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sharing in governance of extractive industries

Launch of the Mining Local Procurement Reporting Mechanism (LPRM): better data, better company performance and greater impact for achieving the SDGs

The 2030 Agenda emphasises long-term, widespread and sustainable economic growth as one of the main objectives of sustainable development. This requires the diversification of local economies, strong value chains as well as the targeted support of small and medium-sized enterprises (SME).

In resource rich countries that host mining operations, the mining sector and its operations are oftentimes not being integrated into the local economy. In order to integrate mining operations into local economies and to increase local value addition, the sector programme Extractives and Development together with the Mining Shared Value  (MSV) initiative of Engineers Without Borders Canada developed the Mining Local Procurement Reporting Mechanism (LPRM). The LPRM was officially launched on July 3 at the London School of Economics in London in front of an audience of students and mining professionals. On July 5, MSV and Extractives for Development presented the LPRM at the Federal Ministry for Economic Cooperation and Development (BMZ) to interested desk officers where the further implementation of the LPRM was discussed.

International mining companies' expenditures in taxes and royalties usually account for around 15 percent while procurement spending is generally the single largest expenditure during mining activity, in many cases accounting for upwards of 70 percent of expenditure. It therefore has the potential to have the most significant economic impact on the ground. There is increasing sector-wide recognition that local procurement offers benefits to mining companies, as well as the countries and communities that host them. “Why if we have a common way of reporting on tax payments (EITI), energy use, etc., do we not report in the same way for the single largest impact?” asked Jeff Geipel, MSV founder and expert on local content based economic development.

The LPRM is a set of disclosures on local procurement that are to be reported by organisations who report on mine sites. It addresses the gaps in current reporting frameworks to help standardise the way the sector and host countries talk about these issues. It facilitates comprehensive reporting on local procurement spending at the site level, as well as practical details on mining company procurement processes and programmes that support better-informed stakeholders.

The availability of data from the LPRM allows for an evidence-based alignment of institutional and legal frameworks, local production as well as training schemes. Emily NICKERSON, project manager at MSV, stresses the potential of increased transparency related to local procurement in countries that host mining activity and the possibilities to better coordinate and manage the efforts of different stakeholders and donors. Isabelle RAMDOO, senior linkages and investment advisor at the African Minerals Development Centre (AMDC), emphasised the LPRM’s high developmental relevance for resource-rich developing countries. The LPRM is able to contribute to implement the Africa Mining Vision (AMV), a resource-based strategy for industrialization and development. The mining sector could be used, according to Isabelle, to support SMEs and supplier development programs.

Hence, while procurement is only one among many components of effective mineral resource management, adoption of the Mining LPRM by the global mining industry will make a significant contribution to local economic development and SDG8. It is the objective now to make the LPRM available to partner countries of German development cooperation and implement it through multi-stakeholder processes for optimum results.

For further information on the project and the LPRM, please contact Kim Schultze (kim.schultze@giz.de).

(Please use the link above for downloading the LPRM).

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