1. Making the Most of Commodities: From Theory to Practice Raphael Kaplinsky Development Policy and Practice, The Open University and CSSR, University of Cape Town

2. Commodities-Manufactures Terms of Trade

4. China’s demand for agricultural commodities 20% world population, 7% arable land Biofuels Industrial inputs 22% global rubber consumption (2006) Imports 27mt cotton vs 7mt domestic production(2008) Pork, other meat and animal feeds Switch domestically from grains to fruit and vegetables

5. World Manufacturing Export Price, 1986-2000 IMF, World Economic Outlook Database

6. Commodities-Manufactures Terms of Trade

7. Curse or Gift? Minerals and metals are capital intensive –Little employment –Income distribution Minerals and metals provide point revenues which can be stolen Commodities through the Dutch Disease, undermines manufacturing –But this has not always been the case SO HOW CAN THE COMMODITIES BOOM BE A SPUR TO INDUSTRIALISATION? –THE KEY LIES IN LINKAGES

8. Global outsourcing Core competences –Has value in market –Unique to firm –Difficult to copy Everything else outsourced

9. Production Design Marketing Services The increasing globalisation of VCs Competitive pressures

10. Linkages in the commodities sector Time Outside Mining Company core competences - win-win Value added Inside core Competences - win-lose

11. Mining Technology Patents Source: EPO, USPTO Databases All PatentsMining Technology patents Share (%) S Africa2,9691284.3 USA1,587,9157,8820.5 Australia16,2833111.9 Canada65,5808531.3 Total1,672,7479,1740.5

12. Mining Technologies – South Africa’s cluster of patenting excellence The portfolio of patents held by South African enterprises is not especially large… But it is distinctive in terms of quality And the measured relative quality of South African patents stands up to quite rigorous tests –Not statistically better than American or Canadian mining patents… –But statistically equal in quality to Australian patents

13. Linkages in Ghana Gold Sector Chamber of Mines –10 production companies –45 mine support service companies –1 exploration company (out of an estimated 15-20) Business/Industrial Directories: –250-300 companies Spatial: –Majority of companies are located in Greater Accra Tarkwa, Obuasi - direct operational support –Sekondi-Takoradi

14. Types of linkages Inputs to gold mining –capital goods –consumables –services Tier 1 direct suppliers and Tier 2 indirect suppliers Business and producer services: 10 to 15 years of significant investment –finance, insurance, real estate/property, legal, logistics, laboratory and other technical services

15. Extent and Nature of Linkages Classification$m% Employees1758 CAPEX66929 Direct to State1466 Mining Host Communities121 Local Purchases (excluding Fuel/Power) 46720 Local Purchases (Fuel/Power) 42818 Loans522 Imported Consumables37616

16. Linkages in the commodities sector Time Outside Mining Company core competences - win-win Value added Inside core Competences - win-lose Speeding up Speeding up and deepening

17. What determines the shape of the linkage curve? Sector specific factors Ownership Infrastructure Skills spillovers Links to National System of Innovation Role of regional capabilities POLICY

18. MMCP Programme Joint University of Cape Town and Open University IDRC-funded Began Jan 2009, ends March 2011 Underdeveloped policy dialogue

19. MMCP Sectors Mining services in South Africa Diamond polishing and cutting in Botswana Offshore umbilicals maintenance in Angola (oil) Copper in Zambia Gold in Tanzania Gold in Ghana Timber in Gabon Services to Oil in Nigeria Central development corridor in East Africa Chinese companies in infrastructure

20. Why am I here…? Exchange of information UNCTAD and policy dialogues UNCTAD and training programmes