|
|
Is Africa Ready For Beneficiation?
Oct 22, 2007 11:07 AM
By Leah Granof
|
|
|
RAPAPORT... The beneficiation buzz that has been gaining momentum at various industry conferences throughout the year reached its most serious debate yet at the 2007 Antwerp Diamond Conference. Held this past week (October 14 –October 17, 2007) for the first time in the cutting and polishing stronghold, the conference brought together African leaders, world-renowned economists, diamond industry bigwigs and pop stars to discuss “Producers in Transition: the Changing Industry Dynamic.” The focus of the conference, however, centered upon the need and feasibility of African beneficiation.
Although the debate yielded few definitive conclusions, one certainty that emerged was that closing the gap between altruism, sustainable business development and economic theories in Africa is far from being resolved. As Nobel Prize Economics winner Dr. Joseph Stiglitz summarized, “development in Africa is possible, but not inevitable.”
According to economic experts, Africa’s most telling potential lies in its annual 5.8 percent average growth rate—far superseding that of Europe and the United States at 2.7 percent and 3.2 percent respectively (in 2006.) Africa has also seen an increasing number of its countries adopt some form of democracy over the past 25 years-- leading to moderate political stability and laying the ground work for foreign direct investment (FDI). In addition, there have been recent movements, particularly within South Africa and Botswana, to add-value to their natural mineral resources while retaining them inside the country. South Africa’s newly established State Diamond Trader which has been charged with the responsibility of purchasing and supplying rough diamonds to the domestic industry is but one example.
Against this backdrop, De Beers managing director, Gareth Penny noted, that “it is not altruism that leads us to this, but a sense of what is right, what makes good business sense, what consumers will demand, and a determination to create the necessary conditions for the future and stability of business.” For its part, De Beers is opening up a state-of-the art $83 million cutting and polishing center in Botswana which it eventually expects to sort 30 million carats of diamonds.
Despite the De Beers determination, Stiglitz, warned that Africa faces multiple challenges in sustaining and capitalizing on its current growth rate. Comparing Africa unfavorably to its more successful counterparts in East Asia, Stiglitz explained how both continents were on similar economic trajectories in the 1960s, but that Asia managed to pull far ahead of Africa through dynamic comparative advantage practices (e.g. finding new comparative advantages,) technology transfer and diversification of its resources (i.e. using profits from resources to develop social infrastructure and new industries, rather than reinvesting in the producing industry.)
Noting that Africa has also been the victim of unfair global trade agreements and on the disadvantageous end of globalization, Stiglitz argued that real development in Africa will occur only when it starts to practice good macro-economic government policies, namely by reinvesting wealth in capital and infrastructure.
This is not to say that Africa has not already begun the process of sustainable development. Africa has organized a number of regional and continental organizations to promote economic growth and poverty alleviation, including The Southern African Development Community (SADC,) the New Partnership for Africa's Development (NEPAD,) and the Africa Mining Partnership (AMP.) In addition, acting permanent secretary of Botswana's Ministry of Minerals, Energy and Water, Kago G. Moshashane told participants that beneficiation would help his country to begin the process of economic diversification instead of relying wholly on its production of rough diamonds.
Although many in the industry welcomed these steps, there were detractors who questioned the financial feasibility of African beneficiation. ALROSA president, Sergey Vybornov sighted Africa’s lack of experience and skills as a major barrier to entry. “The overall quality of cut diamonds, produced by new African nations may not be up to the industry standards, due to the lack of cutting traditions and schools. Their sales and marketing may also be problematic because of virtual non existence of local dealer networks and blockade by competitors—traditional participants of this fragile market,” he remarked.
In addition, whether or not Africa can succeed as a cutting polishing center without initial subsidies seemed to be the decisive point for many industry participants with experts pointing out that subsidies run contrary to the idea of sustainability. During one heated panel debate, Gemdax consultant, Anish Aggarwal, raised the cost benefit issue of moving away from cheap experienced labor in India and China to more the expensive and currently less skilled labor in Africa.
During the debate, it also became clear that it is impossible to equate the better developed economies of South Africa and Botswana with those in Angola, the Democratic Republic of the Congo and Sierra Leone whose economies have been ravaged by recent wars, continuing violence and political instability.
Ironically, it was the dramatic speech at the conference by pop singer, Sir Bob Geldof who called beneficiation in Africa a “human rights” issue that had the potential to seal the view of beneficiation --for the time being-- as an act of altruism first and economics second. Nevertheless, African beneficiation has already garnered the full support of major industry players like De Beers (who will run sights in Namibia and Botswana for the first time starting in 2008) and the World Federation of Diamond Bourses. The question is not whether beneficiation is coming to Africa. The real question is whether Africa will be ready when it arrives.
|
|
|
|
|
|
|
|
|
|
Tags:
Alrosa, Angola, China, Consumers, De Beers, Gareth Penny, Government, India, Namibia, Polishing, Production, Sights, South Africa, United States
|
|
|
|
|
|
|
|
|
|
|
|
|