Mining On Top: Africa Summit, London 2013

Mining On Top: Africa Summit, London 2013

Africa: what role can extractives play in development.

Last week (24-26th June) saw the inaugural Mining On Top: Africa summit in London. The conference highlighted the changing nature of the extractive industry in Africa.

African mining Ministers highlighted their desire to see extractives play a central role in economic development of their countries, and by extension, their continent. The mining executives on the other hand stressed the recent dip in the commodity market, the need to manage expectations and the importance of political stability for investment.

The industry is seeing the cost of business increasing, profits shrinking and demands from investors for greater return on investment rather than further expansion. African governments want to see the industry play a more central role in the development of the continent. How can both objectives be realised and how can Africa profit?

The first message from the African Ministers present was universal. Bilateral aid, whilst welcomed at the turn of the Century was no longer the most effective means of development. Countries new to mining including South Sudan, Kenya and Cameroon had similar messages to the more seasoned African resource rich countries of Ghana and Zambia – development will come through the creation of jobs, downstream entrepreneurial opportunities and industry-linked skills development.

Their second key message, that each of their governments, obviously at differing speeds is determined to provide an investment friendly environment. The Kenyan Minister, the Hon Najib Balala EGH, stated that whilst he is Mining Minister he will actively seek to sign his country up to the Extractive Industry Transparency Initiative (EITI) as part of the new Mining Bill, and wants his government to been seen as a business facilitator not a business legislator.

However, a downturn in China’s economic growth (down to a mere estimated 6%), a corresponding downturn in commodity prices ending the recent commodity boom, and an increase in the cost of investment means the desire of African countries and the reality of the mining world are out of line.

So how can mining be a catalyst for development?

Simply put, mining is one of, if not the largest industry employers across Africa. Anglo American alone employs 90,000 people in South Africa; even with its share of the South African stock market dropping from 75% to the current 8%.

Larger mining companies invest in supporting local entrepreneurs to help with downstream logistics, creating local jobs, swelling local economies and driving further community led economic growth in service sectors.

Training local people to carry out environmental analysis and community engagement provides further employment helps companies understand the concerns and requirements of local communities. The industry wide investment in health and education for local communities has often had more of a direct impact on meeting the Millennium Development Goals than the civil society (individual company compared to individual charity) in areas where mining operations are in action.

Mining, like all industries that involve the extraction of natural resources can be done poorly to the detriment of the host nation’s citizens. You need only look to the DRC, Nigeria or Zimbabwe for examples. Blame for this can be laid at the door of both companies and political figures or institutions.

However, success of extractives as a core facet of development policy can be seen in Chile or Ghana. Replication of these strategies, carried out over the mid to long-term, can see development unparalleled across Africa in the coming years.

As a Western country, the UK, the global centre for mining finance, needs to support one of its biggest international industries and find a way for our flag-bearing mining companies to invest in emerging African markets, develop local communities and local economies and provide lasting infrastructure. Other countries are already ahead of us in this respect, Japan, Brazil and Germany are good at supporting (financially) their listed companies and China’s state owned and semi-private mining companies have been wrapping up numerous mining contracts across Africa.
Whilst we should celebrate this investment, we must condemn short-term, self serving infrastructure projects that win contracts but have no lasting benefit to the country or community; anyone who has driven the Chinese built road between Douala and Yaounde in Cameroon will realise it is not a long-term construction.

Last week African mining Minister’s outlined their desire to use the mining industry to help develop their economies. It is now up to the industry to engage with these ambitions and see how open and fair cooperation can benefit the citizens of Africa.

Eric Joyce