By Marcus Courage, CEO of africapractice
Our modern world would be nothing were it not for the commodities provided to us by African nations. Europe, America and Asia have all been built from the proceeds of Africa’s mineral wealth. With this endowment, Africa should be rich too, but it isn’t. In Guinea, Guinea Bissau, Sierra Leone, Liberia and Democratic Republic of Congo for example, human development indicators remain stubbornly low in spite of those nations’ vast mineral endowments.
Increasing demands and expectations
People expect more from the mining industry. At Marikana in 2012 and in the subsequent strikes that followed in South Africa, we saw first-hand evidence of the resentment that some South Africans feel towards the industry.
Mining can and should contribute more to social and economic development on the continent. This is the central premise of the Africa Mining Vision; a blueprint for harnessing Africa’s mineral wealth to transform human development. It’s against this backdrop of heightened expectations that governments have sought to secure greater benefits from their natural resources, largely to the detriment of private investors. Resource nationalism – the drive by governments and communities to increase the benefits obtained by Africans from minerals mined and exported – has led to several governments raising taxes and restructuring the ownership of assets.
Cameroon, DRC and Zambia all recently raised royalties. These changes were introduced at a time of historically low commodity prices. While companies face pressure from shareholders on one hand to respond to market conditions by doing less – cutting costs and freezing investments; on the other hand governments have been demanding more from them. Expectations of what industry should be delivering in Africa are at an all-time high, while copper and iron ore prices are at historic lows. This misalignment creates tension and can lead to conflict between the regulator and the regulated if it’s not carefully managed.
Active citizenry underpins sustainable mining investments
There’s not a country in the world where the idea of a foreign investor making profits from extracting non-renewable resources is universally accepted. Dealing with it requires companies to forge partnerships with state-owned enterprises and local communities to ensure that more of the benefits of mining transfer to citizens.
A mining firm operating in emerging or frontier markets today must be more than a miner. They need to be a development actor.
I’m not suggesting that they should usurp the role of donors, governments or aid agencies, but I am saying that companies must move beyond mining and get better at connecting with the societies they serve.
Mining firms have been universally poor at engaging with their host nation’s citizens. They have failed to recognise that a critical mass of informed citizens is one of the best insurance policies that a company can have. The onus rests with industry to engage citizens and to create the necessary platforms to build knowledge of the industry and of their operations. Companies must stop obsessing about their relationships with governments and start seeing their relationships with society as the most vital factor underpinning their license to operate.
Marcus Courage is CEO of africapractice, a pan-African business advisory firm that supports clients to mitigate risk and build reputation. He has advised mining companies in Angola, Zambia, South Africa, Zimbabwe, Ghana, Tanzania, Namibia and Democratic Republic of Congo. He has spoken at PDAC and the Japan-Africa Mining Summit 2015 on best practice in stakeholder relationship management in the mining industry.