African mining needs a vision
The expansion of mining and natural resource exploitation has been a critical factor in the highest levels of growth in Africa for more than 30 years. The resource sector’s success in attracting foreign investment has often led to it being held up as a poster child for economic liberalisation.
The wider context for this is the structural shifts in the global economy, which are centred on the rise of China as a major consumer of raw materials. But the commodity boom has also exposed the limited developmental possibilities of mining regimes across Africa, especially the ways in which fiscal regimes are biased in favour of foreign firms, giving greater power to foreign capital over African economies.
The commodity booms exposed the limited developmental possibilities of mining regimes
Not only did the mineral and oil price boom reinforce Africa’s traditional place in the international division of labour as suppliers of raw materials to industrial economies, it has also deepened Africa’s dependence on those commodity exports. The dangers that come with this – the falls in export earnings due to price crashes – have been sharply highlighted by the current economic crisis.
To date, African governments have been focused on improving the state’s share of mining revenue through law reform and the renegotiation of contracts. In the wider debate about mining and Africa’s development, improved fiscal returns are seen as the first steps to a more ambitious and longer-term agenda of diversification and structural transformation.
This agenda for structural economic change and the fightback against dependence on commodity exports is set out most comprehensively in the Africa Mining Vision (AMV). It was adopted as a policy document by the heads of state in the African Union in 2009 and was buttressed with an action plan in 2011. It envisages mining as “a key component of a diversified, vibrant and globally competitive industrialising African economy”.
The AMV also responds to criticisms from civic activists, workers and community groups about governance, rights and environmental violations. The principles of the AMV now form part of agreed regional development plans and are being integrated in national policy in Africa’s mining economies.
For these principles to work out in practice, they need national and regional policy space. However, the orientation of reforms of the Western-dominated international trade and investment regime over the past three decades has reduced the scope for independent national and regional policies. At the same time, it has expanded the range of policy issues affected by frameworks such as the World Trade Organisation, the United States African Growth and Opportunities Act, successive aid and trade arrangements with the European Union and bilateral investment treaties.
Critics of the radical liberalisation of the mining sector argue that despite generous incentives to investors, it has not generated the hoped-for revenues or jobs, and national economies have become ever more dependent on commodity exports. Mining has remained an enclave sector with weak links to wider national and regional economies.
The tripling of mineral prices between 2000 and 2011 generated unprecedented levels of profits for mining companies. Between 2003 and 2011, profits grew by an average of 20% per year. Average net profits of the biggest mining firms went up by 64% between 2005 and 2006 alone, but African governments received only a small share proportionately.
Although the AMV acknowledges the value of mineral taxes for development, it argues for a shift away from the rent-centred strategy. Instead, it sets a framework for mineral-based manufacturing and structural transformation of Africa’s mineral dependent economies and for their better integration into diversified and industrialised regional economies.
The AMV seeks to promote upstream (mining, capital goods and services), downstream (refining and manufacturing) as well as sidestream (power, communications and water) linkages. It recognises the importance of indigenous ownership of enterprises. The AMV recognises the importance of promoting local ownership of mining and related enterprises.
Cooperation among Africans needs to replace the competition that has characterised the FDI-driven mining boom, if the AMV is to become a reality. The jobs directly created by Africa’s artisanal and small-scale mining sector (ASM) are several times those created by large foreign-owned mines. One of the concerns of the AMV is to bring ASM from the margins to the centre of national and regional mining policies so as to optimise its economic and social contribution, whilst addressing the many environmental and health issues associated with the sector.
Those who question the prospects of the Africa Mining Vision have a point. The road to the AU Summit that adopted it is littered with the faded pages of plans and resolutions on the continent’s development that died soon after the ringing speeches marking their birth.
The economic problems caused by the current downturn in demand for and price of minerals, however, underline the AMV’s logic. Across Africa, governments are seeking short-term responses to these structural-cyclical problems. However, citizens’ demand for the types of polices set out in the AMV predate the conversion of their governments to reforms during the boom years and may prove the force that saves the AMV’s agenda from the junk pile of history. ●