policy

Policy is important; it defines road maps that articulate how governments intend to execute their mandate.

The content of policies is followed closely because it constitutes an expression of intent and inevitably provokes strong reactions to key economic indicators.

Good policies stimulate progress and growth and bad or weak policies on the other hand stifle national development and stunt economic growth.

AUTHOR: Selina Zhuwarara

With this in mind, mineral rich countries need to pay particular attention about how each thread of policy provision fits into the overall fabric that makes up the mining policy structure.

Mineral resource strategies should be deliberate and orchestrated blue prints that outline how a nation intends to invest, discover, extract, sell and utilize its mineral resources including what it intends to do with the revenues generated from these activities.

While there are a lot of factors that are taken into account during the crafting of mineral policies, there are six critical pillars that need to be catered for in every national mineral resource strategy blue print.

These six strategic pillars are exploration, commercialization, industrialization, revenue management, technology and sustainability and social and environmental issues.

A strong policy structure incorporates all these key pillars and facilitates the maximization of economic potential from mineral endowment. Each pillar should be structured such that provisions will not clash with attainment of objectives set of the other pillars. This ensures that the overall policy framework in harmony and consequently attainable.

Now the first pillar of a wholesome mineral resource strategy is a clear and robust plan on exploration. Exploration is the motor that keeps the mining industry running. It is important for a country to know what it has, what is required to develop the reserves and to continue to invest in discovering viable potential reserves.

A mineral policy should articulate how to finance exploration, the key national institutions leading the task and the steps necessary in preparing the assets for commercialization.

In many instances governments in developing countries leave this task to junior miners or private entities however, in the interests of harnessing first hand benefits of possessing geological data, governments should seriously consider taking a prominent role in driving exploration as this has strategic benefits.

In many instances some governments do not have the full picture of the mineral reserves the country has because they are held or traded by private companies. This is a poor method of managing resources, knowledge is power and leaning heavily on private equity to handle exploration is a costly mistake. It disables governments from being able to develop lucrative assets timely and in response to national needs.

The second pillar is determining the commercial strategy for developing mineral assets. This pillar includes deciding on investment and financing routes, the role of government and the contractual and commercial systems that will govern the sector.

It also includes multiple sub components which make up the overall business environment which includes but is not limited to setting up appropriate and competitive rights issue rules, fiscal rules, tax structures, marketing and sales rules.

The overall commercial environment that is created should allow all stakeholders to realize profitable and sustainable enterprises. A vibrant policy structure should create an optimal business environment that reduces risks and costs and promotes viability, stability and profitability. Some of the issues that promote those outcomes include ensuring security of rights and tenure, availability of effective and independent judicial mechanisms, robust fiscal and monetary rules, competitive and predictable tax and regulatory fees structures and ease of import and export movements.

The policy framework should also make room for the participation of different players in the industry, it should allow inclusiveness. The structures should accommodate artisanal, small and medium scale miners with sector appropriate rules and regulations.

Policy frameworks that result in closing out survival of smaller individual players end up garnering hostility, fuelling illicit mineral trade, opening avenues of money laundering, the spread of environmental degradation, violence and disenfranchisement from locals. The rules creating the commercial environment should be clear, predictable and fair.

The third pillar is the Industrialization strategy. This pillar looks at how a country intends to benefit from its mining industry outside the receipt of taxes and rents. Mineral rich developing countries should be able to fully industrialize on the backdrop of access and supply of critical primary minerals.

It is prudent for developing countries to court investors that can also establish much needed beneficiation and manufacturing industries in mineral rich countries in order to expand the scope of industry and services to host countries.

Many developing countries have made various pronouncements regarding beneficiation, however, the success of such strategies is in some instances hampered by lack of industrial and manufacturing demand of processed materials within the domestic market, lack of required skills and technological capacity within the country, inadequacy of infrastructure and energy requirements and undesirable fiscal and tax structures that threaten the viability of beneficiation.

As a result their beneficiation efforts still end up largely exports and their industrial capacity remain stunted. The correct approach to establishing beneficiation is to also create corresponding local demand for processed mineral commodities.

The vision for beneficiation should not be the mere extra dollar on exporting processed minerals but should to grow local industrial capacity and to ignite other critical drivers for economic growth.

Beneficiation and industrialization should not be superimposed on a set of ill fitting policies or for short term rewards, the growth of these indicators depend on a long term vision for sustainable growth and national development.

Good revenue management is the blood of the mining industry; the monetary return from mining feeds the entire industry engine. This includes good management of the return on investment received by project shareholders and the rents, dividends and taxes collected by Government.

While the mining system seems like it only depends heavily on outside financing it is actually a system that reinvests in itself. The development and advancement of the mining sector is reliant on mining projects being profitable and the revenues generated from these projects being ploughed back into the research, development, exploration and expansion.

Efficient mining policies firstly make sure that all the systems and mechanisms that oversee the collection, accountability, distribution and use of mining revenues are clear, functional, resourced and effective in their mandate.

If the mining sector is to make an indelible mark to economies, then governments need to be deliberate about the checks and balances they create to ensure efficient collection of taxes and rents and effectual use of the revenues collected.

What mining revenues are used for is very important. The government of Norway has perfected the art of saving the proceeds from oil projects and subsequently the Norwegian Government Pension Fund is currently worth billions which has been accrued from saved oil revenues.

The quality of life of the people of Norway is significantly better because of the way their government decided to utilize revenues generated by oil resources and this is evidenced in the stability of their national fiscus, progressive infrastructure development, food security and advanced social services structures.

While such saving statistics are not readily attainable in developing counties due to various constraints, the principle of creating mechanisms that are intentional, that account and plan for the sustainable and responsible utilization of mining revenues should be embraced.

The fore most questions on policy makers’ minds should be how to get every citizen to encounter the benefits of mining. These benefits should be attested for by present and future generations.

For developing countries mining revenues are normally pooled into the general treasury and utilized for various projects and day to day expenses but such an approach does not work especially in countries experiencing economic failure, poverty and the collapse of health and social infrastructure services.

In such cases governments should be able to separately account for mining revenues and pursue public and social service projects’ specifically headlined by mining revenues. Mining revenues should be largely utilized to finance development projects.

The rate of clashes, conflict and anti-mining sentiment between communities, citizens and mining entities in developing countries is increasing and this is partly because people cannot relate to the benefits of mineral wealth and remain disconnected to the returns of the sector.

The use of revenues brings to bear another important pillar which is technology and sustainability. Technology has taken a lead role in improving key issues in mining such as business efficiency, better mining methods, reduction of waste, improvement in health and safety and also limited environmental damage.

Remotely controlled machinery and plants are increasingly becoming part and parcel of today’s mine set-ups. Research and development is undoubtedly the spine of a sustainable mining industry. Mineral rich countries need policies that promote innovation and drive directed technological change in the industry.

It is important to utilize and create synergies between business, tertiary institutions, private businesses, research institutions and original equipment manufacturers to keep the industry resilient.

For example policies supporting artisanal and small scale miners in developing countries can tap into the accessibility of mobile money platforms as alternative banking and transactional platforms.

In a country like Zimbabwe, all the telecoms operators have strong mobile money applications such as Ecocash and Onemoney operated by Econet and Netone respectively.

These platforms have become central in Zimbabwe’s transactional and banking space and are readily accessible to anyone with a mobile. Such platforms can be enhanced and adapted to allow for artisanal miners to be able to receive and pay loans and also to receive payment for the off take of their produce.

Innovation is required to navigate today’s problems and solutions are within reach if stakeholders are willing to think outside the box.

 Information technology has also improved marketing. Producers should be able to exercise the option to tap into global markets through avenues like online mineral trading platforms.

Over the years several such platforms have emerged such as the Continental Commodity Exchange (CCEX) or Open Mineral which can be carefully integrated to help break internal commodity price monopolies and extend market reach.

Embracing technology and innovative business solutions can produce greater returns for mineral rich countries and also foster responsible mining.

Sustainability should also be a key component of the fabric of mineral policies. Minerals are non renewable and therefore the extraction and consumption of minerals should be closely managed.

Policies therefore should include provisions that promote the purposeful use of mineral revenues, engrain the use of alternative renewable energy sources, promote resource efficiency, participate in low carbon emissions drive, establish vibrant re-purposing of processed mineral commodities and move towards circular economies.

The industry has to b e resilient in an ever-changing world, address critical socio-economic issues and preserve the integrity of the environment. This aspect is closely tied to the last pillar which consists of social and environmental outcomes.

Governments need to know what they intend the mining sector to contribute in respect of social and environmental impacts. If the intention is to look towards clean energy and green economies then the regulations and policy provisions of the sector need to reflect that direction.

If the intention is to preserve environmental integrity then the weight placed on environmental compliance should be clear with corresponding mechanisms of efficiently enforcing punitive or incentive measures.

By its very nature mining is very disruptive and intrusive. Governments need to be clear about how to manage and oversee the preservation of the environment while enjoying the fruits of mining.

The same is applicable for social returns, governments should have clarity and consistency regarding the social impact they want the industry to achieve. The common mistake is to apply varying standards within the industry.

Firstly, all companies and mining participants need to give back to the community in accordance with their capacity and also strive to incorporate solutions to social ills such as discrimination and child labor in the industry.

Most developing countries emphasize social returns mostly from foreign owned entities, this approach is not correct. All mining companies need to exercise social responsibility under the same lens albeit their contribution executed in different proportions.

Secondly social returns usually lie in the grey area between statutory compliance and voluntary corporate social responsibility or company policy hence most companies individually define the extent and nature of investment in social impact issues.

It is helpful for governments to craft credit point system tied to various incentives that guide companies on how they can positively contribute in communities and societies that they operate in.

Governments should also lead the drive to improve social returns and promote balanced policies as an employer and within their business projects.

Where governments hold mining title and run operations they should set the example by improving livelihoods and undertaking sustainable and responsible habits.

Government cannot disregard its own responsibility towards its employees, communities and environment and then efficiently oversee other entities.

The pillars discussed above are by no means exhaustive of the many issues that are central to the industry, they only comprise key guidelines that can be used to assess whether mining policies are coherent and progressive in line with the creation of sustainable value for stakeholders.

The guidelines also ensure that the mining industry is resilient and relevant to addressing the issues of the day. It is important to realize that policies are only as good as there is clarity behind the objectives of government.

Therefore, the first inquiry for any mineral rich government is, what do we intend to achieve with our resources?

Once the answer to this question is clear then policies can be structured efficiently towards that common purpose.