At the just ended, Mining on Top 2014 conference, the tone for creating shared value was set by Parliamentary Under-Secretary of State for International Development, Lynne Featherstone MP.
As Featherstone officially opened the conference attended by ministers of mines from 12 African countries and more than 400 delegates she paused a question that relates to most African states.
“So what does poverty reduction have to do with mining, you might ask? A great deal, I would argue. Let me set out why”, Featherstone said.
“Africa’s mineral wealth is well known – legendary even. Africa is already the world’s top producer of many mineral commodities. It also has the greatest known reserves of many more even though – and this is important – many parts of Africa have not yet been properly surveyed for their mineral potential. Even in Zambia – generally considered to have a very mature mining industry – 60% of the subsoil remains unexplored.
But this resource wealth has generally not translated into wealth and opportunities for its citizens. Formal mining in Africa started almost 150 years ago with the discovery of diamonds on the banks of the Orange River.” Featherstone explained.
The failure for Africa to benefit from its rich mineral wealth from precious metals to gold and gas is seen part as a result of “weak governance”, lack of transparency amongst others.
Transparency and dialogue are key factors in attracting investment in Africa’s mining sector. Featherstone in reference to governance in Africa said “There are well-rehearsed arguments under the headline of the ‘resource curse’: weak government institutions, inconsistent policies, outdated infrastructure, lack of expertise and skilled workers, corruption.
I could add unscrupulous investors with an eye on short-term profits rather than long-term value-addition to that list. This toxic cocktail breeds resentment and distrust among the majority who see their countries’ wealth being exploited to enrich the few in the worst cases” Said Featherstone
Expectations from CEOs
Speaking at the same event Kevin Fox, Managing Director of exploration for Africa, Europe and Asia at Rio Tinto, said that there are a range of challenges related to corruption in African countries.
“We have an internal business ethics, according to which we do not seek compromises [in presence of bribery acts] and avoid corruption,” Fox said during the event.
Attempts of corruption from local governments can bring long delays in obtaining social licences and mining permits, which ultimately affect the feasibility of mining projects in terms of costs, Fox explained.
Rio Tinto identifies corruption as a major factor in its decision to abandon jurisdictions where lack of transparency causes long delays and high costs in projects development.
Expectations from Government
From the government perspective, the Minister of Land and Natural Resources of Ghana (Alhaji Inusah Fuseini) said that companies should also operate in a transparent way within Africa, both in the way they define project objectives and in setting tariffs.
“Ghana does not think it is getting the best from mining investments in the country. These should do more to create shared values and sustainable business,” Fuseini said at the summit.
Ghana therefore welcomes investors to partner Government to undertake mineral related activities that would catalyse wider sustainable development
The Minister of Land and Natural Resources said that many companies which invest in the country are only interested in examining and proving resources, to acquire asset values, without developing the projects.
“We don’t want to create situations where mining companies walk away, but we can negotiate on taxes and royalties,” Fuseini said.
Constructing a dialogue
One of the key challenges that attracted attention of represented governments, companies and investors was the need for increased dialogue amongst all parties. There is a general feeling that such dialogue is a premise for developing and implementing sustainability projects and programmes and increased investor confidence.
Following up on lack of trust and need for dialogue, Richard Morgan, international government relations advisor at Anglo American, also alluded, in order to attract investors in the sector, both governments and mining companies should keep an open dialogue and manage expectations in-order to created shared value.
“It is important for mining companies to get involved with local communities, to build infrastructure, hospitals, water pumping, and deliver transferable skills in the country in which they operate,” Morgan said.
This was also further supported by Brad Boyle General Manager of Triton with Granite operations in Mozambique.
“In our case we have had a different approach in Mozambique. We have been working with the government, local communities and some NGOs. Since we started operations communities have been aboard. Our company have recruited locally and built a local clinic for the community. Through dialogue our operations in Mozambique have been to schedule” said Brad.
James Hopkinson, director of UK-based risk management company, Assaye Risk, said that companies need to understand both natural and social environment of the region where they develop their assets, in order to receive social and local support to their projects.
“It takes a long-term approach to build up this support, but it is absolutely vital to obtain social licences, which are a key component to take the projects into operation,” Hopkinson said.
Hon. Musa Mohammed Sada, Nigeria’s Minister of Mines and Steel Development, said that the African country expects companies to form good partnerships and look for reciprocal understanding with investors.
“Too strong and tight regulations [in the mining sector] are not useful as you end up regulating nothing,” Sada said
Botswana is one country that seems to have a good governance track as it was constantly being credited. Speaking during the conference, The Chief Executive Officer of Geological Survey Mr Tiyapo Hudson Ngwisanyi said Botswana has impressive track record of good governance and economic growth supported by prudent macroeconomic and fiscal management.
It scores highly on most international rankings including corruption perception index, global peace index, and number two on the Mo Ibrahim Index of African Governance. We have also created a competitive environment to stimulate private sector investment in mineral exploration and exploitation.
What also make Botswana a unique case is that they have encouraged beneficiation and downstream activities to be done in Botswana to facilitate economic diversification, e.g for diamonds they are attracting companies to relocate to Botswana to cut and polish, provide support service and trade polished and rough diamonds in order to create a diamond trading centre which will out-live the mining operations
Ngwisanyi also said that the government is generating employment and training for Botswana’s citizens, and evidently assisting in creation of shared value.
“Mining operations are required to operate in accordance with good mining industry practice, to preserve in as far as is possible the natural environment, minimize and control waste or undue loss of or damage to natural and contribute to socio-development” said Ngwisanyi.
Story by Ronald Chawatama Editor and Network Manager of Animus Sustainability Magazine (www.animus-csr.com); For more news, reports and research on sustainability in Africa follows us on Facebook; Twitter and Linkedin