ZIMSEC O Level Commerce Notes: Benefits of Beneficiation And Value Addition

  • The meaning and nature of beneficiation and value addition can be found here
  • Value addition refers to the enhancement of a product’s value usually through the manufacturing process
  • Beneficiation refers to value addition in the mining sector
  • There are benefits to carrying out beneficiation and adding value to products
  • These benefits apply both to the business carrying out this exercise and the country in which it is located

Benefits of beneficiation/value addition

  • Creates employment opportunities
  • It increases a business’s profit prospects
  • Increases the business’ profit margins
  • Mitigates the imbalance of trade/ Reduces trade deficits
  • Increases the host country’s Gross Domestic Product (GDP) value
  • Increases the host nation’s Gross National Product (GNP) value if beneficiation is carried out by local companies
  • Increases the host country’s export proceeds
  • Increases the local economic contribution of raw materials (minerals)
  • Reduces socio-economic inequality
  • Increases the host government’s tax base and thus tax revenue
  • Reduces the import bill as some local demand can now be satisfied using local production
  • Brings in more foreign currency
  • Leads to development of related industry around the main industry for example real estate businesses near a mine and processing plant
  • Distinguishes the business’s products from those of competitors

Drawbacks of beneficiation

  • Beneficiation is not without its drawbacks these include:
  • Huge amounts of capital expenditure might be required to implement beneficiation
  • Purchasing equipment used in the beneficiation/value-added process requires foreign currency
  • Huge training costs expended to train staff in the beneficiation/value addition processes
  • Disrupt current well-tested systems for example instead of just exporting raw diamonds these diamonds have to be sent to a polishing centre first extending the time before they are sold
  • Requires infrastructure that may not currently exist
  • Increases electricity demand

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