The Africa Development Bank recently unveiled the Financial Modelling for the Extractive Industries Facility (FIMES) which will see €1.2 million being channelled to building capacity in mineral rich countries from 2020 to 2022.
The facility is set to assist target countries to realize greater returns from their resources.
Capacity and structural adjustment are pivotal to realizing the African Mining Vision objectives. The sectors potential is partly hindered by the poor state of regulatory, policy and institutional capacity and organization in key areas within the sector.
In this light, the new facility from the African Development Bank which will be initially piloted in Guinea, Liberia, Niger, Mali, Madagascar, South Sudan, Sierra Leone and Zimbabwe is an important strategic effort in Africa’s journey to realizing the optimal receipt of returns from mineral resources.
However, structural propriety is half the battle in this effort. A commitment to prudently and timeously address risks and inefficiencies within the sector is also pivotal to the cause.
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Mining exists in a larger eco system that either supports or undermines the sector. The attitude of mineral rich governments towards addressing risks and inefficiencies that threaten the sector is as important as attracting investment or building capacity.
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There are fundamental issues that need to improve, among them are the sectors’ approach to corruption along the entire value chain, inefficient regulatory and administrative mechanisms and the disconnectedness of the sectors gains to the general populace.
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Following from the same, an improved state of ethical standards, efficiency and equity are key ingredients in the pursuit of the African mining vision.
A lot of value is lost through physical leakages of minerals and bribery along the mineral value chain. Diverting money or resources from a value adding step to an individual’s pocket for self-gain results in diminished returns for the sector and consequently the country.
The fight against corruption and criminality within the sector needs to step up. Corruption remains one of the greatest risks in the mineral resources sector and needs to be addressed in all its forms along the value chain.
This requires sincere political will and corporate commitment to the reawakening of moral and ethical consciousness. The space and ability to manipulate processes and resources for individual gain should be confronted tirelessly and eliminated with the realization that allowing such opportunity works to diminish the ability of the sector to deliver its full potential and impact for the common good.
Whether it is a bribe for mining approvals, bribing mining inspectors to turn a blind eye to a violation, profiteering practices from service and consumables providers, a traditional leader accepting a bribe to endorse or fast track a project, a shareholder who endorses cutting corners, a security detail getting a fee for aiding illegal mining activities or an ordinary citizen who is clandestinely dealing in minerals; it is important to realize that the consequential effect of these actions independently and collectively is to diminish the value of returns and the impact that the sector can achieve.
A system that gives refuge to corruption or ignores it robs itself of achieving the entirety of what mining should be contributing to broad based development.
Likewise, citizens that partake in malpractices within the value chain or participate in the mineral black market must acknowledge that their actions feed into diminishing the greater expectation.
Citizens cannot thereafter turn and accuse only government of mismanaging resources when they also partake, protect and fuel activities that divert value for individual gain.
Accountability is not merely a deliverable for governments and companies, it’s a system deliverable. All parties, players and citizens encountered along the value chain must commit to acting with integrity.
The failure to rise above selfishness and the lure of individual gain within the sector will result in the dream of inclusiveness and the broad-based distribution of wealth remaining elusive.
The administrative and regulatory efficiency of systems and institutions that support and direct activities within the sector also needs to improve. Administrative delays, unnecessary bureaucracy, regulatory inadequacy, poor oversight and enforcement and not addressing root issues are part of the reasons why the sector does not achieve its envisioned influence.
The cost of inefficiency is underestimated in the sector. Inefficiency undermines profitability, stifles progress, introduces corruption, provides the cover for maladministration, threatens sustainability and causes investor apathy.
There is a need to operate in real time, embracing proactiveness and discharging mandates consistently and timeously. The system governing the sector should have the ability to pre-empt, detect and resolve issues that hamper the sectors growth with competence and speed.
Southern Africa has grappled with the impact of the growing influence of artisanal mining, increased smuggling of minerals, energy deficits, extreme weather, vulnerability to the effects of climate change, poor infrastructure and poor regional integration in the mining sector.
However, pace at which the region has tackled these problems is slow and has negatively impacted the productivity and performance of the mining sector. Governments need to take the lead in providing viable and sustainable solutions to risks that threaten the industry.
Mining companies invest significant resources into alleviating the pressure of these challenges and commensurate speed and action is required from host governments through the initiation and implementation of strategic projects that address inefficiencies and infrastructure deficiencies.
While many countries have attempted to tweak policy and regulatory support to ease self-help measures, it is also important to compliment this effort with efficient public investment driven projects that stabilize key areas in the sector.
It is important to note that placing pressure on investors to embark on ancillary projects necessitated by alleviating increased risk will result in investors shunning, limiting, delaying and downsizing existing projects.
This is a devastating consequence for a continent that heavily relies on the sector as one of its high export earners.
At the same time developing countries and Africa in particular, must accept that the minerals market is changing rapidly and is becoming profoundly influenced by scientific and technological advancements.
There is significant investment in finding new solutions to augment the growing demand for minerals vis a vis managing the growing cost associated with mining.
The fourth industrial revolution which is characterized by rapid technological advancements have proven to be pushing every possible boundary that exists.
The results are now playing out in the minerals market, among these changes is the growth of the synthetic minerals market. De beers extension into the retail of lab grown diamonds through its Lightbox collection was a significant acknowledgement of change and proof that there is a viable and sustainable market for synthetic diamonds alongside the traditional market.
Lately, the company has also been revising its rough diamond sales approach to sight holders which placed advantage in volume purchases. They are seeking to give their buyers more flexibility in how much they can purchase and when they can purchase.
This has been necessitated by the changing tides within the diamond industry and liquidity constraints being faced in the midstream players which encompasses primary, secondary buyers and sellers and cutting and polishing.
The strategic direction of players in the mining sector must be led and influenced by the long-term dynamics playing out in the industry. The diamond mining sector is making subtle changes in response to current developments and trends and these shifts are also playing out in other mineral groups.
Mineral rich countries need to timeously re-evaluate the appropriateness, sustainability and scope of their long-term mineral development strategies. This is a process that requires honest re-evaluation, measured planning and agile reaction.
In January 2020, a paper titled: Light Gold: A Colloidal Approach Using Latex Templates, was published in the Advanced Functional Materials Journal. The paper discussed the breakthrough in the lab production of light gold weighing up to ten times less than real gold.
This is made possible because the gold has properties of plastic, having been made by holding gold crystals with protein fibres and polymer latex. This modified gold can prove useful in jewellery and industrial applications which would benefit from its light weight.
These scientific breakthroughs should also be viewed in addition to other various efforts being employed to restructure the industry such as the drive to re-use and repurpose minerals to reduce wastefulness, sensitivity to sustainability and the promotion of circular economy principles.
While natural minerals can never be replaced and will always have competitive advantage, it is important to accept that the range and scope of alternatives and synthetics will increase with time.
This will consequently affect demand and supply dynamics. These developments are important for policy and decision makers in mineral rich countries. Especially countries which are experiencing continued strain on the profit margins of the sector due to increased risk and costs.
The trajectory of advancement makes it even more important for mineral rich countries to be able to take advantage of present-day conditions by efficiently running the sector.
The advantages that mineral rich governments hold today may not be advantages tomorrow because of the rapid pace of changes global policy and regulation and due to the efficacy of alternatives. This has been witnessed in the coal sector as the drive towards dropping fossil fuels continues to increase momentum.
Therefore, the administration and regulation of the sector must be structured and discharged with purposeful timeous precision and diligence in order to take advantage of current favourable market conditions.
It is also important to observe that while a lot of attention is currently being awarded to attracting investment and reviving the sector, due attention is not being given to how governments intend to restructure the distribution of the rewards derived from the sector.
A lot of pressure is being absorbed by mining entities from the growing boldness of artisanal mining, tension with employees and unions and the hostility of surrounding communities. This pressure has proven to intensify as economic decline continues in most mineral rich counties.
Many ordinary citizens cannot relate to the rewards of the sector and there is a general feeling that mining companies and governments should be confronted and held to account for not bringing meaningful change.
The prevailing tension provides an opportunity for African governments to revisit how the profits and results of the sector can be presented and communicated to their constituents.
It is important to support and drive national infrastructure initiatives that are headlined by the profits derived of the sector. While such optics seem trivial, they hold the key to letting people confirm the power and potential of positive change that the sector holds and how it fulfils their direct interests.
It is important to award citizens some insight and participation in what happens to the tax and rent that government collects from the sector. Unlike all other sectors, the mining sector invokes significant interest and emotion because of its impacts. It demands an upfront price from communities and the environment throughout project life cycles.
This sensitivity should direct policy and decision makers to rethink its current strategy on communication, use and distribution of resources derived from the sector. A change in approach would immensely assist the image, sustainability and legacy of the sector.
The mining sector in Africa still has immense potential for further growth and development in its value chain. It also remains one of the most resilient sectors in weakening economies.
Notwithstanding this resilience, it is important address the reasons why the sector fails to fully deliver transformative development to African counties?
The rising environmental and social governance unrest in the sector reveals the growing urgency for every mineral rich country to redefine and restructure the sector for positive and inclusive development.
Among other solutions, this can be achieved by reinforcing ethical conduct, fostering efficiency and promoting measures that build on the equitable distribution of benefits and economic wealth.
Until such a time as when these values are genuinely embraced, the continent will always be so near yet so far from achieving the African Mining Vision.