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Beneficiation critical to growing African mining – Mondi

chief-economist insideIDC's chief economist, Lumkile Mondi, presented opportunities in Africa at the 2014 Mining Indaba Beneficiation and downstream value add was key, said Lumkile Mondi, the Industrial Development Corporation's vice-president and chief economist.

Speaking on the sidelines of the Investing in Africa Mining Indaba, he said the corporation, one of the conference sponsors, was at the gathering to "present ourselves as a leading development finance institution in Africa. We are also here in support of our government in presenting the opportunities in Africa to international partners."

The corporation wanted to use its strengths to influence debate among delegates around African resources and their beneficiation, he explained. "It is a beneficiation story and we want to make sure it is Africa's time."

Mining and manufacturing has been a topic of some discussion at the Indaba, and Mondi said it was critical to think of the two sectors jointly. Indeed, Mineral Resources Minister Susan Shabangu brought it up in her opening address on Tuesday. She said no mining company would be forced to value add.

Mondi continued: "For Africa to industrialise, we need to ensure that there is mining manufacturing, because manufacturing brings a lot. We must bring value add. Raw materials fetch low prices, but it is important to see that there is value add from the electricity that has been supplied. There are other multipliers, such as the water that has been used, the coal, solar, wind.

"More importantly, we know that not only does manufacturing increase the value of the output, it also has a huge impact on job creation, skills and development. A lot of manufacturing, capital goods, and the machines that you use to produce are imported. Then the communities where the raw material is beneficiated are upskilled to develop their own resources and manufacture their own machines. It is a wonderful beneficiation story."

He added: "Many countries have developed without commodities, as they focused on research and development to build manufacturing machinery.

"What we want to stress in terms of our mineral resources is to make sure that other countries in Africa learn from South Africa, which has been a mining country for more than a hundred years. South Africa learned in the early stages of development to beneficiate. For Africa to develop there is no negotiation. We need to beneficiate. Otherwise we are making China, India and other countries more competitive than us on a commodity that we produce."

It was critical that African countries – and mining companies – become involved in manufacturing so that they got fair value for their resources. To some extent, South Africa was leading the field in this in Africa. "We made sure that we beneficiated our minerals. That's why we have refineries and entities such as Sasol.

"For Africa to develop it needs to beneficiate; there is no question about that. It has to happen if Africa is to enjoy its term – and as the East Asian cycle starts to dim, we see a sparkle coming from the continent. Let's ensure that we don't lose that opportunity by just exploiting resources, but by growing manufacturing as well."

South Africa's mining history was its critical edge worldwide, he said. "For example, no-one else mines five kilometres underground; we are the only ones who do that. It is knowledge, experience and expertise we can use in the rest of Africa."

IDC finance to boost manufacturing capacity

About the corporation's interest in the sector, Mondi said it had a strong presence in manufacturing as an industrial development financer. "Working with companies, we can be a critical player in industrialising the rest of the continent. That is why we work very hard with mining companies, because we want to ensure they benefit in terms of beneficiating."

He also pointed out that the IDC had huge experience not only in the gold sector, but also in iron, manganese, bauxite, aluminium, copper, nickel, copper, phosphate, exotic minerals and even plastics. The corporation does not get involved in actual mining – putting holes in the ground and extracting minerals – but rather with the mining services sector.

"We also bring a wonderful package of financing, whether it's debt, equity, or a mix of the two, guarantees, as well as export finance. With this, we can complement mining very well."

Ultimately, he pointed out, the IDC had been involved with mining through "the good, the bad and the ugly, and we survived the bad and the ugly. If you talk to us, you are talking to a professional, expert long-term partner committed to the development of South Africa and the rest of the continent."

However, it was a fair criticism, he admitted, that dealing with parastatals and development finance institutions could be complex and complicated, with a lot of red tape. "But we are working with public funds, so all processes must be clear and open. To make sure we don't waste a single penny of taxpayers' money, we need to be fair and transparent. No short cuts must be taken. This can take a lot of time, but there are places where this can be streamlined, I agree."

At the Investing in African Mining Indaba, Mondi spoke about the IDC at a special corporate white paper presentation in a parallel classroom session. The Indaba is running at the Cape Town International Convention Centre in Cape Town until 6 February.

As a development finance institution and sponsor of Mining Indaba, the IDC has a vested interest in the gathering. Its Mining and Beneficiation strategic business unit has been an active participant in the past years, with Abel Malinga, the divisional executive of mining and manufacturing industries, previously describing the Indaba as the "most important event for the [business unit] to meet existing clients and potential clients".

"The Mining Indaba brings all the role players to Cape Town in order to network and discuss new trends and how we can take such an important industry forward."

In addition, the Indaba gave the IDC a platform to showcase its commitment to growing the mining industry.

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