A word of advice for mining investors
As investors arrive in Cape Town for the annual mining indaba, Peter Eigen gives foreign and local investors tips for improving this dire industry.
Violence in the Eastern Democratic Republic of Congo and South Africa's Marikana mines, pollution in Nigeria and Angola’s growing inequality remind us that mineral wealth can also do more harm than good.
With so many lessons to learn from, most observers have come to believe that Africa’s natural resource wealth represents a once-in-a-generation opportunity to improve significantly the lives of millions of Africans. So why should investors at this year's African Mining Indaba care about the state of Africa's mining industries?
Well, because we all benefit if Africa is prosperous and stable, and if relations between mining companies, local communities and national governments are harmonious.
Top five tips for supporting and improving Africa's mineral industry:
- Look for joint opportunities. With 60% or so of Africa’s population surviving off agriculture, why do so many mining companies still import their food from overseas? Buying local produce is a key win-win opportunity that will help build relationships and feed directly into the local community. There are many other potential secondary linkages to mining.
- Sign up to the Extractive Industries Transparency Initiative (EITI). Twenty-two African countries have already signed up to this initiative, nine of those are fully compliant. Transparency is the critical issue, because it feeds and fosters trust – trust between government, business, and civil society. Transparency can be a difficult concept to work with in a sensitive commercial environment.
About 70 of the world’s largest extractive companies have signed up, enhancing relations with stakeholders and local communities, improving company reputation and demonstrating industry leadership. Signing up to the transparency initiative means that both business and government declare in a credible manner how much money has changed hands for the extraction and export of minerals.
- Train local communities to provide the services that you need. ExxonMobil were importing high quality pipes for their work in Nigeria, until they helped create an independent local business which eventually supplied pipes throughout the region.
- Long-term contracts and strategies provide a necessary stability and policy continuity, but these contracts and strategies need buy-in from all stakeholders, including civil society and they need to be fair. If they’re not fair, they will not hold. If national governments have equal understanding of geological data, for example, and have the best possible negotiating team, they are less likely to question the contract later.
- Keep human rights and ecological sustainability at the heart of natural resource management. The world is getting smaller. Social media and a connected world mean the world is watching your behaviour much more closely. Reputation is everything. The recent example from Eritrea, where an international mining company was found to be using military conscript labour, illustrates this point.
The 2012 shooting of 34 striking miners in South Africa highlighted the abysmal wages and living conditions of many mineworkers. The international community should take this opportunity to demand greater transparency for the minerals industry. Civil society must be critical partners in designing extractive industry development policies. Government must continue to improve their transparency too.
In May, the Africa Progress Panel – a 10-member panel chaired by former UN secretary general Kofi Annan – will launch a report on Africa’s oil, gas and mining sectors, with policy suggestions on how Africa’s mineral wealth can better benefit its current and future generations.
But the world is changing, responsible business practices are favoured. Companies who do not respect the regions and communities where they work will come under increasing pressure.
Cape Town’s mining indaba – taking place from February 4 to February 7 – must help us all to seize this once-in-a-generation opportunity.
Peter Eigen is an Africa Progress Panel member and Founder of Transparency International