Definition of beneficiation

“The treatment of raw material (such as iron ore) to improve physical or chemical properties especially in preparation for smelting “

Mail & Guardian

The future is beneficiation

Sharda Naidoo 10 Feb 2012

“Beneficiation is the new buzz word in government’s resource-nationalism plan, which proposes taxes on the export of raw materials in a bid to boost manufacturing in downstream industries and create jobs. “

SA is so out of synch with global development norms that there are even glaring language gaps.

There is little recognition by economists of the term “beneficiation” because it expresses belief in a concept which is extremely difficult to support.

That globalisation has reshaped the global economy in large part reflects how transport cost have plummeted for a wide assortment of reasons.

The relevance of “benification” rests upon there being compelling advantages to manufacture near the source of the ram materials.

Such advantages clearly exist but rarely have they been compelling and as transport costs continue their long-term relative decline, the advantages of manufacturing near the source of the raw materials will continue to decline.

Even if transport costs were trending higher, the beneficiation argument would remian difficult to sustain as most finished products include inputs which are sourced from multiple locations.

There are however many instances were a single material is the dominant input. But even then it is often cheaper to transport the raw material in its raw form than the finished product.

It takes a lot of iron ore to produce the steel that goes into making a car. Transporting the raw iron ore is vastly cheaper than transporting the finished product.

Smelting aluminium requires a great deal of energy. If a jurisdiction combined substantial aluminium deposits and low-cost electricity, this could justify setting up an aluminium smelting operation. Why the electricity was cheap would need to be considered. But just because the aluminium was smelted in an area that doesn’t by itself make a convincing argument for creating finished products in the same jurisdictions.

Transportation has become so cheap that even the production of inexpensive products will be spread across various jurisditions.

Trying to prioritise access to raw materials misses a great deal.

The massive influence of continual disruptions is highly adverse to emphasising the importance of access to raw materials.

Raw materials which aren’t easily and cheaply accessed are disintermediated through engineering or business driven disruptions.

More and more of mass production is becoming commodified.

There are fewer opportunities to earn attractive returns by supplying raw materials or by performing routine manufacturing.

High returns are increasingly drifting toward areas such as design, branding and customisation.

Market leadership in such fields requires tremendous diffusion of disparate knowledge.

While “diffusion” is central to 21st century economic development, this English word is foreign to SA’s policy making lexicon.

From Vocabulary.com Diffusion is the act of dispersing something, spreading it out from a central point. When an idea catches on, that’s a type of diffusion.

Diffusion of knowledge is often most efficiently achieved through importing highly skilled people.

Education is, in effect, a sub category of diffusion.

SA is not effective at attracting highly skilled workers from other jurisdiction – it routinely loses highly skilled workers – nor is the country effective at diffusing knowledge in the classroom or among groups of workers.