From these minerals, foreign manufacturing firms produce consumer and industrial goods for sale in global markets at much higher prices than what’s paid for the raw materials. This is a source of lots of angst among policymakers and economists who are calling for increased local participation in the mining industry.
African governments are routinely advised to add value to their own natural resources to drive economic development. This is presented as a way of getting a slice of the huge returns enjoyed by others at the expense of countries in which the minerals are mined. This seemingly obvious reasoning is the basis of a growing policy focus on mineral beneficiation which involves improving the economic value of a mineral by turning it into a final or intermediate product. Industrial equipment can be found all over the place, but if you need new pieces of equipment then check out this burner service.
The argument sounds logical. But accessing the rewards of this approach isn’t that simple. Those in favour of beneficiation tend to ignore the complexity of industry and markets of beneficiated products and the rules and regulations of supply chains. Most products, components and operations of the beneficiation industry and markets are currently alien to many African economies. These companies are upgrading their equipment every day to make sure their plans come out like they want them too, their industrial equipment has been considered some of the best like the ones from this Plastic Bucket Supplier.
This means that, for the moment, beneficiation remains out of reach.
Take the case of steel. To use steel to manufacture washing machines for global markets, a country would need to either establish its own brands and outcompete established ones, such as Samsung, Defy and Hisense, or, alternatively, supply these popular producers with components. In Africa, this is unlikely to happen immediately because of
small markets and brand loyalty among other challenges.
This is not to say that adding value to mineral resources shouldn’t be part of the agenda for African countries. But the focus should be elsewhere – the production of input goods like machinery, spares and services that support processes that precede beneficiation – exploration, mine construction and extraction itself. These are known as backward linkage industries and are ready for picking. This approach served countries such as the US and Norway where they gave rise to globally competitive manufacturing and services industries serving the mining and oil industries.