making the most of commodities: from theory to practice raphael kaplinsky development policy and...
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Making the Most of Commodities: From Theory to PracticeRaphael Kaplinsky
Development Policy and Practice, The Open University and CSSR, University of Cape Town
China’s demand for agricultural commodities
• 20% world population, 7% arable land• Biofuels• Industrial inputs• 22% global rubber consumption (2006)• Imports 27mt cotton vs 7mt domestic production(2008)• Pork, other meat and animal feeds• Switch domestically from grains to fruit and vegetables
World Manufacturing Export Price, 1986-2000
-10
-5
0
5
10
15
20
25
An
nu
al
pri
ce
ch
an
ge
(%
)
IMF, World Economic Outlook Database
Curse or Gift?
• Minerals and metals are capital intensive– Little employment– Income distribution
• Minerals and metals provide point revenues which can be stolen
• Commodities through the Dutch Disease, undermines manufacturing– But this has not always been the case
• SO HOW CAN THE COMMODITIES BOOM BE A SPUR TO INDUSTRIALISATION?– THE KEY LIES IN LINKAGES
Global outsourcing
• Core competences
–Has value in market
–Unique to firm
–Difficult to copy
• Everything else outsourced
ProductionDesignMarketing
Services Services
The increasing globalisation of VCs
Competitive pressures
Linkages in the commodities sector
Time
OutsideMiningCompanycorecompetences - win-win
Value added
Inside coreCompetences - win-lose
Mining Technology Patents
Source: EPO, USPTO Databases
All Patents Mining Technology patents
Share (%)
S Africa 2,969 128 4.3
USA 1,587,915 7,882 0.5
Australia 16,283 311 1.9
Canada 65,580 853 1.3
Total 1,672,747 9,174 0.5
Mining Technologies – South Africa’s cluster of patenting excellence
• The portfolio of patents held by South African enterprises is not especially large…
• But it is distinctive in terms of quality• And the measured relative quality of South
African patents stands up to quite rigorous tests– Not statistically better than American or Canadian mining
patents…– But statistically equal in quality to Australian patents
Linkages in Ghana Gold Sector
• Chamber of Mines– 10 production companies– 45 mine support service companies– 1 exploration company (out of an estimated 15-20)
• Business/Industrial Directories:– 250-300 companies
• Spatial:– Majority of companies are located in Greater Accra
Tarkwa, Obuasi - direct operational support – Sekondi-Takoradi
Types of linkages
• Inputs to gold mining– capital goods – consumables – services
• Tier 1 direct suppliers and Tier 2 indirect suppliers• Business and producer services: 10 to 15 years of
significant investment – finance, insurance, real estate/property, legal,
logistics, laboratory and other technical services
Extent and Nature of Linkages
Classification $m %
Employees 175 8
CAPEX 669 29
Direct to State 146 6
Mining Host Communities 12 1
Local Purchases (excluding Fuel/Power)
467 20
Local Purchases (Fuel/Power)
428 18
Loans 52 2
Imported Consumables 376 16
Linkages in the commodities sector
Time
OutsideMiningCompanycorecompetences - win-win
Value added
Inside coreCompetences - win-lose
Speeding up
Speeding up and deepening
What determines the shape of the linkage curve?
• Sector specific factors
• Ownership
• Infrastructure
• Skills spillovers
• Links to National System of Innovation
• Role of regional capabilities
• POLICY
MMCP Programme
• Joint University of Cape Town and Open University
• IDRC-funded
• Began Jan 2009, ends March 2011
• Underdeveloped policy dialogue
MMCP Sectors
• Mining services in South Africa
• Diamond polishing and cutting in Botswana
• Offshore umbilicals maintenance in Angola (oil)
• Copper in Zambia
• Gold in Tanzania
• Gold in Ghana
• Timber in Gabon
• Services to Oil in Nigeria
• Central development corridor in East Africa
• Chinese companies in infrastructure