Addressing the potential loss of benefits from local employment when new mining technologies are introduced: What new arrangements are needed between host governments and mining companies?
The adoption of new technologies in the mining sector presents a fundamental challenge for governments and companies to safeguard their economic interests within the context of the shared value paradigm.
There are growing indications of widespread socio-economic disruption due to technological change in the mining sector. Initial estimates from the African Development Bank show that up to 200,000 jobs could be lost over the next decade due to mechanisation in Southern Africa’s mining sector. Many African countries are not fully prepared for such a jobs crisis.
But there are several types of fiscal solutions that can help countries and industries to navigate this ‘new deal.’
- Policymakers can reconfigure fiscal regimes and commercial arrangements to allow greater state participation (and risk-bearing) in mining operations. These could resemble the production sharing contracts and joint ventures that are more widely used in the petroleum sector.
- The petroleum sector also provides examples of progressive fiscal regimes that self-adjust according to prices and commodity market dynamics, effectively distributing a fair share of the risks to governments and companies. However, to put such a flexible regime in place demands technical and political capacity, if local players want to redesign the rules without scuppering relations with mining companies.
- Stakeholders could cooperate on stronger investments in knowledge generation and infrastructure —by focusing on tertiary and STEM education, R&D and innovation, and other technical skills. It's possible to reskill affected mineworkers and build a new labour pool for the mines of the future, but that is a long-term endeavour, while the effects of technological disruption are more immediate. There are regional mechanisms (such as the Africa Continental Free Trade Area, Regional Mineral Value Chains) that can help to close national skill gaps and generate linkages to local industry.
- Countries can promote the growth of alternative industries (e.g. agriculture, manufacturing) to absorb displaced workers, and create opportunities for more diversified and resilient economies.
In sum, the glass may be half full. Governments have the opportunity to address these challenges by crafting fiscal models that allow them to be more nimble. And, recognising the limits of maximising mineral rents as a development strategy, they can invest in high-tech skills, research, and innovation, which will help transform mineral endowments into lasting economic prosperity.
This may be an optimistic view, but it is rooted in real practices with proven value. I am keen to know if others share my optimism, believing that such new fiscal arrangements and investments in "soft infrastructure" can make a difference.