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Economic Transformation in Africa: What is the Role for Business-to-Business in the Mining Sector?

31-01-2014

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So that African countries can continue the path of economic transformation, the role of the mining sector needs to be enhanced. Besides pure mining activities, there is vast potential to create spatial and economic spillover effects, using the businesses and services opportunities that operate around mining activities. While large business activities have been quite successful in connecting to mining value chains, small and medium-sized enterprises (SMEs) often lack the capacities or technology to tap the full potential out of such activities.

To fill in this gap, is there a role for a business-to-business platform that would connect international and African SMEs, to match business opportunities? As pressure mounts on governments to take measures towards sustainable and inclusive economic transformation and on mining companies to source inputs locally, there are indeed formidable opportunities to match demand to technology, expertise, know-how and knowledge with expertise well-developed outside Africa.

Setting Up a Business-to-Business Platform

An initiative to do so was discussed in Brussels on 23 January 2014 in Brussels. The purpose was to conduct a first assessment of the viability and need for a B2B platform to bring together businesses from within and outside Africa around African mining activities. The vibrant and stimulating discussions built a good basis to make such a platform more concrete to foster business exchange and information brokerage. Experience from stakeholders clearly indicated that there is often a significant lack of information on both sides. Businesses are not fully aware of each others’ demands and needs along the mining value chain, and therefore find it difficult to match these with available service and technology providers.

This was a clear missing link in the path towards involving SMEs in contributing towards broader economic transformation through linkages with various economic sectors.

During the round table discussion Magnus Ericsson, Chairman and Co-founder of the RMG, San Bilal, Head of the Economic Transformation Programme at ECDPM, and Sven Renner, Project Head of BGR/GERI, pointed out that there must be “a clear understanding of local markets and of the mining sector as such”. Furthermore, such a B2B platform must address business opportunities linked to the mining sector, but going beyond the mere “hole in the ground” activities, to include business activities connected to up-, down- and side linkages along the whole value chain of mining. Particular focus should be placed on the increasing the number of SMEs potentially interested in the envisioned platform. Mining can be a real blessing for development but more often than not the role of private sector SMEs is neglected.

Economic Transformation – A Long and Winding Road

The importance of local knowledge, capacity building and needs/demands mapping was underlined. This is crucial to better understand, to take better-informed decisions and to assess, where local strengths and potentials for inter-continental SME cooperation are. If the platform succeeds in moving local suppliers up the value chain and developing their own skills set, sustainable local business development is feasible fostering business opportunities and catalysing effects at the same time.

To achieve that, and as basis for a future B2B platform, it was important, however, to bear in mind

  1. The role of artisanal and small-scale (ASM) mining, particularly in industrial minerals;
  2. Inputs (purchases) needed by mining companies, but that could be sourced locally; and
  3. The need for capacity building as an important pre-condition to ensure sustainability of local SMEs.

It was important to build the platform’s legitimacy by making sure that it includes developmental claims besides commercial interests.

The scope and nature of such a platform remains to be clearly defined. But economic transformation can only be successful if other sectors of the economy, such as agriculture, energy, infrastructure or manufacturing can find synergies with the mining sector to create spillover effects to various larger businesses and SMEs along local, regional, national and global value chains.

The views expressed here are those of the author, and may not necessarily represent those of ECDPM.

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Economic Transformation and TradeBusiness and DevelopmentExtractive SectorsRegional Integration