One of the problems with mining-based economies has been the difficulties of diversification. Of course, having natural resources to sell abroad is hugely beneficial to a country, but it is all too easy to rely on one sector to the detriment of others. It's all too easy for a mineral benefit to lock out diversification. The 'resource benefit' can become a 'resource curse.' We in South Africa have managed to diversify our economy - we are, according to the consulting group McKinsey, one of the four advanced, diversified economies in Africa (the other three are Egypt, Tunisia, Morocco). Other countries have not been so fortunate. Recently there have been new discoveries of minerals in Ghana, Uganda, Tanzania and Mozambique. Will these African countries be able to avoid the ‘resource curse’?

The ‘resource curse’ works like this: First, oil or other natural-resource exports strengthen a currency. Then, a stronger currency renders other exports, in agriculture or in manufacturing industry, less competitive and drives them out of business. But the problem is these other exports are often better for a country’s growth and development. For example, the discovery of oil in Nigeria in the 1970s led to the destruction of cocoa and peanut production that employed many more people than the oil, gas or mining sector.

In effect this means that resource exports skew growth toward resources and away from manufacturing. The fact is that mining uses a lot of land, concentrates ownership, and employs fewer and fewer workers. It attracts investment and turns investment away from manufacturing and the exports of goods and services that use less land, spread ownership, and employ more people.

It is now well known how to avoid falling into the trap of the resource curse, but often governments are not able to do what economists and others tell them to do. It is not always possible to lower the exchange rate or to set up a stabilization fund.

Yet there are some things that South Africa, as an old resource-rich country that has been able to diversify its economy, and new resource-rich countries, can and should do. One is beneficiation and another is localization. The two processes overlap. The two processes are complicated and complex. South Africa has recently introduced policies on both. The aim of both is to promote development at home.

Forty years ago South Korea had a comparative advantage in growing rice. Had it stuck to that strength alone, it would not be the industrial giant that it is today. It might be the world’s most efficient rice grower, but it would still be poor.

What we in the Non-Aligned Movement have to do now is to put in place the institutions, policies, and laws needed to ensure that natural resources benefit all of our citizens. Industrialization is the normal route to development. None of the OECD countries became high-income countries without developing a substantial manufacturing base that in turn provided for full or nearly full employment.

The 2009 UN Industrial Development report explains it like this: “This potential for explosive growth is distinctive to manufacturing. As manufacturing activity expands, instead of running up against shortages of land or resources that inevitably constrain the growth of agriculture or the extractive industries, it benefits from economies of scale: unit costs of production fall.”

In the 1980s firms in the developed world began to relocate manufacturing to the developing world to take advantage of cheaper wage and production costs. It was in this period that China became the “low-wage workshop” of the world. It was in this period that resource-poor and coastal countries in north Africa, like Tunisia, began to develop export processing zones that encouraged foreign direct investment.

It was from the 1980s that the Asian tigers in particular took advantage of this wave of relocation of manufacturing production into the developing countries. And it was this wave of globalization (trade, capital and migration) that African countries missed. Firms in developed countries relocated plants to specific countries in the developing world and benefited from “agglomeration costs” or economies of scale in new locations. Asia, in particular China, has experienced explosive industrial growth, whereas in many middle-income countries industrialization has stagnated and Africa has remained marginalized. Until now. It is now our turn in the Non-Aligned Movement to make the best of the resources in our soil.

Let me give you a few examples of what South Africa is doing to beneficiate (with the benefit of science and innovation) and localize around the development of minerals. The first example is titanium. South Africa is the second largest supplier of the mineral ore that can produce titanium metal. However, we add little value to the mineral before export. The Council for Scientific and Industrial Research (CSIR) has developed a novel process in which titanium metal can be produced from our abundant mineral resource. These new capabilities can position South Africa as a world leader in the cost competitive production of high-grade titanium metal powder. Titanium is a sought-after metal especially in the aerospace industry where aircraft and satellites need to be lighter in weight to consume less fuel.

Another example is platinum. Ten years ago we launched the Hydrogen South Africa (HySA) programme. This marked the initiation of research and development activities by two centres of competence, HySA Catalysis and HySA Systems. In turn, we established, Clean Energy, a South African fuel cell company that will initially market and eventually assemble and manufacture fuel cells in sub-Saharan Africa in partnership with Anglo Platinum and Altergy Power Systems.

A third example is fluorine. Five years ago, we launched the Multi-purpose Fluorination Pilot Plant at Necsa’s Pelchem in Pelindaba. Through this initiative, South Africa has the potential not only to develop much-needed human capital but also to reduce the country’s chemical trade deficit through exports, to attract foreign direct investment, and to increase high-tech research and development towards a stronger fluorochemicals industrial base.

Since at least 2006 African leaders have reiterated the importance of science and technology to the continent’s development, and committed themselves to increase investment in science and technology to at least 1% of GDP. Yet science and technology are not yet fully adopted in the development policies of many African states.

Botswana is a shining exception. It produces the world's most valuable diamonds. Or rather De Beers produces the diamonds in a fair partnership with Botswana. The diamonds are sent to London for sale and then on to other cities for cutting and polishing. It has been like that for many years until 2011 when Botswana introduced a policy of localization and set about establishing its own cutting and polishing industry.

Now the diamond cutting industry is by far its largest industrial sector. How does it compete with India, which is the world leader in cutting and polishing diamonds? India uses traditional, labour-intensive techniques. Botswana uses skilled labour together with new, capital-intensive cutting and processing techniques. That's what it does. Botswana cannot compete with India on the cost of labour. It has moved up the value chain through the benefit of science and technology.

African development is our priority. Science and technology play a crucial role. We have to exploit our comparative knowledge and location advantages to create jobs and livelihoods for as many people as possible.

By Naledi Pandor

Naledi Pandor is the Minister of Science and Technology in South Africa.