Browsing by Author "Gova, Webster"

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    An analysis of possible effects of developmental pricing: A simulation study of the polypropylene industry in South Africa
    (Stellenbosch : Stellenbosch University, 2017-03) Gova, Webster; Bam, Wouter; Schutte, Cornelius Stephanus Lodewyk ; Stellenbosch University. Faculty of Engineering. Dept. of Industrial Engineering.
    ENGLISH ABSTRACT: Beneficiation of locally extracted minerals to produce fully processed, highvalue utility products is currently limited in South Africa. However, in the polypropylene value chain, locally mined coal is fully beneficiated to produce petroleum equivalent fuels and chemicals. The polypropylene value chain contributes fully processed, high utility products for use in various sectors of the economy, including the plastics industry. The Departments of Mineral Resources (DMR), Trade and Industry (DTI), have respectively identified the petroleum and plastics industries as some of the priority industries for intervention in the beneficiation strategy. The polypropylene upstream industry is currently dominated by China, with capacity representing 19% of global supply, while South Africa only accounts for 1%. However, the current capacity in South Africa represents 53% of polypropylene supply on the African continent. The current study investigated possible effects of a cost-plus developmental pricing policy as a beneficiation strategy in the polypropylene upstream industry. The study focussed on evaluating possible effects of cost- plus pricing on the future attractiveness for investment in capital projects to expand polypropylene production capacity in South Africa. The study demonstrated a systematic approach combining simulation and decision models to account for unavailability of full information and high uncertainties in estimates for quantitative appraisals during industrial policy analysis. The study combined value chain analysis using the global value chain (GVC) framework and Monte Carlo (MC) stochastic simulation methodologies to evaluate the possible impact of developmental pricing. The GVC framework was used to analyse the polypropylene upstream value chain with respect to governance and input/output structure. The MC simulation was applied to a discounted cash- flow (DCF) model on net present value (NPV). The approach presented in this research accounts for limited or asymmetric information, high competition and uncertainty in the local polypropylene industry. In addition, this systematic approach to industrial policy analysis appears to be useful in achieving beneficiation strategy objectives in highly competitive, highly regulated globalised industries. This can enable policy-makers to identify measurable impacts in formulating policies for beneficiation strategies. In South Africa, beneficiation strategies for the polypropylene and plastics industry can focus on identifying other raw materials to compete with existing value chains in order to stimulate more upstream competition. This can allow local production of more internationally competitive upstream products and offer better prices to the downstream industries.