTIONS continued 6.Translate existing linkages into joint growth and development 7.Precious Metals and Minerals - Establish requisite refining capacity - Establish semis production capacity - Assess regional design and marketing collaboration 8.Market Access (Trade Barriers; NTBs) 9.Marketing (Pricing; Margins; Promotions) 10.Involve Sector Associations and Trade Unions in decision-making

ACTIONS continued 11.Centres of Excellence - Regional Centres of Excellence * Mintek * CSIR - National Centres of Excellence * Assess capacities and capabilities to play roles * Improve capacities and capabilities 12.Enhance collaboration between Regional and/or National Centres of Excellence & Industry players (e.g. Project AuTek bet. Mintek & AngloGold)

ACTIONS continued 13.Establish Agency for Registering Patent Rights 14.Regulatory Environment & Cost of doing business 15.HIV / Aids 16.Promote positive media reporting about Africa 17.Infrastructure development: If the infrastructure is not in place, we can forget about becoming competitive

Superior quality Competitive Advantage  Low cost  Differentiation Superior efficiency Superior customer responsiveness Superior innovation

An example

Financing SADC Development Fund SADC Governments - 2%-4% of all donor funds - 10% of annual budget for R&D Public-Private Partnerships (PPPs) Private Sector - Industry Sector Associations - Sector Development Funds (?) - Development Finance Institutions (DBSA, etc - Investment Banks - Stock Markets - Other financial institutions (e.g. Pension Funds, Insurance companies, Venture Capitalists, etc) The Diaspora Donors (UNIDO, EU, UNCTAD, USAID, GTZ, CDE, Philantropists, etc)