Dictating the Pace

Africa must set the rules when it comes to exploitation of its resources

Lazarus Sauti

I

t is disheartening to note that as a major world producer of raw materials, Africa has remained on the periphery of minerals trading and value addition.

Despite its immense wealth and this is something that is said over and over again, the continent’s citizens are among the poorest in the world.

The continent has surrendered control of its raw materials to other countries. These countries have arrogated to themselves the right to determine the prices of raw materials and have assumed the role of regulator on our output of raw materials.

As such, Africa is a net exporter of unprocessed raw materials which fetch low prices on the minerals markets, and a net importer of expensive processed goods.

Zimbabwean writer Ben Mutongi asserts that by simply exporting unrefined raw materials, Africa is selling its birthright.

“By merely exporting unprocessed raw materials, Africa is inadvently exporting a higher percentage of its jobs, mineral value and other economic benefits to other countries,” he contends.

Economies in African countries will benefit more from exporting processed minerals. Therefore, Africa should do well by benchmarking its raw materials practices with those of the Oil Producing and Exporting Countries (OPEC).

This means we should set up our own gold, platinum, cobalt, uranium, diamond and copper cartels so that we influence markets and trading to our own advantage.

Ultimately, the continent should try by all means necessary to retain control over the production, distribution and processing of its raw materials.

Mutongi says the continent must also work hard towards building a vibrant processing industry.

“By building a vibrant industry, we can build a consumer market for our raw materials and further downstream employment that would be of benefit to our people,” Mutongi says.

Those who are involved in the mining industry should shift from simply exporting unprocessed or unrefined raw materials to beneficiation.

Mutongi adds, “Such a move will ensure that the continent retain a significant share of the value of raw materials and somehow dictate the pace of their trading.”

This means African governments must be more forward-thinking and proactive in coming up with policies that will result in Africa’s industrialisation and development in a sustainable manner.

Some form of protectionism is needed to stop the unregulated export of raw materials from African countries.

In addition, governments and the private sector must become innovative in coming up with means of raising financing for mechanisation and increased use of technologies in Africa that contribute to local processing of resources.

Value addition of minerals is pivotal in advancing our economies. It brings prosperity for more people on the continent as compared to the current regime that emphasises extraction over processing.

 

‘Legislate, don’t negotiate!’

Cape Town - Key players in the mining sector attending an industry partnership meeting for Mining and Metals session organised by the World Economic Forum and the Economic Commission for Africa (ECA) have underscored that the window of opportunity provided by rising commodity prices must correspond to a rise in revenues for African governments by equal measure.

Held on May 8, the session was aimed at examining how the Africa Mining Vision and its goal of facilitating transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development can be translated into national mining visions, developed from a fully transparent and inclusive process.

While the index price of precious metals and base minerals has increased by over 200 percent in the last decade, industry leaders and policy makers here agree that the current contribution of minerals to Africa’s economic development is not commensurate.

Stressing the need for beneficiation and value addition and linkages in the mineral value chain, ECA’s Executive Secretary, Carlos Lopes said, “Minerals have to contribute to structural transformation - we have to see a stronger manufacturing sector in Africa going forward.”

According to industry experts, Canada, Australia and Chile have used the minerals sector for industrial transformation and the composition of their GDP has seen a growth in the contribution of manufacturing.

“Commodities have not been a curse but rather a blessing for these countries – the diversified and rich mineral resource base can do the same for Africa,” notes Lopes.

A continental approach that steers the course of Africa’s minerals towards a path that derives development benefits is already in place.

“The tripartite partnership of the African Union, African Development Bank, and the ECA is establishing the African Minerals Development Centre (AMDC) to help AU member states achieve broad-based social and economic development based on Africa's mineral endowment as stipulated in the Africa Mining Vision,” say senior officials at the ECA.

The Centre aims to create the institutional and policy space for broad social and economic linkages and thus facilitate a mineral-led industrialisation process.

As underscored by participants here, the risks are changing in Africa due to increased macroeconomic and political stability in most countries and this offers opportunities for investing in the continent’s highly prospective geology.

However, countries need to improve governance and capacity to negotiate contracts and to audit the mineral value chain.

There is a need for a more sophisticated regulatory environment, clarity of policy, as well as consistency and transparency in the overall policy framework.

There is also concerted agreement among stakeholders on the need to domesticate the Africa Mining Vision.

“It is the only way country-specific issues, such as inclusiveness and linking mining to the rest of the economy can be captured and addressed,” stress the experts.

In this regard, piloting of the country Mining Visions in a few countries will provide important lessons for the rest of the continent in the rollout of the development of AMV-compliant policies.

Participants discussed the mineral value management tool developed by the World Economic Forum, which could be utilised in the process of developing country mining visions, as it facilitates the capturing and alignment of the often divergent views of all stakeholders on the value of the minerals sector.

The tool could help to align the value perceptions of communities, the private sector and governments. In addition, there is room to address capacity gaps at country-level, and within governments, according to experts.

“Instead of having agreements on a project by project basis, in one country, a generalised template that specifies all the key parameters can be developed and then customised,” they stress.

“Mining development agreements can become a law in themselves and governments often lack capacity to monitor implementation of these complex agreements,” argue the experts, who stress that a robust legal and regulatory framework or model mining policy or agreement will suffice.

The call here to governments is “legislate, do not negotiate”. – ECA