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Benefits of beneficiation

Why do more emerging and commodity-based economies not require beneficiation?

We want to make stuff too

If you look at infrastructure and trades maps of Africa from the end of the colonial era in the 1970s the spider's web of communication links head in one direction - towards the colonial "motherlands" in Europe.

During the Roman Empire "All roads led to Rome" In the European African empire all roads and telecommunications led to London, Paris and, to a lesser extent, Brussels, Berlin and, yes, Rome. Making a telephone call from Mombasa to Kinshasa probably required routing the call through London and Brussels.

The road and phone routes followed the money, mostly from the mines in the "Dark Continent's" interior to mills, plants, foundries, and factories in Europe where Africa's raw materials were beneficiated, converted into refined commodities that were in turn, made into manufactures, often to be sold back to Africa.

Change of compass

Today's maps are little changed, the roads are still head to the ports but the compass of telecommunications links and trade routes are no longer fixed solely on Europe. There has been a boom in intra-African telecoms and the ships carrying the excavations from the bowels of Africa's earth mostly head towards the Far East.

But in half a century one thing has changed very little. The minerals still leave Africa in the same raw state in which they were brought to the surface to be beneficiated in refineries, forges and factories out of Africa.

Of course this is not just an African issue. Huge ships from Australian coal mines navigate the Great Barrier Reef to serve Chinese markets, iron ore from Brazil is loaded for India and so on. Instead of being refined and manufactured close to their source that would create jobs and opportunities in the producing countries commodities are still travelling in bulk across the world.

Ex Africa semper aliquid novi (Out of Africa always something new)

Tanzania has had enough. It's National Assembly passed a new raft of mining legislation that, amongst other things, will create a "Requirement for beneficiation". The legislation says, "Any arrangement or agreement for the extraction, exploitation or acquisition and the use of natural wealth and resources shall ensure that no raw resources shall be exported for beneficiation". The new laws also require operators to provide a, "Commitment to establish beneficiation facilities within the United Republic".

It is difficult to fault the idea on logical grounds. Beneficiation will bring much-needed investment, jobs, income, skills, profits as well as retained earnings and tax revenues for the country. Local beneficiation also reduces the levels of bunker fuel pollution arising from bulk goods being unnecessarily shipped vast distances across the globe.

It is late in the day, but better late than never stopping the export of low-value commodities to countries where they will be beneficiated to the benefit of the investment, jobs, income, skills, profits etc. of the customer countries of Tanzanian producers.

Any goods produced using raw materials extracted, but not beneficiated in Tanzania but imported into Tanzania are proportionately more expensive. From now on, if they are made from beneficiated commodities exported by Tanzania in a manufactured or semi-manufactured form, they will be proportionately cheaper.

Not so super-cycle

"Market economies" such as Australia may baulk at not exporting bulk on the grounds that it would be a restriction of producers and customers’ freedoms. But Australia is an interesting example. Not only does exporting commodities that require dirty beneficiation also man exporting the need to meet exacting environmental and labour standards: the "super-cycle" commodity boom Australia "enjoyed" in recent years resulted in a soaring currency. That, in turn, decimated Australia's manufacturing exports by rendering them uncompetitive on world markets.

We will have to wait to see if there is Ex Australia semper aliquid novi.

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