By Andrew Lanham, Editor, Mining Review Africa
While countries such as China and India come seeking after Africa’s minerals, there has also been a shift in the attitude of many African governments to the mining industries of their countries.
On December 18 last year, at the 2nd African Union Conference on a Sustainable Future for Africa’s Extractive Industry, a number of African Union Ministers adopted a declaration of intent to put the African Mining Vision into practice.
I have read through the document, which, I must say, has worthy intent. At its core, it seeks to answer the question that many African countries have asked over the decades. ‘How do we get the most out of our mineral wealth?’
Over the decades, on the African continent, there have been many ‘hit and run’ mining operations by foreign mining companies. The type of mining company that found an orebody, set up a mine, mined and sold the minerals and then packed up and moved on, leaving little more than a scar on the landscape.
My own hometown was just such an instance. A US-based company established the mining operation in the region in the late 1930s. A mine was developed and a town established to serve it. And this mining community flourished from after the end of World War II until the mid 1970s. At that time, the copper price crashed and the mine had to retrench large numbers of its staff.
In the good times, the mine made generous (some say overly generous) profits for the group that owned it. And yet, when the group sold off this operation after 30 good years, it left behind a large settled population who now called this little mining town home.
An old timer who had worked on the mine said to me rather bitterly at the time: “They could have at least funded and built a local training college out of the profits.” But the owners have left behind little more than a worn-out mine and a town where many were unemployed. Those employees of the mine who had some money and useful skills moved on. However, the rank and file employees, who possessed neither of these attributes stayed behind and made the best of being unemployed.
The other aspect of foreign companies mining in Africa is that in the past they have left behind an environmental disaster. I hasten to add that blame for this type of callous action could also be laid at the door of many local companies too.
One only has to think of some of the abandoned now owner-less coal mines in South Africa, acidic drainage decanting from their workings into local water sources.
So the question is how to use the value residing in an orebody so that it makes profits for those who mine it, and that a reasonable measure of the profits are ploughed back into some sort of investment that will uplift the local community or region in the longer term.
Mining companies put forward the reasonable argument that during the life of a mine, they pay taxes to the government. In many cases, these taxes on minerals are very high.
However, where mining companies are making returns on investment that exceed the need to make a profit by colossal margins, then there needs to be some equitable way of sharing these profits for the long term economic benefit of the host country. Is the ‘winner takes all’ way of doing business really an appropriate and concerned business model in this day and age? Can we afford to go on mining, with scant regard for the future?
At the same time, governments of African countries need to realise that many mining operations are not fountains of unburgeoned wealth. Mines ultimately rely on the investment put into them by individuals – the banks and other financial institutions, in the final analysis, derive the wherewithal to invest from the pockets of individuals.
So where there is talk of nationalizing mines on the continent, those who speak of this type of folly need to realise that there very utterances are putting the future of the host countries in jeopardy. It has been shown that the wealth derived from nationalization of any business is ephemeral and usually ends up in the pockets of the unscrupulous.
And by taking away what is the property of private individuals, those who would nationalize any business are tampering with the basic fabric of society. The result will be the wholesale flight of investment to other countries, which offer more assurance of financial stability. And as the head of one of our mining corporates recently pointed out, with the scenario of little foreign investment and dwindling local business, our skilled people will emigrate to where the work is. In a perpetuating cycle, this will leave the country concerned increasingly impoverished and less able to pull itself out of the mire of poverty.