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The Evolution of the African Mining Vision

24 June 2014

As presented Monday 23rd June at the House of Commons Dining Room, Houses of Parliament, London, England

Overview

As part of the Mining on Top: Africa – London Summit, the All Party-Parliamentary Group on Extractive Industries and the Commonwealth Business Council hosted a seminar on “the evolution of the African Mining Vision.” The session explained the purpose and evolution of the African Mining Vision and highlight how its work will support Governments, the private sector and civil society to improve the outcomes from mining in Africa.

Andy Churr, Partner at ERM in the UK presented on his view of some of the challenges and considerations in realising the African Mining Vision as a means of helping develop economies in Africa.

Response to the United Nations ECA African Mining Vision
All-Party Parliamentary Group: Extractives
Andy Churr, ERM

Honourable ministers, Members of Parliament, High Commissioners, distinguished ladies and gentleman.

When I was a young boy growing up in Johannesburg, my father used to tell me about a ghost town that had been swallowed up by sand dunes and it became one of my dreams to visit Kolmanskop, in Southern Namibia. Many years later my dream came true and I found myself wandering amongst the most incredible abandoned buildings, including a bowling alley and theatre, their occupants and fine furnishings long replaced by the sands of time. Kolmanskop was home to a short lived and incredibly valuable diamond mine in the early 1900s, until its diamonds ran out and bigger, better diamonds were found in the Orange River mouth. No thought had been put into what would become of Kolmanskop when it was designed. Today it continues to generate a modest amount of employment and revenue as a tourist attraction. I can’t help wondering what it would look like today had something like the African Mining Vision been in place before mining commenced.

Mining as an answer to poverty alleviation
Africa is home to vast mineral wealth which has the potential to end poverty once and for all, if we get it right. The African Mining Vision is a very comprehensive and well thought through document. It has captured the concepts that resource rich countries need to implement to maximise the potential of their mineral wealth:

  • Firstly, fiscal and regulatory regimes that promote investment in the mining sector,
  • secondly, ensuring investment in other industries and beneficiation to capture additional value beyond resource extraction, and
  • thirdly, and perhaps most importantly, the need to find ways to use mining revenue streams for long-term wealth creation after the resources are depleted.

Mining as a force for good?
Mining can be a force for good, if it is well managed. It can transform economies and present Africa with a very different future. On the other hand, the negative effects of mining can be felt far into the future if it is not well managed. The global mining industry has earned a bad reputation due to decades of irresponsible mining resulting in abandoned pits, tailings dams and waste rock dumps poisoning the environment and surrounding communities, and creating massive costs for society to bear. In a recent survey of 57 mines that had ceased production in the past 70 years, less than 9% of these mines were able to close fully. The rest have to actively manage ongoing pollution. Africa can learn from these negative examples across the world and find ways to ensure that the land and infrastructure around mines is used in ways that will generate jobs and wealth through agriculture, tourism and diversified industry. There are very few examples of where closed mines have done this, and when they have it was often after the fact and depended on luck. Gold Reef City, a theme park and hotel built around an old mine shaft south of Johannesburg generates over $100m in revenue every year.

Preparing for a future beyond mining
It is not possible for any policy or regulation to anticipate what a mining region will look like in 50 to 100 years’ time once resources are depleted, and it is therefore not possible to dictate how all mines need to close. What must be enshrined in law however is the need to ensure that closure is thought about upfront so that land is properly rehabilitated and used with infrastructure to continue to generate wealth and employment.

Guinea’s Simandou deposit could provide the first test case for this in recent years. At an estimated cost of $20bn, Simandou is less an iron ore mine than a development corridor. $14bn, or twice Guinea’s GDP in 2012, will be spent on a 700km rail and port opening up transport linkages to the Capital, and bringing opportunity to thousands of villagers. When completed, it will double GDP and add 45,000 jobs to the economy, many of which will not be directly related to mining but will be in ‘renewable’ sectors such as agriculture and forestry. There is however also a strong argument that says Simandou should link to existing rail infrastructure in Liberia to minimise the environmental impact of new railways. Whilst some might hold this as an ideal outcome, it is not hard to imagine which option a state holding the deposit would prefer, and which one might be favoured by their neighbour.

This talks to the biggest challenge the African Mining Vision could face: striving for cooperation and collaboration between countries.

Should we rather negotiate on a case-by-case basis?
Rather than expending time and energy on seeking agreement across countries, or even trying to perfect national mining legislation, this same effort could be put into building government capacity to negotiate with miners, society and other industry players on a mine-by-mine basis to create a situation where not only the full potential of the resource is captured, but one in which all parties win. In some cases it may be desirable to lower taxes on mining companies and divert profits into closure funds, or ensure that windfall taxes are kept aside to open up possibilities for a sustainable future post closure. And finally, these mining-led development visions should not focus too narrowly on local communities, as this can be a source of conflict between those who are perceived to benefit ‘unfairly’ by those outside of the influence zone. Countries need to think about how to show tangible benefits to all citizens early on.

Although this will require significantly more capacity at government level, it is potentially the only way to ensure that the resource is developed responsibly, value is maximised, and that there is a plan to ensure wealth and job creation continues post mine closure. It must be driven from the top of government, and must involve all ministries. But most importantly investors and society must be given an equal voice if this is to earn the trust of everyone involved and become a success story.

As an African involved in the international mining industry I understand the role that Africa’s mineral wealth can play in freeing her people from poverty. The question must not be allowed to become “Can this work?” but rather “How will Africa make this work?”

Visions require leadership to succeed
As with anything as important as this, it will require not only sufficient capacity and capability in government and industry, but also great political leadership. It is up to the ministers and governments to determine what future and legacy they wish to endow on their nations. The window of opportunity is short, and it is now.

In parting, I wish to leave you with some wise words from the late President Mandela:

"On my last day I want to know that those who remain behind will say: 'The man who lies here has done his duty for his country and his people.'"

I trust that we will all seize this opportunity to fulfil our duty and eradicate poverty in Africa, without sacrificing the environment or the future.

Thank you

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