Presentation to MPs

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DTI/UNIDO Conference Gallagher Estate Midrand
8 June 2004
Inter-industry Resource-based Linkages
Paul Jourdan (Mintek)
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Why Focus on Inter-Industry Linkages?

• Changing Global Dynamics
• 1. Globalisation of Capital Markets
• Capital skills flow to where they can be used
  most productively
• 2. ICT Revolution
• Wider and easier access to information
• Raw materials technology can be accessed from
  anywhere in the world
• 3. Rising NICs
• China, Brazil, Indonesia, India, etc.
• 4. New determinants of national competitiveness
  growth
• Technology innovation capacity
• Availability of skilled human capital
• Marketing networks

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Why Focus on Inter-Industry Linkages?

• SAs Manufacturing Strategy aims to promote
• Knowledge intensity
• Value addition
• Exports increasing emphasis on domestic
  opportunity
• Matrices of activities (vertical, horizontal
  spatial)
• Optimise value revenue accruing to SA firms in
  value chain
• Sector promotion ICT, agroprocessing, metals,
  tourism, cultural industries, autos, chemicals
• SAs new RD Policy identifies 4 Technology
  Missions
• Advanced Manufaturing (AMTS)
• Poverty Reduction
• Biotechnology ICT
• Strategies to develop leverage off our resource
  technologies

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From Natural Resources to High-Tech Growth
International Experience

• Successful Resource-based Economies Finland,
  Sweden, US, Canada, Australia (long history)
• Real Output per Capita in 5 Industrial Countries,
  1861-1981

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International Experience

1) Finland Transformation of the Finnish
Economic Base, 1990 2010
Base Metal
Transportation
Forest
Forest
Construction
Energy
Construction
Foodst.
Foodst.
Chemical
Chemical
Base Metal
Telecoms
Well-being
Transportation
Telecommunication
Energy
Well-being
1990
2010
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International Experiencecontinued
1) Finland Production and export shares of the
3 key Finnish clusters, 1980-2000
Cluster
1980
1990
2000
ICT Share of manufacturing Share of exports
4.6 4.0
7.6 12.0
29.4 30.0
Forest Products Share of manufacturing Share
of exports
25.3 45.0
23.8 39.0
21.0 29.0
Metals Share of manufacturing Share of exports
10.6 31.0
10.1 24.0
8.5 25.0
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International Experiencecontinued
2. United States Total Exports, Crude Material
Exports, Mine Product Exports as a of US
National Income, 1860s-1980s
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International Experiencecontinued
2. United States US Mining as a Source of
National Income (oil gas included)
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International Experiencecontinued
3. Canada Canadian Mining Output Metal
Exports as a of GDP, 1890-1975
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Resource Inputs Capital Goods Services - Case
Studies

• Finland
• Moved from technology importer to technology
  developer e.g. forestry industry technologies ?
  leading producer of paper machines in the world
  (Metso)
• Leading regional global producer of mining
  equipment technologies Outokumpu, Imatra
  Steel, Rautaruukki, Tamrock, Metso, etc.
• Sweden
• Nation of clusters - due early emphasis on
  differentiation and diversification
• Global producer of mining- forestry-related
  goods and services Sandvik, Stora-Enso, Atlas
  Copco, SKF
• Canada
• Primary exports drove development through demand
  supply linkages
• Now a global exporter of both primary mineral
  products goods services with high demand
  elasticity and tech content

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Resource Inputs Capital Goods Services - Case
Studies

• Public private sector strategies
  initiatives are being adopted throughout the
  world to leverage off existing competencies in
  resource sectors promote diverisification
• Brazil
• Saudia Arabia
• New Zealand
• Chile - forestry salmon-farming wine
  automobiles copper mining cluster initiative
  (Antofagasta)
• Australia - mining-related capital goods,
  technologies services
• Canada - beneficiation, alternative applications
  of technology, mining mineral services cluster
  around Sudbury

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Lessons for Resource-based Economies
Transition from primary resource dependence to
high-tech, knowledge-intensive growth dependent
due to three key factors 1. A sound
macroeconomic approach to development from the
outset 2. RD involvement long sustained
investment in education, innovation
entrepreneurship 3. Cluster development
promotion of resource industry linkages
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Resource Industry Linkages
Three Types 1. Downstream linkages -
beneficiation 2. Sidestream linkages - capital
goods inputs 3. Technological linkages -
lateral migration Resource sectors in South
Africa
Minerals
Mineral Processing
Agriculture
Agri Processing
Pulp, Paper, Packaging
Forestry
Processed Products
Fishing/Aquaculture
Tourism?? Energy??
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1) Beneficiation the cluster pipeline
Short to medium term potential lies in SAs
natural comparative advantage, vis
resource-based industries, which will create a
competitive platform for finished products in the
longer term. Also, resource-based capital goods
services.
Raw Mat. - Int. Product - Semi-Manufacture -
Fabricated
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Beneficiation Employment opportunities
Job creation is greatest at the beginning end
of the value-chain
Employment Opportunities
Extraction?
Processing?
Fabrication
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2) Mineral Sidestream Linkages Capital Goods
Services (discrete deposits)
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Inputs
Sidestream Industry Linkages

• Capital Goods
• Surveying
• Drilling
• Cutting
• Crushing
• Hoisting
• Materials handling
• Furnaces
• Process plants

• Services
• GIS
• Data processing
• Financing
• Mine planning
• Contracting
• Chemicals/reagents
• Process Control
• Ventilation

Input Sectors

• Finance
• Manufacturing
• Chemicals
• ICT

• Agriculture
• Construction
• Environmental
• Pharmaceuticals/medicine, etc

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3) Technological Linkages Lateral Migration

• Resource Capital Goods Services Global export
  potential (e.g. mining gt1,000bn/an 8X SA
  GDP)
• Examples include
• Nokia (Finland) forestry ?rubber ? cables ?
  mining ? electronics ? telecommunications
• Kone (Finland) cranes ? mining hoists ?
  elevators
• C-CORE (Canada) sensor technology for oil
  exploration -gt sensors for detecting electrical
  objects properties -gt aerospace (de-icing
  sensors) ? quality control in polymer fibre
  manufacturing
• Northern Centre for Advanced Technology (NORCAT,
  Canada) assessing feasibility of adopting
  drilling technology in Mars space exploration

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Lateral Migration in South Africa
Examples include 1. Bell Equipment Materials
extraction/handling equipment sugar cane ?
forestry ? coal ? other mining ? construction 2.
Lodox security screening system by De Beers ? US
defense ? medical trauma units 3. Concor
Technicrete composite packs used for safety in
underground mines ? collapsing buildings ? police
fight against terrorism 4. Mintek PlantStar
control technology ? MillStar ? Minstral ?
FrothStar ? argri-processing...??? 5. Mintek
Gold catalysts ? respirators ? sick buildings,
fags ? air purifiers.??? DC Plasma FeCr ?
Ti/Fe ? Zn ? FeNi ? enviroplas ? Mg?
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IMS Unpacks Resource Linkages Further
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Resource Capital Goods ServicesThe Key to
Lateral Migration
Fabri- cation
Resource Capital Goods Services (generic tech)
eg process control construction
equipment, atmospheric control, pumping,
materials handling, etc, etc.
Lateral Migration into Unrelated Hitech Industries
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Lateral Migration in South Africa
From Static/Resource Competitive
Advantage To Dynamic/KIS Competitive Advantage
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Mintek
Adding value to our natural resources
thank you
www.mintek.co.za