firm to control this process directly or even indirectly

The management and control of the value chain is known formally as the "system of governance" and is what
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what is produced, how and by whom. It is not, of course,

necessary for one lead firm to control this process directly or even indirectly; many factors contribute to value-chain governance, including the role of

governments and even consumers. The factors involved are not simply those related to the physical production of a product. They also include the intangible

elements of the production of a physical product such as the creations of brands, marketing, product innovation and the like.


In the case of diamonds, how does a major diamond-producing nation, such as Botswana or Namibia, take Tiffany Rings of its geographic good fortune in the form of substantial diamond deposits? Often it is suggested that

African development should proceed by exporting less of its primary resources and instead refine them domestically. Is it not simply a matter of, say, exporting

fewer diamonds and encouraging (via subsidy or tax breaks) companies to cut, polish and manufacture diamond jewellery domestically?


Not entirely. Half the value in the chain is produced intangibly: by the marketing, branding and retailing of these items. Whilst integrating the tangible

production process of the physical product vertically will produce returns, considerable value will remain untapped when intangible factors are

ignored.Manufacturing has become increasingly commodified, which means that production is swiftly relocated to where
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educated or trained labour is cheapest and/ or where governmental

incentives make investment most attractive.


Meanwhile, barriers to entry in intangible elements of the value chain are growing, in proportion to the growth in significance of intangibles in value chains

themselves.The problem then for resource-rich African countries is that while they may have a very strong market share in
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of, for example, diamonds, cocoa and coltan, they rarely participate in the

processes in which the highest level of value is added.


Partly, this is the result of access to lessdeveloped market places and not to more affluent consumers - that is they do not benefit from the

"clustering" of the first world.Partly, it is to do with the shortage of highly educated staff to manage the more complex intangible functions such as
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, branding, advertising and PR.That there is a vicious

circle with development is not a new observation. Neither is the obvious need for increased levels of education. However, what can more readily be

emphasised by sensible planning at state and company level is greater management of the system of governance in a given value chain.

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