IN THE STOPE
is killing investment in exploration, development and mining.
It is therefore killing the future of their resources. South Africa
illustrates this phenomenon, with policies that are clearly
too restrictive, have led to disinvestment, do not promote
exploration, but remain rooted in politics.
Are there countries in Africa that ‘get it right’?
Mauritania is a jurisdiction not many people talk about. I’m not
saying Mauritania is a perfect example, but they’ve had the
same mining regime in place for a very long time, which has
allowed them to extract iron ore on a continuous basis for many
decades through a stable state owned company which has
foreign shareholding and management contracts. They have a
royalty system in place.
Now, what Mauritania has not done well is going beyond this
foundation to seek to diversify the economy. There have been
half-hearted attempts, including creating special economic
zones – on which I worked about a decade ago.
So, from a narrow view, the system works in that it is
stable and has allowed mining, production and
revenue generation eff ectively. They got it
half-right.
Botswana and Namibia also do it
half-right. But I struggle to fi nd
jurisdictions in Africa that are doing
it all right.
What would doing it ‘all right’
look like?
Once this has been accepted, doing it right means creating
the right governance to manage the resource in order to: one,
ensure that it is developed and exploited in a sustainable
fashion from geological, social, economic and environmental
standpoints; two, develop a governance framework that
stabilises the boom-bust cycle and limits Dutch disease by
hoarding a part of revenues in stabilisation funds and in policies
that sustain diversifi cation; three, seek over time to limit the
share of the sector to no more than 15% of the economy at
the best of times through the active growth of the non-mining
productive sector (and not borrowing and consumption…).
So, the philosophy at play here would be
acknowledging the strengths and limitations
of mining-based growth, and actively
managing it over a long-term strategy
– no less than 20 years. To enable
this, governments need to
comprehensively understand the
mineral potential underground
in order to conduct economic
simulation of the lower and
higher bands of potential
reserves/resources. They must
own this information, and
then share it with the public
and potential investors. They
also need to introduce open,
"I’m not saying
Mauritania is a perfect
example, but they’ve had the
same mining regime in place
for a very long time
We need to start with the
fundamentals of mineral
economics. Evidence clearly shows
that under no sustainable arrangements do mineral resources
generate the kind of wealth that oil resources create. Not in
terms relative to the size of an economy (like share of GDP, or
mineral rents) but in absolute terms. Mining, unlike oil, has not,
cannot and will not in any country and at any time of the past or
the future be the engine of growth and development. Doing it
right must begin with this acknowledgement.
The DRC is a potential mining giant, but policy uncertainly, political instability and corruption has rendered most parts of the country inaccessible.
www. africanmining.co.za
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African Mining
African Mining November 2019
59