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Good governance: key to social progress in mining-dependent countries

With the increased demand for new-technology minerals and metals driven by the global transition towards a low-carbon economy, the mining sector must not lose sight of the environmental, social and governance responsibilities in the host countries in which it operates.

An opportunity to accelerate socio-economic progress has emerged in the mining-dependent countries where these minerals will be mined, but this hinges on good natural resource governance to ensure that the natural resource wealth is used to improve the lives of the people in these countries, International Council on Mining and Metals (ICMM) CEO ROHITESH DHAWAN tells CHANTELLE KOTZE.

The ICMM initially undertook extensive research on the topic of social progress in mining dependent countries in a 2018 study, which challenged the notion of the ‘resource curse’ – a widely held perception that an abundance of natural resources in host countries damages economic and social progress. The ICMM’s most recent study on the topic, builds on this research and was aimed at better understanding the linkage between effective resource governance and social progress.

The ICMM launched a report on its findings in July, titled: “Social Progress in Mining-Dependent Countries: Analysing the role of resource governance in delivering the UN Sustainable Development Goals (SDGs)”. In it, the research strongly suggested that the higher the quality of governance, the stronger the socio-economic progress observed in these countries.

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The report analysed 41 social metrics grouped under 12 relevant United Nations Sustainable Development Goals (SDGs) and found that life in mining-dependent countries had improved significantly in the last 23 years.

It was found that across three quarters of these metrics, there has been significant progress made on socio-economic development, with the most progress realised in the areas of health and wellbeing (SDG 3), quality education (SDG 4), clean water and sanitation (SDG 6), energy (SDG 7) and infrastructure (SDG 9).

Proper implementation of mining regulations and frameworks is critical

Dhawan says that in determining whether mining-dependent countries effectively govern, or manage their natural resources there are two points to consider: Whether the country has mining and mineral laws in place and whether the country implements and executes these laws consistently and effectively over time.

While the research found that a stable and enabling governance environment has the strongest positive relationship with good socio-economic outcomes, it importantly highlighted that having mining regulations and frameworks was an insufficient condition for good socio-economic outcomes.

“The findings indicated that effective implementation of mining regulations and frameworks was critical, without which the developmental benefits of mining may not be realised for mining-dependent countries, Dhawan says.

According to the CEO, the West African country of Guinea is a good example of how structural mining sector reforms have improved socio-economic outcomes over time,  evidenced by increased investments, job creation and funding for development programmes. Although Guinea started its journey of improvement many years ago, the results were not at first easily observable, and took the country about a decade to transform and generate positive social outcomes.

Liberia on the other hand, despite having developed a relatively strong framework for mineral resource governance following the decades-long civil wars that had devastated its once strong mining sector, has been ineffective in properly monitoring and enforcing its mining regulations over time. As a result of poor implementation of its mining policy, gains have translated to suboptimal social progress in Liberia.

What this shows is that having a good framework in place is not enough, and that effective implementation remains critical, says Dhawan.

“The mining industry also has a central role to play in this by supporting effective implementation of the frameworks needed to help drive social progress,” says Dhawan. In doing so, mining companies themselves should be exemplars of good corporate governance, says Dhawan, noting that this will have a knock-on effect of good governance in the host countries.

Moreover, mining companies often spearhead good governance practices in host countries, so when mining companies take these voluntary leadership positions on governance issues in the countries in which they operate, and are joined or supported by other mining companies, it is quite likely that governments will acknowledge this and turn these standards into law, improving governance practices in-country.

In assisting countries achieve better governance, mining companies can also establish corporate social responsibility initiatives towards improving governance and capacity building in the communities in which they operate. In South Africa, for example, mining companies have channelled investment and human capital into assisting municipalities develop better operating practices and better governance. This has enabled improved service delivery at municipalities and has in turn reduced the pressure on mining companies to deliver basic public services such as water, dentation, health care and infrastructure.

Positive socioeconomic outcomes rely on the existence of an enabling environment

According to Dhawan, the analysis indicated that the creation of an enabling environment for resource governance is critical for good socio-economic outcomes.

Countries that are more peaceful because of politically stability and the absence of violence, with lower levels of corruption, and rule of law, are better able to translate natural resources into positive social outcomes.

The creation of an enabling environment goes beyond mining policies. For example, the improvement of regulatory effectiveness and control of corruption are not only critical to mining sector development, but the development of most other economic sectors.

The report found that out of the countries that were studied, those that are mining dependent had outperformed countries that are non-mining dependent in terms of development over the past 25 years at both a national and regional level, refuting the notion of the ‘resource curse’, says Dhawan.

Moreover, studies indicated that at a regional level in mining-dependent countries, the areas in which mining takes place tend to develop more quickly than the parts of the country where mining does not take place, which indicates that when you properly govern natural resources you can generate better social outcomes than in the absence of natural resources.

Dhawan says the mining industry and government ought to act now in creating an environment of effective natural resource governance, transparency and accountability if it intends to reap the socio-economic growth and development outcomes of the predicted low-carbon economy resource boom.

“This is even more important in the post-COVID-19 environment that we currently find ourselves in,” Dhawan concludes.