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Making the Most of Commodities: From Theory to Practice

Making the Most of Commodities: From Theory to Practice. Raphael Kaplinsky Development Policy and Practice, The Open University and CSSR, University of Cape Town. Commodities-Manufactures Terms of Trade. China’s demand for agricultural commodities. 20% world population, 7% arable land

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Making the Most of Commodities: From Theory to Practice

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  1. Making the Most of Commodities: From Theory to Practice Raphael Kaplinsky Development Policy and Practice, The Open University and CSSR, University of Cape Town

  2. Commodities-Manufactures Terms of Trade

  3. 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

  4. World Manufacturing Export Price, 1986-2000 IMF, World Economic Outlook Database

  5. Commodities-Manufactures Terms of Trade

  6. 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

  7. Global outsourcing • Core competences • Has value in market • Unique to firm • Difficult to copy • Everything else outsourced

  8. The increasing globalisation of VCs Services Services Design Production Marketing Competitive pressures

  9. Value added Linkages in the commodities sector Inside core Competences - win-lose Outside Mining Company core competences - win-win Time

  10. Mining Technology Patents Source: EPO, USPTO Databases

  11. 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

  12. 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

  13. 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

  14. Extent and Nature of Linkages

  15. Speeding up and deepening Value added Linkages in the commodities sector Inside core Competences - win-lose Speeding up Outside Mining Company core competences - win-win Time

  16. 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

  17. MMCP Programme • Joint University of Cape Town and Open University • IDRC-funded • Began Jan 2009, ends March 2011 • Underdeveloped policy dialogue

  18. 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

  19. Why am I here…? • Exchange of information • UNCTAD and policy dialogues • UNCTAD and training programmes

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