LETTER PUBLISHED IN SUNDAY INDEPENDENT

In his thoughtful article," China must sweat for African money” ( Sunday Independent,6/5/12),William Gumede rightly argues for a hardnosed approach to trade with China. But along the way, he falls into the trap of putting too much faith in beneficiation as a panacea for what ails South African manufacturing. In fact, across government and particularly within the DTI’s Industrial Policy Action Plan, there is a current infatuation with beneficiation of our raw materials. At some levels it does make sense.




But if the market is not already signalling an interest in specific types of beneficiation, caution is advised. Not only are there long term infrastructural constraints , such a electricity costs and shortages in supply ( beneficiation is after all nothing but the application of heat to ore), but South Africa cannot always compete with the international markets for some beneficiated products. There are successful examples of beneficiation, such as the production of catalytic converters from platinum, but these are private sector led and limited in scope. When government takes it upon itself to select beneficiation products, it is as likely to fail as it is to succeed.



As South Africa faces stubbornly high unemployment, the temptation once government is involved in a beneficiated product independent of market competitiveness, it becomes politically impossible to withdraw. This means more subsidised state industries open to crony capitalism and freed from the profit incentive. And South Africa simply does not have enough revenue available to sustain this. So, yes, support SA manufacturing to beneficiate where it makes economic sense, but be careful of choosing sectors where we will never be competitive. Let the market be your guide.



Dr Gavin Lewis

DA MPL Gauteng Legislature

Spokesman: Economic Development

Deputy Spokesman: Finance