Houjie Town is a busy trading port on the eastern banks of southern China’s Pearl River Delta. Translated, the name means ‘Thick Street’ – a reference to the area’s centuries-long history of wealth and trade, aided by its lucrative location in the heart of the Guangzhou-Shenzhen economic corridor.
The town is a retail paradise. But honestly, you probably shouldn’t be reading about it in an article about the state of Africa’s mid- and downstream minerals processing industries. The fact that you are, though, is in many respects part of the problem.
That problem – from a minerals perspective – was well explained by Nelson Mandela Metropolitan University research associate Gift Mugano in a column he wrote for Zimbabwe’s government-owned Herald newspaper: ‘This demonstrates that having natural resource endowment does not automatically translate to downstream beneficiation, but requires dedicated interventions to address possible constraints to realise a competitive advantage for the mineral beneficiation industries.’
In other words, just because South Africa has a wealth of minerals, it doesn’t mean that the country is enjoying the full benefits of those minerals all the way down the value chain. In most cases, the country exports the raw commodities, rather than processing those minerals at home. Or, as Mugano wrote: ‘In essence, South Africa can be broadly defined as an economy with low levels of mineral beneficiation, in that most of its minerals are exported as ores or semi-processed minerals rather than high-value intermediate to finished products.’
This brings us back to Houjie. In May, the Gauteng province signed an MOU with Houjie to establish an industrial park in the area to promote trade between the two countries. The 33 000 m2 industrial park will include a South African jewellery mall, South African commodity display centre and a Chinese jewellery institute.
‘When the industrial park is completed, it will be beneficial to both sides,’ said Jiang Yajun, mayor of Houjie at the signing of the MOU. ‘It will be a platform for the South African jewellery industry to enter the Chinese market.’
The park will also allow for South African minerals to be processed into finished products – a step in the value chain that isn’t happening in the country, due in large part to a skills deficiency.
Gauteng legislature deputy speaker Uhuru Moiloa hinted at the problem when speaking at the MOU announcement. ‘We welcome Chinese partnership and wish to secure part of the Chinese market,’ he said.
‘I encourage South Africans to interact with the Chinese to propel the interest of our people. We want our youths to go for training in China for a year and return to replicate what they learn in the country.’
In South Africa, it’s becoming not so much a case of wanting our youth to learn those skills, as them needing it.
A Statistics South Africa report for May released figures that showed South Africa’s mining production volumes had declined by 18% in March this year – accelerating February’s drop of 8.3% and bringing the biggest fall since at least 1980.
The report also revealed the commodities that were hit the hardest. Those on the decrease were manganese ore (24.3%), platinum group metals (23.7%), iron ore (21.4%), coal (15.8%) and gold (7.4%).
Economist Mike Schussler was quoted in a Mineweb interview saying that this was the biggest year-on-year decline he has ever witnessed. In another media report Schussler added: ‘This is a radical structural shift for South Africa. The commodities bust is coming home to roost. These are the worst numbers South Africa has ever had.’
The key to making African investment contribute more strongly to economic growth is to ensure that money goes into the processing of raw materials
In February, Mineral Resources Minister Mosebenzi Zwane opened the annual Mining Indaba in Cape Town with the lyrical – if sobering – words: ‘There is an ebb and flow to life. There are highs and lows. There are sunny days and grey days, summers and winters. The 2016 Mining Indaba comes at a time when the mining industry is in its winter season – a season that some have characterised as a crisis.’
Mineral beneficiation is widely seen as a solution to this crisis – and to the country’s broader economic malaise.
‘We have responded to the crisis by introducing the nine-point plan to boost growth and employment, within the framework of the National Development Plan,’ said President Jacob Zuma at a meeting of labour and business leaders in mid-May.
‘The nine-point plan focuses on energy, infrastructure development, agriculture and agro-processing, mineral beneficiation, a higher impact Industrial Policy Action Plan, small business development and encouraging private sector investment, among others.’
Also in May, Nigerian entrepreneur Tony Elumelu told the 26th World Economic Forum on Africa – which took place in Kigali – that ‘investment into Africa is rising despite the [economic] downturn’. He added that the key to making African investment contribute more strongly to economic growth is to ensure that the money goes into the processing of raw materials – as opposed to simply extracting and exporting.
‘For far too long, economic growth in Africa has been dominated by the export of unrefined raw material and unfinished products – from crude oil to cashews and diamonds to cocoa,’ Elumelu wrote in a WEF report. ‘Economies around the continent have limited our own potential by not building the internal capacity to add more value locally by making semi-finished and finished products.
‘This deprives Africa of the vast majority of the ultimate value inherent in raw materials. Instead, global companies from developed economies have long been the only viable – although far from ideal – alternative. This severely limits the resources and opportunities Africans are able to derive from our own natural endowments and slows the pace of development. More worryingly, these circumstances have created enclave economies and growth that is very often non-inclusive.’
Elumelu’s home country, Nigeria, provides a case in point. Speaking at the 2016 Stanbic IBTC Bank Iron Ore and Steel business session in Lagos in May this year, Nigeria’s Minister of Solid Minerals Kayode Fayemi said: ‘Steel is the world’s most important engineering material and it is crucial to any country’s industrial-isation objectives.
‘In Nigeria, most steel operations are focused on using imported scrap metal, and hot/cold rolled steel and wire coils to produce finished products such as steel roofing sheets, nails, pipes and reinforced steel bars.
‘Nigeria imports an estimated US$3.3 billion of processed steel and associated derivatives, representing 80% of the US$4.2 billion total metal products imported per year – 25 million tons (MT)/annum. Despite the country’s relatively robust iron ore reserves, there are only 30 steel rolling mills in the country, with combined installed capacity of 6.5 MT/annum – only 18 are operational, producing about 2.8 MT/annum using 100% scrap metal.’
‘Steel is the world’s most important engineering material and it is crucial to any country’s industrialisation objectives’
On a continent that boasts such a wealth of mineral resources, it doesn’t make sense that such a huge percentage of processed metals are imported from overseas. But this irony lies at the heart of Africa’s minerals processing problem.
As Rick Menell, former president of the South African Chamber of Mines, wrote in a recent Business Day column: ‘Much of the history of post-independence Africa has been defined by the struggle to convert mineral wealth into long-term human and national development.’
Menell argued that, while other mining countries have made huge progress in the use of technology and machinery for mining, simply copying their processes is not feasible.
‘Africa, therefore, has a golden opportunity to develop technology and assert its leadership in the sector. Not only will we be able to beneficiate and export our mineral wealth competitively but, having deepened our industriali-sation process, Africa will be able to compete effectively as a global leader in skills, technology and services,’ he wrote.
Zimbabwe is making moves in that direction. In March, the government announced plans to establish 32 gold processing centres in small-scale mining areas around the country, offering mid-stream services such as gold milling.
Mines and Mining Development Deputy Minister Fred Moyo confirmed that the Mashonaland West, Mashonaland Central, Midlands and Matabeleland South provinces would get the bulk of the processing centres, which will be kitted out with US$5 million worth of machinery.
That machinery will, of course, be imported from China.
