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Africa Renewal (United Nations)

Africa: Mining Profit for People

Mary Kimani

29 April 2009

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(Page 2 of 2)

Burkina Faso's former Minister of Economy and Finance Jean-Baptiste Compaoré agrees. But he adds that countries such as his are taking steps to avoid such pitfalls. Burkina Faso has recently joined the Extractive Industries Transparency Initiative (EITI). Launched in 2002 by the UK prime minister, the initiative requires members to publish all data on revenues from mining and oil operations. By joining the EITI, Mr. Compaoré said in June 2008, "Burkina Faso has undertaken to ensure transparency in the exploitation of its mineral resources and the use of resources arising from them." This, he hopes, will "maximize the positive development of the mining sector on growth and the fight against poverty."

In theory, publishing all data on mining revenues and on what mining companies pay to governments should make it possible for citizens and development experts to track how much of the wealth is being used to help reduce poverty. This, it is hoped, will encourage transparency and accountability on the part of governments and mining companies. Sixteen African countries, including Burkina Faso, Ghana, Liberia, Guinea and Sierra Leone have joined the initiative.

Mining after war

Transparency is especially difficult in countries coming out of war. Civil society activists often cite the mining industry in the Democratic Republic of the Congo. In March 2007 a coalition of more than 100 international and local Congolese non-governmental organizations (NGOs) demanded that the government "renegotiate, revoke, or cancel" disadvantageous mining contracts that had been signed during the war or under the transitional government that was in power from 2002 to 2006. The NGOs claimed that three of the largest contracts approved by the transitional government had "collectively signed away over 70 per cent of the government's most valuable copper and cobalt reserves to international companies." None were negotiated in a transparent manner, the NGOs assert.

A month later the new government - which came out of the first democratic elections at the end of 2006 - set up an inter-ministerial commission to examine more than 60 mining contracts. It finished its work in October 2007, but did not published the results until March 2008, after concerted lobbying by the NGOs. The commission's report recommended that all the reviewed contracts be renegotiated to increase the government's stake in the mines - and thus the state's share of earnings.

But environmental degradation, compensation for people affected by mining operations, and post-mine recovery concerns were not addressed. NGOs also protested the fact that a task force set up to oversee implementation was staffed entirely by government officials. Given the history of corruption and lack of transparency in the Congo's mining sector, the NGOs argued that the task force should have included independent and international legal experts, as well as members of civil society.

'Sanitize the industry'

Since civil war ended in Sierra Leone in January 2002, various governments have sought to start operations on the country's first industrial-scale gold mine and increase investment in bauxite and iron ore. But disputes over multiple licences granted by various authorities during the conflict and after have hampered the process. "We ... need to sanitize the whole industry," President Ernest Bai Koroma, who was elected in 2007, told reporters. "We hope to lay to rest all of the difficulties we have in this mining sector and open it up, because it has a huge potential."

In neighboring Liberia the government has just completed a review of major mining contracts, including one with the iron-mining company Arcelor Mittal of India. The revised contract removed clauses exempting the company from Liberian environmental and human rights law, removed certain tax holidays and enforced compensation and property rights for people living in areas affected by the mines.

Patrick Alley, director of Global Witness, an NGO that campaigns for better mining contracts, says that such reviews are vital. "Predatory and unfair investments in natural resources in developing countries, especially post-conflict countries, set back development," he says. "It is good that the Liberian government brought Mittal back to the negotiating table, and good that Mittal renegotiated the contract. In countries coming out of wars that were fuelled by natural resources, [bad] deals like this are playing with fire."

Promoting development

African countries have been through cycles of high and low metal and oil prices before. Previously, bad contracts, mismanagement, corruption and poor investment of windfall revenues continued to leave populations poor and economies undiversified even after bountiful times. Turning this situation around, experts say, will require greater transparency, improved planning for the use of revenues and better partnerships among companies, governments and communities.

In Burkina Faso, gold-mining companies such as Cluff Mining of the UK, the Australian conglomerate Metal Mass and the Canadian-owned Société d'exploitation minière d'Afrique de l'Ouest (Semafo) are already actively involved in helping the country better channel revenues from natural resources to local populations.

Elie Ouédraogo, the national director of Semafo, told local media that his company recognizes that a mine is a finite resource. "We must think about the post-mine phase," he said. "We must act to ensure that people living close to the mine, do not face desolation.... We will certainly give the fish to local people, but we will also teach them how to fish," he said, recalling a popular proverb. To meet this goal, Semafo is working with the UN Development Programme (UNDP), NGOs and local communities to put together a sustainable development plan. Near its Mana gold mine, in the western part of the country, it is also building two villages of 425 houses, with meeting rooms for youth people and women, places of worship, schools, wells and roads.

Such cases give reason for optimism that Africa will come out of the current price decline much stronger than it did in previous cycles. "Resource-rich countries have been using their windfall profits to scale up outlays on infrastructure and social services, and they've also been saving a lot more than in previous episodes," says Abdoulaye Bio-Tchane, president of the West Africa Development Bank and a former director of the International Monetary Fund's Africa department. "In contrast to earlier commodity booms, this time around Africa has been coping remarkably well."

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