Africa Mining Vision can help put ESG benefits in focus
Picture: 123RF/IVAN TRIFONENKO
It is essential that policymakers connect opportunities to green industrialisation
When the Africa Mining Vision (AMV) was launched in 2009, few could argue with its forward-thinking approach. It envisions a continent that harnesses its mineral and hydrocarbon wealth for broad-based development. With governance — transparency and accountability — as its heartbeat, the vision delineates mining as a flywheel for structural transformation. This is the DNA of the AMV and it is undoubtedly good.
For all its promise, however, the vision has not delivered. This is easily explainable. A vision is only as strong as its implementation. For this reason, the African Minerals Development Centre (AMDC), which is the custodian of the vision, quite rightly embarked on a mission to domesticate the AMV for each country.
This strategy recognises that each country is unique. Each has a peculiar set of institutions inherited from the colonial era, most of which were designed to extract and repatriate raw materials to the imperial powers. Post-independence, those institutions have largely been subverted into tools of narrow enrichment for wealthy elites and entrenched them in power. This is the essence of the resource curse — the paradoxical correlation between mineral abundance and underdevelopment — and it must be reversed.
As with all correlations, however, they should not be confused with causation. Correctly harnessed, the AMV can cut through the vicious cycle of rent accumulation to the elites at the expense of citizens. Mineral wealth can and should lead to development that benefits most citizens.
As the world deals with the fallout of Covid-19, there is no better opportunity than the present to realise the AMV. For the last few decades we have known that climate change is a serious threat to the future of our shared planet. We have failed, however, to change direction, largely because profits — inaccurately measured — were high and the costs of generating pollution were seen as low by those with decision-making power. We have therefore continued to mine and burn coal, and we have continued to exploit oil resources, both at substantial environmental cost.
The key to a set of desired futures is to eliminate what economists call negative externalities, the divergence between private returns and social costs. The 2015 Paris Agreement, for all its flaws, commits countries to reducing emissions and therefore global warming to below 1.5°C above preindustrial levels, a necessary but insufficient mechanism for reducing negative externalities.
Because it is essentially nonbinding, it cannot generate the incentives required to force companies to internalise the costs of pollution. Until now, there has been little in the way of credible deterrence to disincentivise firms from offloading social and environmental costs onto local communities who can least afford it. It is partly for this reason that Covid-19 erupted — we ignored the costs of environmental encroachment. Climate change unleashes viral dark matter and we have probably only seen the tip of the iceberg.
There is, however, always hope. Environmental, social & governance (ESG) performance is rapidly becoming a determining variable in capital allocation decisions. The world has finally realised that true sustainability lies in committing to the spirit of good governance, eliminating environmental degradation and doing right by citizens. Merely ticking boxes on these three metrics will take us no closer to where we need to be, but at least greenwashing is becoming a serious operational risk. Because access to capital will increasingly be contingent on authentic ESG credentials, firms are being disciplined to this end. There is nothing quite as powerful as a market tool to reduce negative externalities.
So, what does this all mean for mining in Africa? Because the drive towards global carbon neutrality by 2050 will require the minerals and metals Africa has in plentiful supply — copper, cobalt, lithium and the like — the demand-side of the positive futures equation looks promising. The key to translating this demand into sustained development lies in the bread and butter of better governance.
The ESG moment presents an opportunity to attract responsible mining firms that will help build state institutions and become real development partners. African governing elites will have to make a conscious decision to attract responsible capital. It may appear less costly to run after irresponsible finance from jurisdictions that pay no heed to our development imperatives. But the least costly options in the short run invariably have the most devastating long-term consequences.
With the guidance of the AMV’s emphasis on structural transformation, it is essential that policymakers connect mining opportunities to green industrialisation. A critical strategic goal of African countries is to reverse premature deindustrialisation — the process by which we are transitioning out of manufacturing into services much earlier, and at lower levels of per capita income, than our industrialised counterparts. Doing so will necessarily mean connecting mining to global value chains involved in producing new, low-carbon forms of energy and transport.
Realising these strategic objectives will require a commitment to good governance and sensible policymaking. Mining and industrialisation policies simply must reflect the DNA of the AMV and be orientated towards attracting players that are ESG committed.
Similarly, mining firms must endure the upfront learning costs of embodying ESG principles as part of their ethos. The long-term payoff is that social performance will become mainstreamed and produce genuine sustainability. With more effective states and more responsible mining and manufacturing firms, broad-based development may become a realisable future.
- Harvey is director of research & programmes at Good Governance Africa. These remarks were delivered at a webinar on mining futures hosted by the African Minerals Development Centre and the SA Institute of International Affairs.