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Local Content and Extractives-led Local Economic Diversification at PDAC 2017

Many members of  GOXI were in Toronto earlier this month for the Prospectors and Developers Association of Canada (PDAC) 2017 Convention. Building on the momentum of past Indaba events, the need for economic diversification, as well as local content were frequent topics of discussion in many of the sessions. Below is a list of four sessions including links to relevant reports and resources:
 

1. Integrating local content regulations: A win-win for communities and companies? Sunday, March 5th

This panel put on by the Mining Shared Value (MSV) initiative of Engineers Without Borders provided perspectives on local content regulations for the mining industry. Emily Nickerson of MSV opened the panel with an overview of their recent research study with CIRDI on local procurement regulations in South Africa a..., and laid out the increasing trends across Sub-Saharan Africa of local content regulations. Robin Weismann from the IFC spoke from the standpoint of a multilateral finance institution, and then Jan Klawitter from Anglo American provided the perspective from a mining company. Regrettably Toni Aubynn from the Ghana Minerals Commission was unable to attend PDAC as planned and MSV’s Jeff Geipel filled in by providing an overview of Ghana’s regulations for local content. Some insights that came out of the panel:

  • It was discussed that the starting point, before regulation, needs to be common vision or goal. It was reiterated by each panelist that local procurement is a means to an end, not an end in and of itself. Therefore, all stakeholders need to come together to define the end point and to establish a joint-vision for growth, with industry at the table and part of the vision.

  • Jan Klawitter emphasized the local content regulations are effective if they are targeted, stable over time, flexible and coordinated. In addition, it was further highlighted that they are driven to invest in local procurement because across the board the investment pay off in the long run.

  • Generally it was suggested however, that shifting any companies’ mindset internally from “local procurement is costly” to “local procurement adds value” is an extremely large hurdle and potentially local content regulations, if done well, could provide the necessary external pressure to spur action by the industry.

  • It is important for recognize the different priorities of industry and governments as they come together to work for increase local content. For government, this includes increasing jobs, increasing the tax base to support programs and services, and increasing the competitiveness of their industries domestically and globally. For companies, this includes mitigating risk, widening the supply base to limit reliance on select suppliers, and the social license to operate.

2. Transforming Mining into a Development Partner, Monday, March 6th

This session was put on by Hatch to showcase how they approach local participation in the development of mines. Olivia Gamache laid out how not ensuring local hiring and procurement during past mine development has resulted in significant delays and financial costs. She explained how the model they use to seek increased local participation is that of moving from “Informing” local stakeholders to “Empowering” them, and that this was the way to ensure that programming to increase local employment would succeed (even if empowering local stakeholders brought increased risk). She also explained that increased local participation was a central KPI for their team during mine construction.

 

3. The Economic Multiplier Effect of Mining, Tuesday, March 7th

This session organized by the IFC featured Liane Lohde from the IFC, Aiden Davy from the ICMM, Nick Cotts from Newmont, Olivia Gamache from Hatch, and Jeff Geipel from Mining Shared Value. There was broad agreement among the panelists that efforts to measure the employment impacts of mineral extraction need to become more sophisticated. This included insights on making programming to increase local hiring and procurement more systemic and less ad-hoc, and in going to the next level of detail in impact assessment – looking at not just the number of jobs created during mining but also the types and skill learning opportunities involved in them, for example. The panelists drew from a number of their own programs and research efforts, and links are provided below:

  • Aiden Davy drew on their study in Zambia “Enhancing Mining's Contribution to the Zambian Economy and Society” with the important point that in fact most of the “locally procured” goods by the mining industry in Zambia were in fact imported goods resold, therefore not creating many jobs for the country.

  • Nick Cotts shared many insights from their Ahafo mine in Ghana and the Ahafo Linkages Program, profiled in this WBCSD case study as well as several others in the CoP’s resource library.
  • Olivia Gamache talked about the need the ensure local participation is built into the mine during its development, including the need to start even before construction begins to train up local suppliers and potential employees.

  • Jeff Geipel spoke of MSV’s work with GIZ to create a Mining Local Procurement Reporting Mechanism (LPRM) to standardize how the mining industry and host country stakeholders report on and talk about local procurement. He also drew from their recent study with the CCSI and IISD, “Mining a Mirage”, which shows that both companies and governments are going to have to adapt for the potential job losses that will come from increased automation.

  • Finally Liane Lohde talked about their IFC Jobs Multiplier tool under development in partnership with consultants at Steward Redqueen. This tool seeks to predict job creation during mining using an economic model to assess the various impacts of relevant policies and local conditions.

 

4. Leveraging mineral resources for economy wide growth, Wednesday, March 8th

This session was organized by the OECD and provided practical examples of how to ensure economy wide growth as a result of mining activity. Some highlights:

  • Jane Korinek of the OECD provocatively argued that governments should focus on incentives and cautioned against the use of targets in law. She discussed the limits of export restrictions and presented a tool that the OECD has developed to show which countries have export restrictions....

  • Cory McPhee Vale presented examples of their efforts to create benefits, providing an example of their Integrated Community Development Program (PTPM) in Indonesia that is supporting businesses to diversify. As well, he pointed to their support of the Sudbury Area Mining Supply and Service Association as another effort to help diversification.

  • Related to employment, Cory also described their activities in Thompson, Manitoba where increased Indigenous hiring has led to increased retention rates. The key element in this was not to “lower the bar, but to widen the door” whereby the criteria for hiring was re-examined and tailored to accommodate the local context. For example, the mining company reviewed their hiring policies and removed high school certificates as a pre-requisite to employment in order to increase access to employment opportunities for individuals that live close to the mine. This had hugely positive impacts for the company as their previously low retention rates have significantly increased.

 

Of course local content and economic diversification was a consistent theme throughout the entire week of PDAC, beyond these summarized sessions. There was a great deal of focus on ensuring mining contributes to meaningful development during the Development Partners Institute-organized “Why partnering for development is the future of mining” session on Sunday morning with the CEOs of Anglo American and Hatch. During the “Where is the Trust?” Session, Oxfam America President Ray Offenheiser made the important point to the mining industry “You are being seen and expected as a development partner like never before”. Finally, the Executive Director of PDAC, Andrew Cheatle commented during the CEO Panel that wrapped up the CSR Event Series that the need to increase local procurement featured heavily throughout the sessions.

Please let us know if there was other sessions that had a heavy focus on ELLED-relevant themes, and we can adjust this post.

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Comment by Jeff Geipel on March 31, 2017 at 2:52

Glad to hear you enjoyed the summary Debra!

Comment by Debra Stokes on March 27, 2017 at 22:44

Good summary for someone like me who was unable to make it to PDAC this year. It is also good to see the conversation continuing re how the extractives industry can contribute to community development. In B.C. we are looking at how Aboriginal peoples can benefit from LNG and mining developments in the long term, beyond the construction phase of an liquefied gas terminal and the closure of a mine. 

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