Transcript Securing the Transformational Potential of Africa`s

Securing the Transformational Potential
of Africa’s Mineral Resources
Jamal Saghir
Director
Sustainable Development
Africa Region
World Bank
Cape Town
February 4, 2013
1
The continent’s under developed mineral riches
Mining output by value USD386bn in 2009
Africa’s share of mining output is less
than 10%, including South Africa
… but its share of proven mineral
reserves is higher
South
Africa
… and average investment in discovering
minerals is just 1/5th of the OECD average
Source: Raw Materials Group, Stockholm 2011
Country
Global mining investment was USD980bn
from 2000-11 (RMG)
Africa’s share of that may have been no
more than 5% but is on a rising trend
(15% recently according to RMG)
Projected investment is
quadruple that of the last decade
Burkina Faso
Primary
Mineral
Gold
Investment,
2000-2011
1
Forecast Investment,
2012-17
0.5-1.5
GDP, 2010
DRC
Ghana
Guinea
Liberia
Mauritania
Mozambique
Copper
Gold
Iron Ore
Iron Ore
Iron Ore
Coal
3.1-4.1
7-8
4-5
3-4
2-3
6.1
9-14
1-1.5
12-20
9-12
3-5
11.6
13.1
31.3
4.5
1.0
3.6
9.6
Namibia
Niger
Sierra Leone
Tanzania
Zambia
Total
Uranium
Uranium
Iron Ore
Gold
Copper
4
0.25-0.5
1-2
3
3-3.5
37.4-44.1
3.5
1.5
4-5
4-6
4-6
63.1-87.6
12.2
5.5
1.9
23.1
16.2
132.8
8.8
Source: McMahon, World Bank (forthcoming)
2
Three reasons why mineral investments will continue to grow in Africa
 Fundamentals based on increasing resource intensity of global growth,
marked by industrial development in emerging economies, are likely to
Gold Base Other
Metal support high commodity prices over the longer run. This is a thesis
supported by McKinsey1 and Chatham House2.
 Africa’s mineral endowment, coupled with exhaustion, scarcity and barriers
to access elsewhere, has already attracted intense competition for Africa’s
resources, involving both traditional multi-nationals and newcomers from
the emerging economies.
 The increasingly stable and open economies of Africa are more conducive
to investment flows, even though there have been cross-currents
generated by more assertiveness by governments on issues of rent sharing
and ownership and infrastructure challenges remain immense.
1 McKinsey Global Institute, Resource Revolution: Meeting the world’s energy, materials, food and water needs, November 2011
2 Chatham House, Resources Futures, December 2012
3
The continent’s mineral dependency
Minerals (excl. oil & gas) 2010
> 50% of exports
> 20% of exports
emerging
4
Tremendous opportunity for mineral-driven transformation on this continent
 Revenue mobilization through mineral rents can displace aid dependence and
leverage commercial finance. Data from IMF reports indicates that on average
mineral rent collection in mineral dependent economies amounts to 5% of GDP (with
considerable variation) and is on a rising trend.
 Africa needs USD93 billion per year in infrastructure3. Mineral rents can support
public capital programs and mining projects can serve as anchors for road, rail, port,
water, power and telecoms investment. This morning’s session will focus on how
joint solutions can be found by mining investors and governments.
 The scale of annual spending implied by mining investment offers opportunities for
development of local supply chains, thereby increasing income and job multipliers
 Where economies of scale, transportation savings and power reliability allow, new
downstream value addition opportunities will increase
 These kinds of linkages with wider economic development must be capitalized
upon. This means a clean break with the old model of enclave mining development.
3 Africa Energy Strategy 2011, World Bank
Evidence of positive human development outcomes
Resource economies have fared better
than non-resource economies in
terms of human development
Mineral economies have fared better
than oil rich economies in terms
of human development
Annual GDP and HDI Growth Rates 2000-2010
12
12
Average annual HDI Growth Rate
SSA 2000 - 2010
1.5
1
0.5
Angola
Mineral rich
Oil rich
10
GDP Growth %
5
Sierra Leone
Chad
Mozambique
8
Sudan
6
Ghana
Nigeria
Tanzania
Mali
Botswana
Zambia
Mauritania
Namibia
4
Burkina Faso
DRC
Cameroon
2
0
Gabon
00
0
0.5
1
H D I 1.5G r o w t2h %
2.5
3
3.5
3.5
6
Better governance platform for mineral resource development
 Sunday’s program was devoted to the governance dimension of mineral resources development
– evidence shows that poor governance is more likely to inhibit beneficial use of mineral
resources
 Sunday’s AUC keynote and the presentation on the role of the Africa Peer Review Mechanism
sounded a note of optimism on governance trends, while recognizing governance risks that have
to be managed
 Participation in global good governance initiatives is growing on the continent – several
governments have joined the Open Government Partnership and there is a large block of EITI
implementers and several are moving beyond EITI
 There is a proliferation of good practice guidance:
Natural
Resources
r
Charter
WEF
Responsible Mineral
Development
Initiative
ICMM
Mining Partnerships
for Development
Toolkit
 Sessions yesterday focused on:
o moves towards greater disclosure of mineral right holding and contracts
o wider adoption of budget tracking tools
 It remains the case that mineral resources are still coveted by rent-seekers, rebels and criminals,
policy-making and regulatory institutions are often weak and access to the benefits of minerals is
highly uneven in many countries
7
Better deals that are better managed for more development impact
Fair contracts
Responsible conduct of mining
The benefits of mineral Even the benefits of fair contracts
resources will remain
can be undone if mining is allowed
elusive if governments to be conducted irresponsibly
and mining companies
strike deals that are
one-sided and narrowly
focused
Optimal use of resource wealth
Ultimately responsibility falls on the
Government to ensure that citizens are
better off because of minerals are
harnessed for sustainable development
8
Fair contracts
 Better knowledge of the mineral endowment to underpin policy choices and
enhance government’s bargaining position
o Bank TA on geo-data acquisition, interpretation and dissemination (Uganda, Malawi)
o African Mineral Geoscience Initiative (meeting this PM)
 Open and competitive allocation of mineral rights to obtain best terms from the
most qualified investors
o Bank TA on rules based mineral rights management (Madagascar, Mozambique)
o Advice on design and conduct of mineral deposit tenders (Liberia)
 Fair and predictable sharing of mineral rent to maximize long-term benefits
o Bank TA on mining fiscal regime and model mining agreements (Mozambique)
o Negotiations support (Sierra Leone)
 Strong government policy making and negotiating capacity
o EI Sourcebook; Training; South-South exchanges
 Eliminating opacity and rent seeking that leads to unfair contracts
o GEI work on contracts database / how to interpret contracts
9
Responsible conduct of mining
 Good corporate governance and ethics
o Enhanced home country disclosure requirements (Dodd-Frank; EU Directive)
o IFC Performance Standards for investees
 Social contract with the host community
o Emerging best practice on CSR and community development agreements (Bank guidance
on CDAs, IFC’s CommDev)
o Community engagement support (incl. gender)
 Preserving environmental, social and cultural assets
o Strategic Environmental and Social Assessments of mining development and resettlement
frameworks now mainstreamed into mining technical assistance;
o New Africa Trust Fund to enhance local sustainability and address impacts on conflict and
communities of mining
 Effective monitoring and enforcement
o Capacity building for government regulators (12 Bank TA projects in Africa under
implementation worth over USD600mn)
o Strengthening mineral tax administration (How to Guide for administrators based on West
Africa pilot)
o Enhancing community-based monitoring (under WBI’s GEI)
10
Optimal use of mineral resources
 Macro-fiscal prudence; managing volatility and Dutch Disease
o Guidance note on prudent macro-fiscal policies in resource rich countries (forthcoming)
o New Sovereign Wealth Fund community of practice
 Using mineral rents to create manufactured and human capital
o Enhancing public investment management; procurement reform (highlighted on Sunday)
 Using mineral rents to distribute wealth (spatially/future generations)
o Sub-national transfers; citizen rent distributions; social safety nets; savings/trusts for
future generations
 Fostering economic linkages between mining and the wider economy
o Shared infrastructure (IFC study on transport infra under Africa Special Initiative; Bank –
Vale Center study on mining & energy)
o Resource corridors & growth pole diagnostics – focus of today’s first session
o Supply chain development – planned West Africa regional local content project; Zambia
Local Content Initiative
o Mining skills development – focus of one of today’s session – Africa Centers of Excellence
Project; scope for PPPs in educational provision
 Outcome
A vibrant post-mining economy
11
An integrated approach at work with partners: Mozambique
 Fair contracts:
o Legal support for mining negotiations and gas (LNG) negotiations financed
by a global multi donor trust fund (EI-TAF)
o Front end support to improve mining sector policy framework financed by
an AusAid grant to the Bank
o Functional management review of institutional arrangements for mining
and gas financed by a DfID grant to the Bank
o Preparation of a Gas Master Plan including downstream potential financed
by AAPF and Norwegian TF (PGI)
 Responsible mining:
o 6yr regulatory capacity building project for both mining and gas going to
Board in April 2013 financed by $50mn IDA loan + $10mn DFID co-financing
o Revenue transparency – support to EITI implementation and CSO
engagement financed by global MDTF
o Demand side governance work financed by Governance Partnership Facility
 Optimal use of mineral resources:
o Fiscal policy and revenue management financed under Budget Support
o Rail and port infrastructure study on mining infrastructure feeding into
proposed Spatial Development project
o Support development of mine supply chain linkages (proposed under new
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Scaling up the World Bank’s commitment
World Bank Group Africa Strategy
Emerging themes for Africa are Energy, Skills/Education,
Agriculture/Dry Lands, Social Protection, Women’s Economic
Empowerment, and Natural Resource Management
Extractive Industries Practice for Africa
• New Extractive Industries Practice to focus on knowledge and
partnerships in Africa:
• Draw on global knowledge programs in the World Bank like
Extractives for Development (E4D), Governance for Extractive
Industries (GEI), EI Task Group and communities of practice on
topics such as SWFs, PPPs and SESAs
• Identify joint solutions using analytics, advisory services,
technical assistance and capacity building
• Explore potential partnerships with other donors’ mining
development programs: Australia’s M4D; Canada’s CIIEID,
Germany’s GeRi; UNDP’s EI for HD, OECDs Policy Dialogue, etc.
• Seek possible partnerships with institutions in Africa
• AMDC under the inter-governmental Africa Mining
Vision
• with think tanks and academia (e.g ACET, SAIIA)
• Collaborate with industry groups: ICMM, World Gold Council
and multi-stakeholder alliances: WEF, EITI Secretariat
Take Away Messages
•
Africa is the under explored continent but a growing destination for mineral investment
•
While previous scrambles for Africa’s natural resources conjure up images of plunder and
squandered opportunity, the past should not be a predictor of the future
•
This time the chances of better development outcomes are greater – this depends on fairer
contracts, responsible conduct of mining and wise stewardship of mineral wealth by the
government
•
The Africa Mining Vision offers a roadmap for mining to be better integrated into socioeconomic development setting a foundation for sustained growth after minerals are
exhausted
•
The World Bank Group’s Africa Strategy is aligned with this vision and together with other
partners the WBG will deploy its fund of knowledge, advisory services, technical assistance,
development policy lending, investments and guarantees to secure Africa’s transformation
through minerals
Thank You