Industry Adds Value

Below find Prof. Ben Turok’s letter to Business Day on 17 June 2015.

ALLOW me to comment on Songezo Zibi’s latest column (Unembargoed, June 15). He takes a rather pessimistic view on the prospects of industrialisation in SA through building a “bigger heavy industrial sector … to fuel infrastructure”.

The obstacles he cites are high electricity prices, the lack of skills and technologies, and pollution.

While we can debate whether it is undesirable to build heavy industry, the objections raised are often applied to almost any industry.

Every now and again, opinion pieces come down against any form of beneficiating our minerals on the grounds of electricity prices and unreliability, skills shortages and environmental consequences.

Such views chime with the school that argues “just because you have steel doesn’t mean you make pots and pans”. True, but if you make pots and pans you have to employ design engineers, train workers, build physical infrastructure and create employment, which is no bad thing.

Industrialisation through beneficiating your own mineral resources means you add value and create jobs locally. The alternative is to export raw minerals until they run out.

Mr Zibi argues our input costs are too high for heavy industry. They are also too high for all industry. The answer is to manage these inputs or the exercise becomes uncompetitive.

But that is precisely the job of effective governance — providing inputs and services that enable final products to be competitive. We need to pressure the government to observe that need just as the Chinese have done for decades. Instead, we have allowed our state-owned enterprises to become grossly inefficient and parasitic.

All of this is the subject of a research programme on our mineral value chains commissioned by the United Nations Economic Commission for Africa that I am undertaking with experts.

Prof Ben Turok
Director, Institute For African Alternatives

 

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