ZIMSEC O Level Commerce Notes: Beneficiation And Value Addition/ Added Value

  • One of the reasons why developing countries lag behind developed countries is due to the imbalance of trade
  • Developing countries export mainly raw unprocessed materials which have a low price per unit
  • On the other hand developed countries export back high value processed materials
  • This means that developing countries have to exports higher volumes in order to avoid a negative balance of payment
  • One solution that can be used to mitigate this problem is beneficiation
  • Beneficiation refers to the transformation of a mineral (or a combination of minerals) to a higher value
    product which can either be consumed locally or exported
  • Examples of beneficiation include:
    • Polishing diamonds- polishing diamonds does not require a lot of technology but doing so increases the export of value of diamonds
    • Removing waste material (gangue) from valuable minerals which results in a higher grade product (concentrate)
    • Frothing flotation of copper
    • Turning coal into coke
    • Distillation of crude oil
  • All these processes add value to the product and help reduce poverty and the balance of payment deficit

Addition of Value/ Added value

  • Added value can be defined as an increase in the value of a resource, product, or service as the result of a particular process
  • Value addition must not be confused with beneficiation
  • Beneficiation, as mentioned above, refers to various ways of adding value to minerals in the mining sector
  • Value addition refers to both beneficiation and other forms of value addition in other sectors
  • Added value describes the enhancement a company gives its product (which can be a mineral or any product really) or service before offering it to customers
  • In economic terms, added value is the difference between the selling price and the cost of inputs used in the production process
  • Value Added = Sales Revenue – Cost of Raw materials
  • For example, a product sells for $10 when the inputs (raw materials) used to make this product cost $7,
  • the added value is $3
  • For example, a mining company extracts iron ore from within the earth and passes it on to a processing factory which increases the value of the ore which is turned into pig iron.
  • The iron is then processed into steel which further enhances the value of the product.
  • ¬†Value is added as a product moves along the production process from the primary level up to the secondary level of production
  • Businesses ( and the countries in which these businesses are located) that add more value have a higher profit margin that businesses that add little value
  • Value addition should not be confused with profit
  • When calculating value added we only subtract the cost of raw materials
  • On the other hand, when calculating profit we subtract other costs as well
  • Value can be added by:
  • Refining for example distillation
  • Purification processes
  • Cutting and polishing for example diamonds
  • Manufacturing goods into finished or semi-finished goods
  • Branding
  • Packaging
  • Advertising- promotional strategies like these can create brand loyalty allowing businesses to charge more for a product
  • Providing additional features, for example, more storage on a computer

To access more topics go to the Commerce Notes page

Quick NetOne, Telecel, Africom, And Econet Airtime Recharge

If anything goes wrong, chat with us using the chat feature at the bottom right of this screen