It has become a regular feature of policy statements in the minerals sector throughout much of Africa to exhort mining companies to “beneficiate” or “add value” to the minerals they increasingly export to China.

But will sending a refined metal rather than exporting concentrate (effectively dirt) change much?

Last week deputy minister of mines Kornelia Shilunga reportedly called on Rosh Pinah Zinc mine to add value to zinc concentrate here in Namibia. She is quoted as saying that “beneficiation and manufacturing create competitive advantages such as skills, labour and capital, access to markets and distribution networks, quality assurance etc.”

While this is certainly the case, the opposite is also true – a case of what comes first between the chicken and the egg. In order to convince companies to beneficiate in Namibia you first need the skills, access to markets and distribution networks. If government wishes to pursue further value addition of Namibia’s base metals, then what policies need to be put in place in order to make them work?

If you listen to the aid donors and the World Bank, they tell African countries that beneficiation is a really bad economic idea and should not be pursued.

There are many valid reasons why, including the fact that most of the beneficiation of copper, for example, has to occur close to your final market so you can deliver the product on time; you need efficient and low cost electricity; and, you must have few of the other metals that are needed to make copper alloys. Having copper, like having zinc in the ground, gives you very little commercial advantage in processing concentrates into refined copper and into semi-fabricates and fabricates.

Learning from Japan

Japan is the world’s second largest exporter of copper and yet it has almost no copper in the ground. Everything comes from Indonesia, Chile and Peru. Yet, not having copper and having to ship concentrate thousands of kilometers across the Pacific cannot be a source of advantage. 

Japan developed a commercial advantage in refining copper steel and aluminum because it was determined to become internationally competitive in producing ships and cars and steel.

In the 1960s and 1970s the Japanese wanted refined copper, steel and aluminum and they wanted it cheaply so that they could compete with the Americans and the Europeans in the production of ships, cars and electrical goods. Despite all the talk of Japanese management genius in the 1980s, cheap inputs was one of the most important components of Japan’s industrial rise and success against the might of Europe and the USA. 

By the early 1990s Japan had succeeded beyond its own expectations. Japan subsidised its firms to enter mining and then they bought concentrate cheaply, often well below market prices. They also developed the scale to make them efficient. A country with no copper, no domestic sources of electricity and expensive unskilled labour succeeded in becoming and remaining one of the world’s biggest producers and exporters of copper. 

It is truly a remarkable story of what government policy can do when it works to a specific long-term objective and co-operates with business.

Commercial advantage is like getting an education – it is expensive, painful and there is no guarantee it will work.

If the government of Namibia wants to develop a commercial advantage in beneficiating zinc or copper, or even diamonds, then it will have to pay for it. To learn to be really good at something costs a lot; just like educating a child, it means making painful sacrifices as well as facing the possibility of failure. 

If base metal beneficiation is to work, a great deal of investment needs to occur in providing low cost electricity, which is absolutely vital in refining. Transport costs, the railway and ports have to function very efficiently. But even if Namibia exports only refined zinc and refined copper, this will not solve the country’s employment difficulties.

Can we think bigger?

There is simply little point in refining zinc or copper unless we think about exactly where we want to go in the value chain in 20 years and, like the Japanese 40 years ago, we are willing to spend the huge resources needed to get there. The problem is that Namibia alone is simply not big enough a producer of any base metal to dream of repeating alone what Japan and Korea did a lifetime ago. 

Beneficiation on a national scale in Namibia can only be a modest affair with limited economic benefits. But SADC could, at least in principle, repeat what Japan did because between Cape Town and the Congo, SADC has all the resources, skilled and enterprising people it needs to be as rich as Japan. 

Even South Africa alone cannot achieve this – it needs all of its neighbours as partners. As it is, for South Africa the neighbours are simply markets for its exports. Only the 250 million people of SADC are potentially a market force large enough to even think of moving far down the value chain over the next 30 years in the way Asia has done. 

But SADC is simply unwilling to do much in this regard as most of our neighbours think only of their narrow national commercial interests. 

Until our neighbours change, nothing will happen seriously on beneficiation that will benefit Namibia and all of Southern Africa in a significant way.

Roman Grynberg is a professor of economics. These are his personal views and not necessarily those of his employer, the University of Namibia.