http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 14.59Change: -0.06
R/$ = 10.55Change: -0.03
Au 1303.44 $/ozChange: -0.51
Pt 1439.50 $/ozChange: -5.00
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Nelson Mandela 1918 - 2013   Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science & Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Oct 07, 2011

Thinking of value-add in a way that guarantees future of sustainability

Back
BP|Unilever|Europe|North America|Brazil|China|India|Japan|Turkey|Energy|Energy Consumption|Energy Demand|Energy Supply|Finance|Transport
bp|unilever|europe|north-america|brazil|china|india|japan|turkey|energy|energy-consumption|energy-demand|energy-supply|finance|transport-industry-term
© Reuse this



The world was once run on three big economic engines: Europe, North America and Japan. These engines of growth are slowing down but three or four or five new engines have come onto the scene with youthful vitality: India, Brazil, Turkey, China and so on. The resource hunger of these countries will exert new demands on commodities, energy and finance.

The growth of these countries has implications for all of us as we simultaneously watch a new world unfold before us. How these demands will be met is a matter of speculation, but what we know is that, if you have five or six large economic engines running all at the same time, resource demands will be stretched beyond current capacity.

Since 1900, according to a BP World Energy Outlook report, real income has grown by a factor of 25 and energy demand by a factor of 22.5. But most of this growth was in the last 20 years. For instance, real income grew by 87% in the last two years.
At the current rate of population growth (which is slowing down), developing and emerging economies’ real income is projected to grow by 100% in the next 20 years. Increased income has a strong correlation with increased consumption.

To continue with the BP analysis – world primary energy consumption grew by 45% in last 20 years and is projected to grow by 39% in the next 20 years. By 2030, non-Organisation for Economic Coop- eration and Development growth in energy consumption will be 68% higher, averaging about 2.6% a year.

Between 1990 and 2010, fossil fuels contributed 83% to the growth in energy supply. However, in the next 20 years, fossil fuels will contribute 64% of this growth and nonfossil fuels 36%, of which renewables will account for 18% by 2030.
One can add a similar picture of demand surge for food, metals and so on.

Clearly, for both countries and corporations, it cannot be business as usual. This demand can only be met by either increasing supply, making production more efficient or through technological innovation.

In the meantime, the surge in demand has generated supply scarcity and vola- tility problems. The prediction is that conditions for opening up more supply chains are not going to be as rapid as the pace of demand.
Even in the capital markets, toxic debt has thrown out predictable trends in the financial markets. Uncertainty in both resource availability in the capital markets and in currency values makes planning a challenge.
Value-add itself loses its firm moorings of predictable measures for containing costs. We are now in a situation where a multiplicity of resource constraints and price volatility trends interact in ways that only heighten systemic risk to economies and require new approaches to dealing with risks that are often beyond the control of a firm or a nation, a case in point being the scarcity of oil in conjunction with the currency weakness. These manifest themselves through food inflation as a result of the increases in transport costs and oil-based inputs costs. If we were to think of this as value-add for the economy, it would simply mean that all the value of gross domestic product growth output is eroded by the countergrowth in inflation and costs of imports.

Countries are facing constraints and trends not experienced before for a very long time. Countries are responding to these pressures in different ways. Those that are better resourced are seeking to lock long-term contracts or build inventories in critical resources, all of which merely compound the problem rather than resolve it.

Why has value-add become so important? Firms and countries are judged by their output but a better way is to judge them by their value-add. Value-add, in simple terms, means the value of outputs minus the cost of inputs. Traditionally, the focus was primarily on capital deployment (cost of capital) and labour. Value-add quickly has to shift from a supply cost issue to a demandside cost issue as well. Value-add is generated at every step of the production chain – right up to sales – that is, the value added in each step and the price at which the product or service is sold.

Indeed, Unilever has already recog- nised this challenge. The corporation’s new CEO threw a stretch challenge to his team last year: to double the output of Unilever products within the next 20 years but remain within its current resource consumption footprint.

With large firms, the integration of this new type of value-add has a long range and focus than smaller firms. They are better at it because they have greater capability.

For countries, this is even more challenging as it is dependent on the state of the national economy and ways in which politi- cal decisions are efficiently and timeously made around various national investments.

Putting it more simply – it is not a question of paying cheap to get more but rather having to use less to generate more. Value-add, as a result, must make use of multiple strategies to sustain a country’s or a company’s competitiveness. This is one of the reasons why sustain- ability or resource optimisation both at the supply and demand ends is now becoming far more integrated and mainstreamed. This is not only in terms of production but also in terms of employee effort. In other words, not only does optimisation of input use matter but also employee practices outside the production system – within the workplace and at home. Employees do not become just an input cost but intelligent and conscious social actors in and outside the firm, which is key to the integration of sustainability in a more universal sense.

If countries and firms achieve this, then, in the long term, the idea of value-add extends beyond the boundaries of the firm or the borders of a country.

Smart countries and firms want smart citizens and employees. All this contributes to the new value-add notion or a more integrated approach to sustainability effort, or VA+Sef.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines
 
 
 
 
 
 
 
 
Other Saliem Fakir News
On the surface, the relation between high electricity and oil prices and food inflation can be perceived as linear rather than dynamic. There is a relation but it is more complicated. Here are few insights that may help us understand the dynamic. Final food prices...
The latest version of the Integrated Resource Plan (IRP) has some interesting changes, which could have far-reaching consequences for South Africa’s electricity mix. This IRP is a vast improvement on the 2010 plan, featuring more flexibility to respond to real-life...
The recent rise in electricity prices is eating away at everybody’s pockets. While energy-intensive users are the largest consumers of electricity, in terms of total share, they receive prices at wholesale rates rather than retail prices. What ordinary citizens...
More
 
 
Latest News
Charl Coetzee
Updated 52 minutes ago Namibia is set to get a skills boost as a new information and communications technology (ICT) centre starts training network engineer recruits to maintain the Southern African country’s own infrastructure. Telecom Namibia, in conjunction with XON Systems and...
Ismail Vadi
Updated 1 hour 4 minutes ago The Gauteng provincial government (GPG) on Wednesday launched the GoGauteng mobile application (app) aimed at assisting commuters in planning their journeys, an alternative route app to provide road users with the resources needed to avoid e-toll roads and also...
Updated 1 hour 53 minutes ago The ultra-deep Angolan offshore oil project called Kaombo generated the third huge contract in three days on Wednesday when French group Total picked two firms to carry out underwater engineering worth $3.5-billion. The latest groups to win a share of the mega...
More
 
 
Recent Research Reports
Steel 2014: A review of South Africa's steel sector (PDF Report)
Creamer Media’s Steel 2014 report provides an overview of the global steel industry and particularly of South Africa’s steel sector over the past year, including details of production and consumption, as well as the country's primary carbon steel and stainless...
Projects in Progress 2014 - First Edition (PDF Report)
This publication contains insight into progress at the delayed Medupi and Kusile coal-fired projects, in Mpumalanga and Limpopo respectively, as well as at the Ingula pumped-storage scheme, which is under construction on the border between the Free State and...
Automotive 2014: A review of South Africa's automotive sector (PDF Report)
The report provides insight into the business environment, the key participants in the sector, local construction demand, geographic diversification, competition within the sector, corporate activity, skills, safety, environmental considerations and the challenges...
Construction 2014: A review of South Africa's construction sector (PDF Report)
Construction data released during 2013 hints at a halt to the decline in the industry during the last few years, with some commentators averring that the industry could be poised for recovery. However, others have urged caution, noting that the prospects for a...
Electricity 2014: A Review of South Africa's Electricity Sector (PDF Report)
This report provides an overview of the state of electricity generation and transmission in South Africa and examines electricity planning, investment in generation capacity, electricity tariffs, the role of independent power producers and demand-focused initiatives,...
Defence 2013: A review of South Africa's defence industry (PDF Report)
Creamer Media’s 2013 Defence Report examines South Africa’s defence industry, with particular focus on the key players in the sector, the innovations that have come out of the defence sector, local and export demand, South Africa’s controversial...
 
 
 
 
 
This Week's Magazine
Updated 2 hours ago There is enough water in South Africa to supply communities and the economy, even if some activities may be constrained, such as agriculture in the Limpopo, says National Planning Commission commissioner Mike Muller. 
Muller was also the director-general from 1997...
South African antenna designer and producer Poynting and provider of professional products, system integration and implementation and commissioning services for the broadcast and telecommunications markets in South Africa, African Union Communications (Aucom),...
Industrial automation giant Festo has been displaying some of the its ongoing research projects and latest automation developments and products at the Hannover industrial fair from April 7 to 11, as part of its Integrated Automation – The Next Steps theme. The...
South African retail companies are responding to the way in which e-commerce is changing their engagement model with customers by improving customer engagement channels and order fulfilment intelligence, says industrial and retail software company JDA Europe, Middle...
In support of the South African government’s mandate to create more jobs and promote sustainable development, multilevel marketing company Amway’ business model aims to assist government in easing the startup of business and encourage an entrepreneurial mindset...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks