GROWTH AND DIVERSIFICATION
IN MINERAL ECONOMIES

Regional workshop for mineral economies in Africa
Cape Town, South Africa, 7 to 9 November 2000

 Background | Programme | Documents | Summary

Summary of workshop discussions
(French text)

The following summary of comments and proposals by participants has been prepared by the UNCTAD secretariat on the basis of notes taken during the discussions. Where possible, ideas that received wide support from participants have been identified. The summary is intended to assist UNCTAD and participants during the follow-up to the workshop, particularly in identifying areas for future work and cooperation.

Theme 1: Attracting and retaining investment in the mining sector 

Legal and institutional framework

 1. There is a need for African governments to establish simple and transparent legal and regulatory frameworks that clearly define the respective roles of the Government and the private sector. Elements of such frameworks include:

• The establishment of counterpart agencies (“single window”) to deal with mining investors;

•      Enacting investment codes that take into account the specific characteristics of the mining sector, such as long lead times, the particular configuration of risks and the need for security of tenure;

•      The development of active regional co-operation with a view to harmonizing policies and capitalizing on synergies.  

Mining taxation 

 2. It is important to pursue mining taxation policies that serve to attract and retain investment. To this end, African countries need to:

•       Design simple and unique mining sector fiscal regimes, which should be both stable and predictable over time;

•       Insure that investing companies are able to recover survey/exploration funds during the mining phase;

•       Ensure that governments receive at least some revenue over the entire life of mining projects, for instance, through royalties, while also ensuring that the distribution of tax payments over time meets the requirements of investors;

•       Establish means for systematic auditing of mining companies accounts to insure accuracy of information provided for taxation purposes;

•       Make sure that fiscal incentives provided to mining investors also take into account the requirement for a balanced central government budget. 

Investment promotion and information

 3. It was widely recognized that access to geological information is a cornerstone of any mining investment promotion campaign.  There is an urgent need to repatriate geological data retained outside Africa by the administrations of former colonial powers, research institutions or mining companies which have surveyed all or parts of the territories of African countries in the past.  In this regard, African governments should call upon the good will of industrial nations to facilitate the transfer and appropriation of data from airborne surveys and other remote sensing geological data as part of any development assistance package to Least Developed Countries. Practical measures to promote investment should include:

• The dissemination of country mineral inventories and information about mining legal frameworks through active participation in international investment fora and trade shows;
• Attracting interest from multilateral donors by demonstrating geological potential and submitting concrete project proposals;
• Promoting a positive image of African countries’ business environments;
• Taking advantage of financing instruments offered by international financial markets;
• The Third LDCs Conference 2001 should provide for adequate financial and technical assistance to allow the LDCs to strengthen their national geological survey organizations and networking among them, and provide them with the means to make the results of airborne surveys and other remote sensing geological data accessible to all potential investors.

  Theme 2: Mining as an engine of growth and the management of mineral revenue

 Macroeconomic considerations, governance, trade and industrial policy

 4. It was noted that macroeconomic management poses particular problems in mineral dependent countries, but that some countries, including Botswana, Chile and Papua New Guinea, had managed these problems successfully. The following courses of action were discussed and recognized as useful:

·        Mineral resources should be used to promote growth and development for the whole economy;

·        The establishment of a dialogue between the government, the parliament and civil society on the management and investment of revenues;

• Legal and institutional mechanisms to prevent corruption should be established;

·        Countries should conduct active monetary policies to avoid the effects of a rapidly appreciating exchanged rate on non-mining sectors;

·        Countries could negotiate with the donor community the conversion of debt into an Economic Diversification Fund;

·        Funds could be established whereby mineral revenues would be invested on international financial markets in boom periods to generate income to be used in bust periods;

·        A portion of mineral revenues could be used to develop the private sector through a credit scheme to small and medium sized industries;

·        Capital should be allocated efficiently through the market to the projects showing the highest expected return;

·        In order to overcome barriers to vertical diversification, African countries should use the WTO forum to negotiate effective policing of anti-dumping measures which developed countries tend to use to discourage imports of value added products and to deter the use of non-tariff measures (the case of Gabon’s wood exports which will have to be certified as to the type of forests exploited was mentioned as an example);

·        Advantage should be taken of existing financing mechanisms such as the one offered by the Common Fund for Commodities (CFC), to obtain funding for example for R&D projects aimed at improvement of productivity and quality;

·        Labour-intensive mining activities should be encouraged;

·        Cost-reduction measures such as energy saving technologies in furnace processes should be explored;

·        Countries should exploit the advantage provided by their low cost energy to develop competitive products;

·        Innovative technologies adapted to small-scale miners such as gold extraction without mercury should be disseminated and widely utilized.

Mineral revenues management and decentralization

 5. The distribution of regulatory authority and of mineral revenues between different levels of government and between regions is an important problem for mineral economies. There was broad agreement that the following ideas were worth pursuing:

• Negotiate with mining companies royalties to be paid to local communities as a contribution to their development and mitigation of any damage to their environment;
• Follow the national budget unity principle to insure equitable allocation of resources among regions according to their respective development priorities;
• Try to achieve a balance as regards both spatial revenue distribution among regions and temporal distribution between generations through investment and savings;
• Recognize the importance of the role of the national government in insuring the provision of basic socio-economic infrastructure while agreed revenue quotas at different levels of decentralized government should help local communities to mitigate negative effects of mining activities on their livelihoods.

Theme 3: Diversification and development in local regions dependent on mining

Role of the Government in regional diversification

6. With regards to the role of the national Government, participants underlined its two components, regulation and development. The Government should take the leadership role in long term planning, including setting general policy directions, and provide for the legal framework.  It should also provide basic infrastructure, including roads, geological mapping, and telecommunications facilities. The experiences of several countries with respect to government initiatives to promote regional diversification were discussed:

·        In Mali, indicative agreements are signed with mining companies at the outset, encouraging sub-contracting with local suppliers to increase linkages and develop skills;

·        In Tanzania, a five-year tax exemption on imported goods is given to mining companies; such a scheme should, however, be devised so as not to crowd out domestically produced goods; 

·        In Congo Democratic Republic, state ownership by GECAMINES gave way to joint-ventures with overseas companies through divestiture thereby increasing management efficiency and linkages to the local economy;

·        In South Africa, the construction of a railroad from the north helped turn that region into the world's largest manganese producing region;

·        At the international level, regional co-operation can be a good catalyst for the development of cross-border deposits; the construction of the Maputo corridor is an illustrative case.  

7. Different types of actions that could be taken to promote diversification included:

·        In cases of mine closures or downsizing, a social plan should be established to retrain mine workers; this type of training should include developing professional and entrepreneurial skills among mine workers to facilitate their eventual movement into other sectors;

·        Vertical integration by downstream processing should be promoted so as to increase the value added retained in the country. The success of Morocco in this area was the result of sustained investment in engineering education which facilitated gradual mastering of the technologies required for processing phosphates into phosphoric acid;

·        Para-mining or non-mining activities should be developed to broaden opportunities for mining dependent regions; one example from Morocco was noted, where a 70 year-old coal mine’s washeries are to be re-exploited through sub-contracting to former mine workers upon the mine’s closure in 2002;

·        Support should be given to the development of cluster activities requiring skills similar to the ones developed in the mining sector;

·        Mineral revenues should be used to support the creation of small and medium sized enterprises both in mining and in other sectors of the economy.

Regional development stakeholders: Government, Companies, NGOs and local communities

8. Programmes based on a multi-stakeholder approach provide a good framework for coping with problems stemming from downsizing, mine closures, unemployment and poor public health in mining regions and in surrounding areas that supply labour to the mines. Such programmes should aim at fostering cooperation between the government, mining companies, NGOs and local communities in the design and implementation of an agreed socio-economic development plan aiming at transformation of the regions concerned from mineral-dependent local economies to communities with broad-based sustainable economic development. NGOs have a crucial role to play in this process, since they provide an interface between the public sector, the private sector and communities. In this context, the following South African experiences were particularly noted:

·        The development of small scale economic activities such as food production clusters (vegetables and fruits growing/processing, lobsters farming for export) by NGOs working together with local communities;

·        Government provision of funding for an anchor project in a mining dependent region around which local initiatives can flourish;

·        Partnerships with communities managed by stakeholders' steering committees;

·        Facilitation of community participation through cooperation between small scale miners and large mining companies in the area of training, financing and sub-contracting;

·        The existence of a monitoring and evaluation system for diversification related activities, used by the Government and the mining companies; in this regard, a geographical information system (GIS) is used by mining companies to locate mine workers' across the country after closure or downsizing to guide follow-up programmes;

·        Encouraging mining companies to improve their public image through worthwhile development initiatives.

9. It was noted that mining companies have taken several successful initiatives for local development projects in a number of countries. These include social programmes with communities in the areas of education and health. There were also instances of companies providing consultancy services for the implementation of an agreed regional development programme.

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