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sharing in governance of extractive industries

Mining in Sub-Saharan Africa: Why contributing so little in the development of economies within the Region!?

While contibuting a lot of revenues and raw materials in the development of Western economies, mining industries in the mineral rich Sub-Saharan African countries contribute very little in the development of economies within the region.

Responsible for the little contibution to African economies are the faulty Mineral Policies countries in the region are equipped with.

In the development of Mineral Policies, Governments in the mineral rich Sub-Saharan African countries failed to recognize the following:

(a)   Mineral resources within the region are non-renewable and the national wealth of all nationals in all generations within the region and will be developed in a manner that serves their national and regional interests most effectively;

(b)   Self-reliance in the appraisal and exploitation of mineral resources within the region is the main enabler of countries to serve their national interests most effectively;

(c)    Collaboration of all stakeholders within individual countries and countries in the region would enable to mobilize own seed capital, risks sharing and self-reliance to dominate the appraisal and exploitation of mineral resources and maximize benefit for the countries;

(d)   Having a mineral policy which is common throughout the region would enabled countries to dictate terms and ensure the foreign involved appraisal and exploitation of mineral resources within the region contributes most effectively in their economies;

(e)   National and Regional investing for profits in the appraisal and exploitation of mineral resources within the region is one of the most important ways of serving the national interests of individual countries most effectively, and that what foreign investing serves individual countries in the region (mostly in the form of taxes) is very limited and little compared to the national and regional profits national and regional investing would generated;

(f)     National and Regional investing (especially in grass-root exploration and in the provision of services and supplies to exploration and mining activities) and effective collection of taxes on all taxable profits realized by investors other than governments (in the provision of financing, supplies, services, exploration, sale of mineral rights, exploitation of mineral resources and sell of minerals) is the only way the deserved share of national mineral revenues could be served most effectively;

(g)   Governments investing (especially in exploration to add value to mineral resources) stimulates private sector investments,  maximizes national shares of mineral revenues and a must in the developing countries of the region, where private sectors are still underdeveloped and lacking the financial muscles involved in a meaningful national investing;

(h)   Most of the mineral potentials in the countries are in the undiscovered medium scale mines within the grounds held by small scale miners, and that it is only local and foreign partnerships could enabled their discovery and transformation of the small scale mining sectors into modern, efficient and highly productive small and medium scale mining  sectors which contribute to economies in the region significantly;

(i)     Partnerships which involve Local and foreign (public and private) sectors in the financing, ownership and management of exploration and mining projects in the small, medium and large scale mining sectors would enable countries to obtain the transfer of skills, know-how and technology, and to maximize their shares of mineral revenues;

(j)     Limited tax exemptions are useful when offered to exploration investments (but not to exploration profits) involved in the highly risky exploration stage as a way to lure in the risk fearing investors but, destructive when offered to mining investments and enable exploitation to happen when market conditions are not favourable and at the expense of countries within the region; and

(k)    Investing the whole government share of mineral revenues in a national sovereign fund which would serve credit for interest to the Government investing in the development of national infrastructures to support economic activities and nationals investing in economic activities would serve national interest most effectively throughout generations.

As a consequence of non-recognition of what said above, most mineral policies within the region have failed to serve national interests most effectively due to the following:

  •  They differ from one country to the other; they are products of competitions for foreign investments (in which the interests of foreign investors are favoured at the expense of the countries); they allow foreign investments to dominate in response to the faulty focus they are built on enabling private sector led mining sectors to evolve when private sectors within the region are still underdeveloped and unable to participate effectively.
  • They are built on fear of encounter with the high risks involved in exploration and mining businesses and fault belief that the highly experienced and well funded small and medium scale foreign miners could be kept away from the small scale grounds held by citizens and it is the Governments (which are inexperienced in small scale mining) will modernize the small scale mining sector through supportive extension services and establishment of mechanisms.

Mining sectors which contribute significantly and sustainably in the economies of countries with the Sub-Saharan region could evolve if the following is done to rectify mistakes:

(a)   Countries in the region should collaborate in the establishment of national and regional funds for exploration to add value to mineral prospects, and maximize their attractiveness for further investing and shares of  mineral revenues (if well managed, such funds would start to generate revenues for own growth and shareholders after a very short period of exploration activity);

(b)   Countries in the region should collaborate in the development of a mineral policy which would be common for all countries within the region;

(c)    Common mineral policy would abolish mineral tax exemptions because luring private (mostly foreign) investors from one country to the other and/or into the exploitation of minerals when market conditions are not favourable is what they do at the expense of countries within the region;

(d)   Common mineral policy will encourage local and foreign joint ventures in all exploration and mining activities in small and large scale mining to enable the experienced foreign explorers and miners to contribute discovery of medium scale mines with the grounds held by small scale miners and maximize contribution to economies in the region;

(e) Common mineral policy will establish sovereign national funds in which Governments would deposit their shares of mineral revenues for serving in the form of credit for interest in the economies of the countries throughout generations; and

(f) Common mineral policy would be intolerant to all kinds of corrupt practices in the doing of mineral businesses within the region (e.g. investor will lose right (s) as soon as it is proven beyond doubt that he/she engaged bribe (s) to secure the right (s))

Such a common mineral policy would eventually lead to the evolution of Africans led mineral sectors which contribute significantly in the development of African economies.

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Comment by Antipas Massawe on May 12, 2014 at 15:19

Kristian, Thank you very much for the very valuable remarks, would visit www.africaminingvision.org for the details.

Comment by Kristian Lempa on May 12, 2014 at 13:24

Hi Dr. Massawe,

thanks for these crucial insights. I think the suggestion for a common minerl policy is a good one. Actually there exists a common framework, the Africa Mining Vision of the AU. Recently the Africa Minerals Development Centre (AMDC) was esteblished to promote implementation of the AMV through country mining visions that are based on the same principles. I believe the AMV answers to most of your questions above and you might want to have a look at the web page: www.africaminingvision.org The AMV Action Plan has 9 clusters and is quite comprehensive with regards to the challenges you mention.

In my project in West Africa we use the AMV as the major framework of reference for our activities as this vision has been endorsed by the African Heads of States. The 9 clusters of the action plan are very helpful in thinking about what still needs to be done to use mining for the sustainable development of the African continent. No country has to reinvent the wheel while developing their own country vision. The AMV and its action plan actually tell you most you need to know.

All best,

Kristian

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