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sharing in governance of extractive industries

ECONOMIC DEVELOPMENT & SOCIAL PROGRESS - POLICIES FOR IMPACT

New Tech, New Deal Topic 4: ADDRESSING THE POTENTIAL LOSSES: WHAT COMMUNITY ECONOMIC DEVELOPMENT POLICIES CAN MAKE THE GREATEST DIFFERENCE? For instance, should companies increase their community investment activities? Should governments establish development funds for local communities? Should governments and companies negotiate shared infrastructure like roads, water supply, or Internet?

I am confident that we are on the cusp of a new era for policies that will support diversified economies during and beyond the life of any mine and any country's mining sector. Our collective approaches to new technology (the New Tech, New Deal) can support community economic development and social progress.

Development funds, community investment, and negotiating shared infrastructure all have roles to play as countries and communities seek to realise their potential. To achieve the full promise of new technology (and overcome the fears), we need policies that create more opportunity for human innovation and collaboration. To reap long-term benefits across the full spectrum of our resource endowments, we must enable sectors such as agriculture, tourism, and technology to thrive long after mineral deposits are exhausted.

Mining can enable diversified economies to rise, through non-traditional partnerships that cross sectors and between companies large and small, governments, development agencies, and civil society. Surprising partnerships can be a crucible for pioneering thinking and new ways of operating.

To move beyond the theoretical and truly achieve benefits such as shared infrastructure (water, energy, roads), we need to create new business models that respond to both community and company needs with jobs that leverage the full spectrum of infrastructure. We need to build capabilities so that specialists can cross between sectors such as mining, energy, and agriculture. To redraw this economic landscape, we must consider other aspects such as transparency, fairness, environmental impacts and benefits, and we must expand access to business opportunities for women and other vulnerable populations.

If we want to innovate, we will also need to explore new ways of engaging with one another. Change calls on us to seek common purpose among diverse stakeholders. This will be fundamental for success.

We need to carve out neutral spaces for dialogue, where stakeholders can explore each other’s aspirations and needs. Our experience shows that we can find unity of purpose if we keep people at the centre of decision-making. For new, respectful partnerships to be the foundation for economic diversification, we may also need to confront our deeply-held beliefs and cultural assumptions about power, status, and entitlement. We may need to invent new models for ownership and access.

I will be interested to hear your varied perspectives and I am particularly interested in your examples of economic diversification and new paths to both commercial development and social progress. I am optimistic about the opportunities ahead.

New Tech, New Deal

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Comment by Nicolas Maennling on June 10, 2019 at 4:00

Thanks to everyone that contributed to the fruitful discussion over the last week. Let me summarize the key takeaways.

With fewer jobs at the mine of the future, employment opportunities for mining impacted communities will fall. The jobs required at an automated mine will be technologically more advanced, therefore requiring a different skill set that is not likely going to be readily available locally. How should mining companies and governments respond to this change to ensure that local communities benefit from mining investments in the future? This was the topic of last week’s discussion.

There was consensus that particular effort is needed to promote economic diversification, as fewer employment opportunities will be available in the mining sector. Diversification can also help ensure communities benefit beyond a mining project’s lifetime. As mining investments often occur in regions where agriculture plays an important role, synergies with this sector should be explored. Particularly in water-scarce regions, shared-use infrastructure investments can help address community concerns around access to clean water, and support agriculture production. Efforts should also be placed on education programs that focus on new technologies. This will not only make it easier to employ locals at the mine of the future, but also in other sectors that are likely going to require more advanced technological skills. These programs may therefore contribute to economic diversification into higher-skilled sectors.

The decision making process of what should be invested in is equally important. All stakeholders should be involved, with transparency and accountability being fundamental principles in the process. This may require additional capacity building efforts and could take more time than unilateral action, but will lead to stronger foundations and trust amongst stakeholders.

To help in the decision making process and to monitor progress, more focus needs to be placed on measurement. Baseline data assessments can help identify community needs, and public data monitoring systems can help assess whether interventions have had the hoped for impact. Indices should go beyond financial and employment measures, and include the three dimensions of sustainable development - social, environmental and economic. Mining companies could play a leading role in advancing modern policy decision making tools and monitoring technologies in the regions where they operate.

In sum, as mining is expected to continue expanding to satisfy growing demand for minerals needed for the energy transition, automation has the potential to increase efficiency and reduce the ecological footprint of mines. As such, governments should encourage uptake in this space by providing a stable and predictable investment framework. To ensure that communities also benefit from this trend, a new deal is needed that increases community participation in decision making, focuses on investments that promotes economic diversification and skill upgrading, and emphasizes improved data collection and monitoring across the three dimensions of sustainable development.

Comment by Nicolas Maennling on June 9, 2019 at 17:22

Hi Hughe, thanks for your contribution. I don't disagree with you that ideally development indicators are already available prior to any mining company interest in the region. In some countries this exists. Brazil, for example, already has a lot of development data readily available at the municipality level. Have a look at the Brazilian municipality portal.

However, in our experience Brazil is the exception rather than the norm. And if there is little or no data collection at the sub-national level to begin with, there is a tradeoff between the breadth of the data to be collected and the cost. This is where to my mind it is important to prioritize based on context specificities and priorities.

Comment by Hugh Thompson on June 9, 2019 at 9:21

Hi All

Looping a couple of themes together:
One of the constant 'requirements' for investment that is heard from the mining community is the request/need for a stable set of rules upon which it can make decisions. ie. legislative certainty.
Plenty of examples where jurisdictions are judged poorly in this, and the capital required for mining does not get invested.  Happening in Zambia now in an obvious manner; decisions in Indonesia going back 3 years are also continuing to have obvious impact.  (note: there is a difference here between being judged poorly, and being judged correctly)

Government inaction, and/or unclear implemented action has similar potential regards investment - although is harder to understand and see results in such an obvious manner.
This is one of the reasons why the investment in the III region of Chile mentioned by Nicolas has consistently failed to meet expectations.  See the successive reports from Cochilco, Sernageomin etc. over the 2010 to 2018 period.  Same projects listed each year, but constantly pushing out in time.  Not a lot of good news for the local communities.  Lots of reasons for this, but government role in this is not insignificant.   Also is part of the explanation as to why mining capital for Copper has favoured Peru over Chile in last few years.  Nelson Pizarro, head of the Chilean Copper miner CODELCO, mentioned this recently. 

So, yes elements need to be understood and measured as part of the baseline process. That is, described and measured in an open and early manner.  In this respect I disagree with you Nicolas - this measurement does need to determined early.  Difficult to manage what is not measured.

I suspect that concepts such as SROI will come into use.  Provided measurement methodologies and standards can be agreed.   As mentioned elsewhere in this set of topics - I see this as becoming similar to environmental management practices.   Effectively this needs to become part of the mine permitting phase. In a number of jurisdictions it is - but not in such as measured manner.
Thus obligations are known, outcomes are agreed, at an early stage of the project.

Again, from the mining industry perspective I think these will be welcome.
Mining has its' share of intrinsic uncertainty and risk (eg. geology variability - as mentioned by Wendy) - this can be seen in the light of reducing overall uncertainty.
This will also provoke change in the societies around the mining projects, particularity in terms of governance and managing community expectations.  The effort required in that aspect should not be underestimated.

Comment by Osvaldo Urzua on June 8, 2019 at 15:56

Hi Nicolas, I am 100% with you about the importance of having good baselines to inform decision-making processes, to enabling monitoring and continuous improvement and learning. This applies not only to support community investment, this is also very critical for business decision-making process, which have a much higher impacts in communities than social investment.  

Comment by Nicolas Maennling on June 8, 2019 at 1:14

Picking up on the conversation around measurement, which I think is crucial to improve community investments through community development funds or other mechanisms that invest mining revenues in the region. Many development interventions by governments and companies around mine sites have not placed enough importance on measuring baselines and development progress. This makes it difficult to assess which investments have been successful. In the age of the so called “data revolution” where satellite imagery and mobile phone data can complement more traditional census and survey data, the options of what can be measured to make more informed decision making has increased significantly.

 

To my mind, what is measured should not be determined at the outset. This is very context specific and will depend on the priorities by the community. It should aim to include some elements that capture the three pillars mentioned by Henri-Claude though (social, environmental and economic). For agriculture productivity, which has been mentioned by Michel to be an important economic sector that could benefit more from mining, a measure of agriculture production or yield rate could be used to assess whether agriculture interventions have been successful.

I think the Zero Harm Framework provides good guidance on how mining companies can engage with mining communities around development priorities and selecting development indicators. We are currently engaged to help update this framework to align to the SDGs, and are piloting a similar approach in a mining-impacted province in Chile.

The mining sector will increasingly adopt new technologies. So too should governments to improve policy decision making. Mining companies are well placed to support new technology adoption (data collection and data interpretation systems) in the regions where they operate. The new deal should incorporate new tech transfer.

Comment by Osvaldo Urzua on June 7, 2019 at 14:17

Hi Wendy, thank you for steering this interesting discussion. Let me add an addition element to the debate, it refers to how mining economies can attract capital (investment). The world is transiting to automation, digitalization, robotic s and the like. This process has been in place for quite a while and probably will continue and deepen.
If mining economies start to set regulation in order to make a smooth transition to automation, this can be seen by investors as persuasive elements to invest in a given country at less this process happens at a global level. What kind of actions, regulations, agreements are required in order to avoid this behaviour?

Comment by Wendy Tyrrell on June 7, 2019 at 2:50

Thanks Henri-Claude, Hugh, Armando, Nicolas, and Michel for your viewpoints.

I will offer a couple of points - focusing on alternative views to consider. 

Henri-Claude - thank you for comments and for opening up an interesting and important aspect of the discussion about community economic development: measuring value. I know SROI as Social Return on Investment and there are sound reasons for contemplating: what are the most suitable measures for community economic development?

I see that in communities that thrive, policies and processes are most effective when they enable and empower people AND their businesses to succeed and grow in sustainable ways, build markets, and attract investment. There are underlying aspects of healthy communities where people feel empowered, for example, where women and men are equally respected and able to contribute fully economic and social development. Some experts might say that these aspects do not need to be measured or others may say that measurements such as SROI incorporate those aspects. I am interested in the views of others on this topic of measurement.

Hugh - I see changing expectations as a feature of the modern world that we operate in, as demand for some metals and materials expand which others reduce.  As you point out, new technologies will enable greater precision and efficiencies and new ways of operating. This is set against a backdrop of deepening and complex geology, tendency towards lowering ore grades, and within contexts where requirements and expectations of communities, governments, and customers are heightened. I support the notion that there is much we can learn from past experiences - positive and not so. That said, as we look out beyond the horizon, the radical changes taking place point to a need for us to take a fresh approach to what the future holds and how we can best navigate it so that the sector does contribute to economic development in the long term.  

Armando - Empowering local people to take a central role in decision-making is a critical step and requires a special combination of awareness and skill - and willingness to relinquish some control. I have seen the full spectrum in my work over many years in the sector and I see opportunities to build on the energy and momentum of empowerment as we contemplate New Tech, New Deal. 

More to follow....

Comment by Osvaldo Urzua on June 5, 2019 at 2:49

Hi All, regarding non-traditional partnerships one approach to be explore refers to develop an approach that integrate social investment, business decision-making and public policy. My experience is that they usually work independently one of each other while there are significant complementarities. For instance, social investment can be used to develop as a public good the definition of competences required for skilled jobs in an autonomous mine. Then business training programs can test whether this competences and training schemes meet real operational needs. Next, public policy can be used to scale up the solution that proves that work and apply it beyond mining. This could deliver significant productivity increase of public and private investment.

So mining can be a platform to develop public goods, capabilities and institutional arrangements required to enabled the transition into automation, which can also be used in other industries, which will support diversification, employment and local content

Comment by Michel Jebrak on June 5, 2019 at 2:00

Hi

The topic is obviously of major importance. Jobs and taxes used to be and will be of major interest for any country looking for mining investment. Nicolas is perfectly right: the number of local jobs will decrease dramatically: For instance, in a typical South American gold open pit, the truck and mining equipment drivers represent usually 40 to 50% of the total employment. And it is these jobs that will be the first to vanish...Moreover, very few local people, if any, are able to repairs high tech material...

The mining industry is a primary industry, structuring the territory. The nearest sector where its intervention will be most acceptable seems to me to be agriculture. Although the mining workforce will be less numerous, the mines will continue to have facilities management service, including a restaurant that must be fed, preferably in local products.

Many mining companies have supported agricultural development (farming, livestock, ...) on several continents, and these activities mobilize many more people, are more sustainable and can be connected to the same infrastructure than mine operations. They make the link with the restoration of the post-mine environment and may sometimes correct the gender imbalance in productive activities. Water and people transportation are also common tasks.

So I believe (I wish...) that either large mining companies or service companies will have to offer new services for better mining-agriculture integration and management. This would be the other face of new tech in mining!

Comment by Nicolas Maennling on June 5, 2019 at 0:28

Thank you Wendy for kicking off the conversation, and Henri-Claude and Hugh for being the first ones to comment.

Let me add my two cents to the conversation and try to build on these interesting interventions. While I agree that there are plenty of experiences in the mining sector that can help us guide what good and bad practices are for mining projects to benefit local communities, I think that automation will negatively impact one of the major expected benefits of local communities – namely employment. This includes (1) direct employment, because an automated mine by its very nature requires less employees; (2) indirect employment because the goods and services procured locally tend to be lower-end technological goods that are often associated with the employees working at the mine (examples include food production for catering services or clothing for workers); and (3) induced employment, because fewer mine workers will be on the ground spending money in local restaurants and taking a taxi after having a beer at the local pub.

This begs the question whether mining-specific education schemes and supplier programs – a key focus of mining company interventions to create value added to local communities in recent years - will provide the same benefits that they did in a pre-automation era. Yes, these programs will still be valuable to those that can be absorbed in the mining sector, but the absolute numbers of beneficiaries in the local community is likely to fall.

In order to gain or retain community support, I therefore believe that affected communities will increasingly have to benefit from mining operations in other ways. This could be through investment programs that support other economic activities which provide employment and a stable source of income. While very context and site specific, I think that shared-use infrastructure arrangements could be such investment. Take the examples of shared-use water infrastructure. In many arid regions in Latin America, access to clean water is a major concern for communities and source of opposition to mining projects. The Cerro Verde case study shows that water-related infrastructure investments can benefit both the mining project and help address infrastructure needs of the nearby locality. Many proposed desalination projects to feed future mining projects in Chile and Peru could be built at excess capacity through shared investments in order to guarantee stable water supply not only for the mining operation, but also to surrounding communities that are often reliant on agriculture.

Henri-Claude, I fully support your claim that we need to get better at integrating measures that go beyond financial and employment parameters to also consider broader economic, social and environmental benefits and costs in mining (and non-mining) project assessments. In fact, we will be co-hosting a side-event at the 2019 EITI Global Conference entitled “Quantifying the economic, environmental and social costs and benefi...” on the 17th of June where we are looking to discuss this exact topic.

It would be an interesting exercise to assess the positive and negative economic, social and environmental impacts resulting from new technologies in the mining sector. To my mind, while automation is going to have a negative impact on employment, it is likely to have a positive impact on other issues like environmental parameters. For example, new technologies are going to increase precision of finding and mining high-grade ore bodies, thereby potentially reducing the mining footprint of an operation. Furthermore, automation of mine trucks increases efficiency, thereby reducing the greenhouse gas intensity of operations. Ventilation and associated energy requirements in underground mines can also be significantly reduced as a result of automation.

I look forward to a lively debate this week on this very important topic and will do my best at the end of the week to summarize the various views. 

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