The roots of inequality: Mining profits soar, but Africans are still poor
In 2009, African heads of state adopted the African Mining Vision. Its key objective is the transformation of Africa’s mining sector into a catalyst of broad-
The vision foresees Africa moving away from being a source of unprocessed minerals, towards the production of value-
The argument was that resource royalties to African governments, along with the voluntary community development activities of mining firms, would be adequate developmental returns.
Except for a short-
But very little of this additional income and profits went to the mineral exporting African countries, thanks both to the lopsided fiscal terms enjoyed by mining firms, and to their use of tax avoidance schemes such as doing business with shell companies in tax havens.
Voluntary CSR is woefully inadequate compensation
The case of Zambia, for which copper makes up about 80 per cent of export earnings, is a good illustration of the asymmetry of power and benefits between mining companies on the one hand and African states on the other. Zambia levies a derisory 0.6 per cent royalty on copper in some cases.
In 2004, with copper prices averaging $2,868 US per tonne, it earned $8 million US in budget revenue from 400,000 tonnes of copper exported by foreign mining companies. This is a mere fraction of the $200 million US it earned in 1992, before privatization, from the same volume and similar price of copper. In the meantime, with the quadrupling of copper prices between 2002 and 2008, firms operating in Zambia such as the Canadian company First Quantum Minerals, have seen sharp jumps.
Over the past decade, a lot of international attention has been focused on ensuring extractive-
However, the limits of revenue transparency for ensuring an adequate share of mineral revenues for African countries is highlighted by the wildly disproportionate returns to mining firms and African governments since 2002. Completely corruption-
For communities in Africa’s mining areas, the promised development outcomes of the mining boom remain illusory. Human rights violations, tensions and conflicts between mining companies and communities are persistent and widespread. Voluntary corporate social responsibility interventions by mining firms have been woefully inadequate compensation for the disruption of livelihoods through dispossession of lands, pollution of waters and heavy-
The African Mining Vision exemplifies the growing consensus in Africa that the harmful race to the bottom to attract mining investment has to end. The race has inflicted a ‘winner’s curse’ of gaining investment, but at the high price of lost revenues and reduced policy options for broad-
African countries want to re-
Africa is the continent with the least industrial capacity, and increased revenues from Africa’s mineral wealth could and should help transform that reality. Communities expect a much stronger accountability framework for the human rights, environmental and social responsibility of mining firms. These and more should set the benchmark for support of Africa’s development efforts by countries such as Canada.
Yao Graham is the co-
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