Op-Ed: Africa needs her mineral wealth to benefit the continent

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    In 2009, the Africa Union (AU)
    adopted the Africa Mining Vision (AMV) as its developmental
    approach to help secure optimal benefits from mineral
    resources. The goal of the AMV is to
    ensure
    Transparent,
    equitable and optimal exploitation of mineral resources to
    underpin broad-based sustainable growth and socio-economic
    development.

    The AMV is fast becoming Africa’s
    reference policy for the transformation of the mining sector.
    Its ultimate objective is to create wealth for Africans. Wealth
    creation will contribute to resolving the triple challenges of
    poverty, inequality and unemployment. In the process of
    creating wealth, the AMV puts people at the centre by ensuring
    that the process protects people, especially mining
    communities, from the harmful impacts of mining
    activities.

    It is not the first time that Africa has come
    up with an ambitious plan. Previous plans like the Abuja treaty
    and the Legos Plan of Action did not get traction. The
    implementation of the AMV will require us to identify,
    understand and adapt to factors that perpetuate the resource
    curse and return to equilibrium. There are imperatives that
    need to be in place for a successful implementation of the AMV.
    There is need to fix the African state and position it as the
    driver of resource management. Fixing the state is about
    constructing the foundations of the very (government) edifice
    within which mineral resources governance ought to operate.
    Africa needs to develop “world-class” mining administration.
    Without the construction of this edifice, governance
    interventions cannot have an impact. Strong government
    institutions are needed to negotiate contracts, to collect and
    manage mineral rents, and enforce regulations and sanction
    companies that do not respect laws and regulations. Perhaps an
    important imperative that is not often discussed is that we
    need to reduce the interference of politics in resource
    management.

    There is a direct relation between political
    power and the under-performance or mismanagement of the mining
    sector. There are various political and social forces that
    mediate the relationship between mineral resources and
    development outcomes. In Africa, political power is the
    dominant factor that determines how resources are negotiated,
    extracted, commercialised and how revenues are used. We know
    that political power on the continent is corrupt and selfish.
    If resources are not contributing, as they should, to the
    eradication of poverty, creation of jobs and reducing
    inequality it is in big part because of the way political power
    is projected. In most African countries, political leaders give
    to themselves the right of ownership of their countries’
    resources by dint of being in leadership. In addition, mining
    companies are often too happy to enter into deals that protect
    them from paying taxes, for human rights abuses and
    environmental destruction, if only they can pay kickbacks to
    political leaders. This is a norm on the continent —
    corruption in the sector is organised by the highest office in
    the land.

    There is no doubt, in order to reduce
    corruption, there is a need to promote transparency and
    accountability. The process by which anyone comes to own an
    asset which produces resources should be open to scrutiny.
    People of any country are entitled to know how private
    investors come to own the mines located in their country, how
    much they are producing, how much they are paying to the state
    and how the state is using these revenues. This is why civil
    society on the continent is engaged in advocacy to have all
    contracts published.

    An imperative that is now at the centre of
    the debate is the need for African mineral producers to start
    adding value to the minerals locally and stop exporting them
    raw. Africa remains a net exporter of raw materials and
    importer of manufactured good. The AMV wants to break this
    colonial model. This will not happen automatically. Africa will
    need to promote self-reliance by investing in science,
    technology and innovation. The continent will need to improve
    in these three areas to be able to create mineral linkages.
    There are two ways of acquiring technology. We can produce
    indigenous technology (this take too long) or promote
    technology transfer. Unfortunately, most African governments do
    not understand the importance of a knowledge-based economy.
    Experience teaches us that countries that achieve a
    knowledge-based economy are those that take a decision for
    inward-looking policy.

    We cannot also run from the fact that
    currently the African mineral sector is dependent on foreign
    investment. To continue attracting foreign investment we need
    to have in place predictable legislations and policies. This is
    called “the permanence of policies over time”. Policies must be
    based on two principles—transparency and predictability. The
    process of designing mining policies must be transparent. It
    must happen in consultation with key stakeholders — mining
    companies, labour, civil society and communities. Mining
    policies and regulations also need to be predictable. The lack
    of policy certainty does not encourage both local and foreign
    investment. The biggest weakness with Africa’s mining policies
    and regulations is the fact that they change with every new
    minister of mines or new government. This has been detrimental
    to investment and economic growth. Mineral policies must
    reflect the interests of the country and not those of
    individuals or political parties.

    There is also need to renegotiate unfair
    contracts. We still have on the continent mining contracts that
    undermine host countries’ development because they were badly
    negotiated. Most mining contracts have a life span of between
    20 to 50 years. A critical area in contracts that need to be
    renegotiated is the fiscal regime. A fiscal regime is key for
    many African countries to be able draw benefits from the trade
    in minerals. Most mining contract clauses prevent revision of
    the fiscal regime for at least 15 to 20
    years.

    Because investments can be deducted from
    taxable profit on an annual basis, there is only limited tax
    paid to African governments in that period. The optimisation of
    revenue accruing from mineral resource extraction will not
    occur with current fiscal regimes which encourage tax evasion
    and avoidance. Another area of concern is the
    “over-incentivisation” to attract foreign direct investment.
    The exemptions lead to deteriorating profit for African
    governments. Renegotiation is a corrective measure. Before it
    can take place, the laws themselves must be reviewed. While
    contracts can be ring-fenced to avoid renegotiation of the
    fiscal aspects, there are moral and right-based arguments that
    African governments can use to renegotiate
    them.

    One critical imperative Africans need to
    consider is to increase their ownership of the mines. Whoever
    controls the resource has substantial power to control revenue
    sharing. Countries that sell mineral rights to domestic
    interests have greater bargaining power than those that sell
    them to foreign investors. The issue of ownership of companies
    involved in mining/extracting of mineral commodities is key to
    favour development of African countries. Ownership of the
    companies that extract the minerals is key to allow for
    reinvestment of increased revenues in the country. There are
    different ownership models that countries could look at. Most
    African governments are in a joint venture with multinational
    mining companies. They have shareholding in these companies but
    they are passive shareholders. This must change. The approach
    that government has cannot run business is not true:
    “Governments have business in business”. However, one area that
    we must consider and deliberately facilitate is local
    entrepreneurial development.

    The above imperatives will not produce
    expected outcomes if we do not invest in key infrastructures to
    facilitate mining. African countries often lack the necessary
    infrastructures (roads and rail transport networks, energy,
    water, communication etc) at national and regional levels to
    fully and sustainably exploit mineral resources and increase
    competitiveness on the international market. Infrastructure
    bottlenecks and inefficient energy supply are causing
    extraordinary frustration to mining companies. Companies are
    using these challenges to cut into the taxes they are supposed
    to pay to governments. Furthermore, the lack of appropriate
    infrastructure is a constraint to attracting investments. If
    Africa is going to add value to its minerals and ensure
    minerals are the basis for the continent’s industrialisation
    then we need to invest in those critical
    infrastructures.

    We also need to consider the quality of our
    human resources. Nothing will move unless we have a
    well-trained and equipped labour force. The continent needs to
    invest in relevant skills and R&D to achieve the
    transformation envisaged in the AMV. Africa needs a
    knowledge-driven minerals sector to create a diversified,
    vibrant and globally competitive industrialised African
    economy.

    Perhaps the most important imperative is
    geo-science capabilities. Africa cannot draw maximum benefits
    from its minerals if we do not know what we have. Geological
    and Mineral Information System become the most important
    imperative. Without correct and comprehensive knowledge of our
    mineral endowments, we will not be able to create broad-based
    development using our minerals. We must relentlessly invest in
    improving and strengthening our geological and mineral
    information systems to underpin investment, exploration and
    mine development.

    In conclusion, what we are
    saying is that Africa needs to promote direct mineral linkages
    – up and downstream value addition (mineral beneficiation),
    knowledge linkages – science, technology, engineering, and
    mathematics (STEM), skills and research development and
    innovation (RDI) – and spatial linkages by optimising the use
    of mineral resource-based infrastructure to promote broader
    development. This is the central pillar of the
    AMV.

    DM

    Photo: In this
    file 18 June 2009 file photo taken in Chudja, Ituri Province in
    the east of the Democratic Republic of the Congo (DRC) a
    Congolese artisan mine worker carries gold-rich earth out of a
    pit for water processing. EPA/MARC HOFER

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