|AA 15.1 is out!>>"End the Mining Enclave"|
|Written by AA15.1 Editorial|
|Thursday, 15 March 2012 16:37|
THE days when mining in Africa was seen as rent-seeking activity by African countries are drawing to a close with the call by most of them to make mining a broad-based growth and development activity that is a key component of a diversified, vibrant and industrializing economy.
In the pre-independence era, mineral rich African countries as colonized entities had no say in the exploration of their minerals by such colonizers as Britain in the case of Ghana, Zambia, Zimbabwe and Belgium in the case of the Democratic Republic of Congo. Indeed, the minerals of these countries were looted by their colonial masters without much regard for using them to develop these countries. Immediately after independence, most African countries inreaction to the centuries of 'rape' by the colonial masters decided to nationalize the mining operations. Unfortunately, given that they lack the know-how, the technology, the capital among others to keep the mines in operation as well as machinations by the colonial masters, they could not sustain the operations of these mines. By the 1980s most of the mines had collapsed and this coincided with the economic difficulties that most African countries found themselves in at that time.
In stepped the Bretton Woods institutions, the World Bank and the IMF, who had become the economic governors of African countries and from them came the very liberal mining regimes that more or less handed over the mines on a silver platter to the colonial masters now represented by multinational mining conglomerates like AngloGold. What these regimes meant was more or less a return to the colonial era where the mining companies had a free hand in their operations and repatriated their profits with little hindrance. The result was that African countries with their abundant mineral reserves made little from the exploration of these minerals by the multinational companies. Worst of all the mining companies were operated as enclaves with little or no links to the local economy. All the host countries were getting from their minerals were royalties and taxes which were even pegged at such low rates in the name of attracting foreign direct investment.
Furthermore, booms in mineral prices rather profited the companies more with no difference in returns for African countries. This is what has prompted countries like Zambia to introduce windfall taxes (See page 11, Mining boom without benefits……) Tanzania to increase royalty rates, Guinea to review its mining code (See page 7, Reforms in Guinea's mining sector bring hope) and the abrogation of some mining contracts by the government of the Democratic Republic of Congo. The government of Ghana in its 2012 budget has also indicated increases in royalties and a windfall tax among other measures to rake in some more revenue from the mining sector. (See page 15, Continue the needed reform in the mining sector….). These efforts at redressing the balance in terms of returns from the mining sector have rankled the mining companies who have not hidden the fact that they would not accept these measures without a fight. Some have responded with indirect threats as they refer to the measures as disincentives to foreign investment and not taking account of previous agreements.
In all these however, the good news is that African countries have since 2007 recognised the need to turn the tables as far as Mining Codes in use in Africa are concerned. Through the United Nations Economic Commission for Africa, UNECA, which established an International Study Group to look at Africa's mining regimes and the African Union's African Mining Vision, steps are being taken to correct the defects in Africa's mining regimes. In a recent report, Minerals and Africa's Development, the International Study Group, has called for a total relook at Africa's mining regimes to not only remove its colonial 'enclave nature' but also transform it from a raw material activity to an industrial one that has linkages to the whole economy. (See page 14, Mining policy must be linked to development policy.)
The African Mining Vision for example calls for a knowledge-driven African mining sector that is a catalyst to the broad-based growth and development of Africa and is fully integrated into a single African market. Embedded in this is the downstream and upstream linkages in the sector that allows for manufacturing, beneficiation, consumables and services and a mutually beneficial partnership between the state, the private sector, local communities affected by mining and other stakeholders. The challenges to these are enormous as vested interests that stand to benefit from the status quo will not willingly accept the desired changes. The international trade regime among other global business arrangements skewed in favour of foreign investors through the World Trade Organisation, bilateral agreements and others would have to be fought to wrench free Africa's mining sector. Even some African governments more interested in rent-seeking than turning the mining sector to an industrial one with linkages throughout the economy may also play ball with multinationals against their own people.
In all these, the fact must be recognized that despite most of Africa being mineral rich, poverty continues to reign in the continent. There may be other causes for this but a simple cost benefit analysis by such groups as the ISG, and the African Mining Vision, suggest that, 'Transparent, equitable and optimal exploitation of mineral resources' could lead to 'sustainable growth and socio-economic development' in Africa. Africa can achieve this by less dependence on foreign multinationals in the mining sector and integrating the sector into the general economy through a resource-based industrialization approach just like the Nordic countries. The mining enclave mentality that makes Africa only suppliers of raw minerals must therefore be a thing of the past.
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