/ 19 February 2016

Time to walk the talk on transforming African mining

The market chaos in China led to stock market sell-offs around the world.
The market chaos in China led to stock market sell-offs around the world.

One of the more significant developments at the Investing in African Mining Indaba did not appear to attract the same limelight as the heavy hitters.

African governments and mining businesses launched the African Mining Vision (AMV) compact that seeks to align the key interests of both sides. The document outlines several commitments that its signatories will undertake, allowing for each party to benefit from the continent’s rich resources.

It is timely — the relationship between mining companies, communities and governments has often been one of antagonism, and the current dip in the industry’s fortunes could stoke even more rancour.

Governments expecting the high rentals and returns of previous years from the industry are increasingly disappointed, and the natural reaction is to throw the book at miners through, for example, ad hoc policy changes.

Mining firms seeking to rebuild damaged balance sheets have been shedding thousands of jobs, aggressively cutting costs and selling off assets at a loss. 

Unions are in turn demanding assured employment and increased wages, while communities and civil society continue to demand more and transparent socioeconomic benefits from “their” resources. 

It could all lead to an impasse, which is why the compact was well received by the parties concerned. It is a product of the AMV adopted by African Union heads of states in 2009, following the realisation that the continent’s minerals have greatly underperformed their potential.

It is Africa’s great paradox that resource-dependent countries score lower on human development indices, and cut poverty rates far slower than those states not as well endowed.

The vision seeks a structural transformation of the industry, to move it away from the historical ills that have contributed to this state — among them the enclave nature that stems from Africa’s colonial history, and the little beneficiation and value addition that takes place.

It was thus refreshing to listen to industry chiefs talk of transforming from just next extractors to integrated development partners, and governments pledging to ease the pains of both miners and communities and take long-term, progressive approaches to the industry.

The compact offers a way around the issues that often plague the influential industry meeting — poor community relations, low transparency, high expectations and a business-at-least-cost approach.

The current downturn is also an opportune time for reforms — boom times tend to lend themselves poorly to an urgent need for change.

The ability of minerals to transform Africa runs deep.

Botswana’s model is well cited. The country has used its finite mining revenue prudently to invest in education, health and infrastructure, steadily creating space for other forms of capital with the anticipation that the industry will one day cease to be the main fiscal contributor.

Nigeria’s astounding emergence as a net exporter of cement has been a result of domestically-focused policies. The potential for growth is staggering, even for those minerals seen as “low value” such as limestone and sand: an industry report shows that a 1% growth in cement output can contribute as much as five GDP points to an economy’s growth.

But the compact, which still has to be ratified, needs to be more than just another document — it must maintain the balanced reforms required for a sustainable and all-inclusive industry that is vital to the continent’s future, if it is to work for ordinary Africans.