- Forward Linkages (Supplying Extractives’ Downstream Sectors)
- Policy Options
- Identifying Obstacles to Downstream Integration
Identifying Obstacles to Downstream Integration
At a Glance
Consultation processes allow potential investors to be better understand the government's position and the resources it is prepared to commit to downstream production.
Consultations help to facilitate mutual understanding, and policies based on such understanding are far more likely to achieve defined objectives in supporting downstream production.
In most cases, governments wanting to enhance downstream production will have to offer incentives or penalties.
Consultation alone may be sufficient to induce investment downstream in cases where a natural resource is unique or rare.
Governments may achieve more of their policy aims by focusing on parts of the value chain other than downstream processing, such as local procurement.
- Botswana Diamond Workers Bleed (Roman Grynberg)
- Export Restrictions on Raw Materials: Experience with Alternative Policies in Botswana (Jane Korinek)
- Region Fails to Cut It in Diamonds (Roman Grynberg)
- Zimbabwe's Beneficiation Policy Part 1: Understanding the Drivers and Objectives (Claude Baissac, Ferdinand Maubrey, JP van der Merwe, Jessica van Onselen)
- One Thing Leads to Another: Promoting Industrialisation by Making the Most of the Commodity Boom in Sub-Saharan Africa (David Kaplan, Raphael Kaplinsky, Mike Morris)
- Linkages to the Resource Sector: The Role of Companies, Government, and International Development Cooperation (Columbia Center for Sustainable Investment, Deutsche Gesellschaft fur Internationale Zusammenarbeit (GIZ))
This paper analyzes policies that contribute to the governance and management of the mineral sector in Botswana. Lessons from other ...
One Thing Leads to Another: Promoting Industrialisation by Making the Most of the Commodity Boom in Sub-Saharan Africa
The ''resource curse'' is challenged in this paper, which presents opportunities for promoting industrial development by building economic ...
This report provides an in-depth case study of Zimbabwe’s beneficiation policy, particularly contrasting the country’s efforts ...
Linkages to the Resource Sector: The Role of Companies, Government, and International Development Cooperation
This publication includes information for key linkages in the resource sector. Each linkage explored includes a literature review and case ...
This article provides an in-depth analysis of the diamond-cutting industry in Botswana and the effects of rising costs on employees and the ...
This article provides an analysis of the downsizing of the diamond cutting industry in Botswana, Namibia, and South Africa. ...
Governments contemplating supporting downstream production would do well to consult with potential downstream investors to identify any obstacles to investment. This will help clarify which government incentives are likely to be most effective in attracting investors.
Consultation with potential investors is a necessary first step when designing policies to support downstream production. Consultation processes allow mutual understanding. Policies based on such an understanding are far more likely to achieve the government’s objectives in supporting downstream production.
It may be that in the interest of maintaining good relations with government, consultation alone is enough to persuade potential investors. However, this is rare. In most cases, governments wanting to enhance downstream production will have to offer incentives and/or penalties.
One situation in which consultation alone may be sufficient to induce investment downstream is where the natural resource is unique or rare. Botswana is such a case. In 2005, De Beers was required to renew the mining license for Debswana—a 50/50 venture between De Beers and the Botswana government. The Botswana government entered into negotiations with De Beers, seeking the company’s aid in developing the domestic cutting and polishing industry. The government had considerable leverage. De Beers obtained some 60 percent of its diamonds from Botswana, and the country was the source of an even larger share of high-quality gem diamonds. In order to retain its profitable diamond sales, De Beers had little option but to enter into negotiations with the government. An agreement was reached whereby a share of locally mined rough diamonds were set aside and allocated to the domestic cutting and polishing industry. The companies that received these diamonds were required to hire and train locals. De Beers also agreed to move its aggregation business—where it selected diamonds for its customers—from London to Gaborone.
A domestic diamond aggregating, cutting, and polishing industry was thus established. Approximately 30-35 percent of the world’s rough diamonds are now sold in Gaborone and some 3,500 jobs have been developed in diamond cutting and polishing.
 Claude Baissac et al., “Zimbabwe’s Beneficiation Policy Part 1: Understanding the Drivers and Objectives,” Eunomix Research, Sandton, South Africa, 2015, 32.
 Mbayi 2011, cited in Mike Morris, Rachel Kaplinsky, and David Kaplan, “One Thing Leads to Another Commodities, Linkages and Industrial Development: A Conceptual Overview,” MMCP Discussion Paper No. 12, Making the Most of Commodities Programme (MMCP), Open University, 2011, 28; Mike Morris, Raphael Kaplinsky, and David Kaplan, One Thing Leads to Another. Promoting Industrialisation by Making the Most of the Commodity Boom in Sub-Saharan Africa (University of Capetown and the pen University, 2012), 252.