Extracting value

Africa’s vast mineral deposits make it, arguably, the world’s greatest treasure chest. Africa contains around 85% of the world’s chromium and platinum group metals, as well as more than 60% of the reserves of cobalt and manganese.

It ranks either first or second with her reserves of diamonds, bauxite, phosphate rocks, vermiculite and zirconium.
Africa also produces more than 21% of the world’s gold, 16% of its uranium and 13% of its petroleum.

Naturally, mineral exploration and production constitute significant parts of the economies of a number of African countries and they remain key to the future economic growth of this developing continent. It is also home to some of the best examples of poor social stewardship and unregulated environmental impact on record.

Most of the countries classified as least developed in the greater global context, are African. In many of these countries it is regularly debated whether the possession of such rich resources is a blessing or curse.

While the extraction of its precious minerals has boosted economic growth, it has not significantly contributed to improved living conditions or adequately met the challenges of sustainable development. The demand for these resources remains high, despite the persistent global economic woes, and will certainly increase as the world’s finances return to prosperity.

Short term challenges
One of the greatest challenges facing Africa’s leaders is to put strategies, policies and programmes in place to ensure the mining of mineral resources becomes an important tool for sustainable economic growth and development in Africa. While there are many encouraging results reported by well-established mining houses as the world’s economy rebounds, not all of them are out of the woods yet, with many facing considerable challenges in the short term.

Impala Platinum, the globe’s second-largest platinum producer, reported a 62% jump in profits earlier this year and expects to increase its annual output too, boosted by higher sales and market prices.

“An economic rebound, particularly in developing markets, is underpinning demand for platinum,” says chief executive David Brown. Platinum is used in a variety of important applications, from jewellery and electronics to technology that inhibits vehicle pollution.

Politicians covet Zimbabwe’s mines
Beleaguered Zimbabwe is facing a new onslaught from its wealthy, political elite. They are eyeing its large foreign-owned mines, as more than 30 major mining companies roll out the planning phase of handing majority stakes over to the country’s citizens. What makes matters worse is that these foreign companies may be forced to accept empowerment partners not of their choosing.

The next challenge for mine owners is to find a way to select their own local partners, while warding off undesirable bids by influential politicians. Among the companies facing this new challenge is Zimplats, the largest platinum producer in the country.

Zimplats is South African Impala Platinum’s (Implats) Zimbabwean subsidiary and south of Harare, in the area where it has mining operations, local MP Bright Matonga is bidding as the leader of a seemingly benign community consortium, including local traditional leaders.

Citing the example of the Royal Bafokeng nation’s buy-in into South Africa’s Implats in 2006, Matonga says “We feel Implats should apply these same principles in Zimbabwe.” While initially opposing Zimbabwe’s drive toward further indigenisation of foreign-owned companies, Prime Minister Morgan Tsvangirai recently stated, “Indigenisation is not about appropriation or nationalisation, it’s about setting fair value. Across the political divide we agree on the principle of citizenship empowerment.”

Back in South Africa, where continued calls for nationalisation of the country’s mines is causing increasing jitters in the market place, Communist Party leader Blade Nzimande claimed these calls where simply a ruse to raise bail-out funds for black-owned companies who are in dire economic straits. “Ten years from now, they will be calling for privatisation, after the state has inherited the debt,” he said.

Some good news
A rare earth project is to be developed in South Africa by Canadian mineral exploration and development company, Frontier Rare Earths Limited. Frontier focuses exclusively on rare earth elements in southern Africa and recently signed an agreement with Asia’s Korea Resources Corporation, who will develop the project on Frontier’s behalf.

Korea Resources CEO Shin-Jong Kim says, “Rare earths are a critical raw material needed to support Korea’s high-technology industry and future economic growth,”. They are used in flat-screen televisions, lasers, sonar systems and hybrid cars.

Zandkopsdrift in the Northern Cape is Frontier’s flagship asset, being one of the biggest undeveloped rare earth deposits in the world. Zambia is Africa’s chief copper-mining nation and is about to become one of the world’s top five producers, following a massive US$6 billion investment by Vale SA, First Quantum Minerals Limited and Vedanta Resources Plc.

The country is likely to overtake Indonesia and Australia to slot in as the fifth-largest copper-producing nation by 2013. Chile, China, Peru and the USA are the world’s largest copper producers.

Encouragingly, Zambia has vowed not to impose windfall taxes or take the mines under state control, despite the exploitive plans of neighbours Zimbabwe, Tanzania and the Democratic Republic of Congo.

Environmental concerns and progress
The mercury used by Africa’s artisanal gold miners has caused severe water and air pollution in many countries such as Kenya, Ghana, South Africa, Mozambique, Zimbabwe, Tanzania and Sudan. In an attempt to alleviate the increasing pollution, the Global Mercury Project was established in August 2002 under the auspices of a United Nations Development Programme called The Global Environment Facility and the United Nations Industrial Development Organization.

The project delivers cleaner technologies and provides training for miners, conducts health assessments and helps governments implement new regulations to curb and even reverse the effects of mercury pollution. Sadly, these positive measures are still too few and far between to mitigate the extensive damage caused over many decades by exploitive businesses and governments.

The prevailing attitude was neatly summed up by executive director John Capel of the Bench Marks Foundation, “Profits are still put above everything else. Sustainable development is very rarely considered. Communities’ voices are still ignored.”

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