The Power of Mining to Transform Development in Africa
Anita Marangoly George, Senior Director of the World Bank Group’s Global Practice on Energy and Extractive IndustriesInvesting in African Mining IndabaCape Town, South Africa
Good afternoon and thank you for this opportunity to address you today.First, let me say what a pleasure it has been to attend my first African Mining Indaba. It has provided rich ground on which to renew old friendships, make new ones, and to learn from the vast array of viewpoints represented here.
I have talked at length with many Ministers, with mining company CEOs, with civil society representatives, and with the many partners working – as we do – to help overcome the development challenges that Africa continues to face.
From these conversations, a similar theme has been emerging. That is: the need for much more genuine and lasting partnerships between mining companies and the countries in Africa that host them. Governments rightly expect the industry to be a reliable partner for sustainable development for their people and economies. Beyond the profit motive, mining companies are looking for stability, security and certainty. Getting these two agendas to add up to stronger economies based on sustainable growth over the long-term is what we should all be working for – no matter which perspective we bring.
As Former Prime Minister Tony Blair said here yesterday, countries want and deserve more than just deals. They want to move away from a relationship based on transactions to one based on collaboration. From my perspective, that collaboration must lead to opportunities for people to get a good education and jobs; for women to have equal access to the benefits that flow from mining revenues; and for society as a whole to grow and develop in a healthy, safe environment.
About eight months ago, when the World Bank Group President – Dr Jim Yong Kim – asked me to become the new Senior Director of our Energy and Extractives Global Practice, I could see the potential for synergy.
Combining the forces of our teams working to end energy poverty with those working to improve outcomes for countries with large extractive industries, made a lot of sense to me. Strong energy sectors and sustainable extractives sectors have similar underpinnings: good governance; open and accountable institutions; sound practices; clear policies…
At the same time, the development implications of the two sectors are enormous. A reliable energy supply is essential for countries to move people out of poverty and toward shared prosperity. And a well-managed extractives sector can deliver huge economic and social benefits that further enhance development.
Nothing motivates me more than the fact that if we continue with business as usual, by 2030 more than 650 million people in Africa will be living without energy – and this on a continent blessed with abundant energy potential and enviable growth rates.
Power of the Mine
On Monday, here at Indaba, we launched a groundbreaking study entitled “The Power of the Mine” that, for me, showed the synergy between energy and extractives in action.
The report highlights the potential for connecting mining’s demand for power in Africa with the opportunity to bring affordable, reliable energy to the one third of Africans still living without electricity.
Over the last 15 years, mines in Africa have spent more than $15 billion to cover their own electricity investment and operating costs and have installed close to 1600 megawatts of generating capacity. None of this power made it onto a national grid.
Rather than supplying their own energy on site, we say that mines can become anchor customers for electricity utilities or other private power producers which can then grow to bring low-cost power to the wider community.
Power-mining integration can be a good deal for everyone. For mining companies, it means lower cost energy and improved competitiveness. For governments and utilities, it means more consistent revenues to help with energy expansion plans. And most importantly of all, for communities across Africa, it means a better, more reliable power supply.
We recognize that in this new and relatively unchartered area obstacles exist – prominent among them a lack of transmission links, and the sometimes fragile commercial viability of electricity utilities. But these are not insurmountable challenges and we have plenty of examples of countries which have overcome them.
At a time of much lower commodity prices, the mining industry may argue that this is not a further risk worth taking. I would argue that the volatility of commodity prices only strengthens the case for mines to combine forces and partner with national utilities to plan for their long-term energy needs. This is especially so when – as we heard on Monday from a mining CEO on our panel – energy costs can be as high as 30 percent for some mining operations.
To be successful, power-mining integration needs the commitment and collaboration of governments, power utilities and mining companies. For our part, the World Bank Group can help bring everyone to the table, generate a dialogue, share knowledge, and where it makes sense, provide tailored financial and risk management instruments. We think this synergy could help turn Africa’s energy challenges around.
Governance and Transparency
Of course, as the potential of the mining industry grows in Africa, so does the need for improved governance of the extractives sector. We work in 35 countries across Africa advising governments on everything from rules of disclosure of payments to policies for managing the granting of mining licenses fairly and transparently.
We are working with governments on mining governance programs in the Democratic Republic of Congo, Malawi, Tanzania, Guinea, Mozambique, Cameroon and Sierra Leone.
We also work across Africa to strengthen transparency in extractive industries through implementation of the Extractive Industries Transparency Initiative (EITI). That translates into action on the ground in countries like DRC and Guinea, where we are working with the government to develop efficient and transparent frameworks for managing mineral rights.
All of this work delivers results. In Tanzania, for example, strengthening mineral governance has led to more efficient government oversight and improved geological knowledge that in turn brings further investment to the country. The reforms have helped transform extractives revenues in Tanzania which have quadrupled since 2009.
Helping the Poorest
While improved governance of extractives is critical at the macro-level, partnering to improve the livelihood and working conditions of small-scale miners can have a multiplier effect – both for small and large-scale mines.
Recently, we began an innovative pilot project in Tanzania to help small-scale miners work with large mining companies to learn and develop healthy and safe practices. This Multi-Stakeholder Partnership Initiative involves the Government of Tanzania, the World Bank Group, AngloGold Ashanti, Acacia Mining and small-scale miners of the Geita region.
Large-scale mines are donating the time of technical employees to assist the small-scale miners in the areas of mining, geology, health and safety issues. With small-scale mining employing over 1 million people in Tanzania, this partnership has huge potential to impact the lives of some of the poorest people in the country.
We are also working to improve outcomes for local suppliers to large mines. In Guinea for example, the IFC and Rio Tinto are working on a local supplier development project that strengthens the technical, management, and health and safety skills of small businesses so that they can become suppliers to the Simandou mine project.
Now, over 60 small businesses are reporting improved performance, with better incomes. More than 130 stable jobs have been created. These are the kinds of results that make benefit-sharing a reality at the local level.
Investment and Capacity Building
Unlocking the potential of mining in Africa means investing in local capacity so that a flourishing mining industry can be led by local professionals.
Capacity of government negotiators to develop fair and transparent mining agreements is an essential part of a genuine collaboration. That’s why we recently brought over 70 government mining negotiators from around Africa to regional workshops with the world´s leading mineral law experts.
Sustainability and Gender
But fair contract negotiation is just the first step, then comes the challenge of ensuring mining projects are environmentally sustainable as well as socially inclusive.
Women in particular often miss out on the potential benefits of the extractive industries and bear an unequal share of its burdens. Formal unemployment rates for women in mining communities can be as high as 90 percent in some countries. Without a focus on gender, employment and incomes are largely captured by men. Women will also be exposed to risks from loss of productive agricultural land, marginalization and an increase in health risks, including HIV.
That’s why we work with governments to develop strategic Environmental and Social Assessments. We need to anticipate the impacts of mining and encourage better policies and regulatory arrangements that protect people and places.
Health and Ebola
Some risks are harder to predict and plan for. Ebola continues to heavily impact the economies of Guinea, Liberia, and Sierra Leone even as transmission rates show signs of slowing. The Bank Group estimates that these three countries will lose at least $1.6 billion in forgone economic growth in 2015 as a result of the epidemic.
In response to the crisis, The World Bank Group mobilized nearly $1 billion in financing for the countries hardest hit by Ebola. This included $518 million for the epidemic response, and at least $450 million from IFC, to enable trade, investment, and employment in Guinea, Liberia, and Sierra Leone.
It’s at times of crisis like this when companies and investors can show that their partnership with the country is not only about the good times.
Many mining companies are making major efforts to prevent the spread of disease in their operations and in nearby communities because they tend to have the infrastructure and resources that can have the quickest local impact.
On Monday here at Indaba, we hosted a panel discussion that brought out many case studies of governments and mining companies collaborating to prevent the spread of disease. More signs of long-term partnerships in action.
Ladies and gentlemen, these are interesting times for mining in Africa. When prices are down, the instinct is often to flee or circle the wagons. But these are the times when a collaborative, long-term and genuine relationship with countries can pay off.
Now is the time to plan to cut energy costs by finding ways to connect to national grids. Now is the time to build the capacity and skills of local people and local suppliers. Now is the time to ensure employment policies encourage equality across genders. Now is the time to get your long-term social and environmental house in order.
The World Bank Group, as a long-term partner of countries across Africa, is ready to work with you in all of these areas. Together in partnership we can help to transform development in Africa.