Exploring the Promise of the Africa Mining Vision: A Perspective by Antonio M. A. Pedro Director,...

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Transcript of Exploring the Promise of the Africa Mining Vision: A Perspective by Antonio M. A. Pedro Director,...

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Exploring the Promise of the Africa Mining Vision: A Perspective by Antonio M. A. Pedro Director, SRO-EA- Kigali, Rwanda Slide 2 Objectives Raise awareness about the Africa Mining Vision (AMV) Offer insights into its construct Discuss factors that can ensure its realisation Identify linkages with international processes and initiatives Mobilise support for the implementation of the AMV Slide 3 Profiling the Sector Slide 4 Disputed accounts on mining Mining is bad camp: Enclave, capital intensive, Dutch disease, lower growth, corruption, conflict, rent-seeking; etc Mining is not bad camp: Nothing intrinsic with mining, non-conclusive statistics, mixed performance, important natural capital Slide 5 The mining is not bad camp Mining generates positive macroeconomic impacts and fosters growth through: -Fiscal flows (Royalties, taxes and other levies) -Foreign exchange generation -Associated economic and tertiary development -Opportunities for SME development -Upstream and downstream opportunities (minerals cluster development) -Job creation -Technology acquisition and skills creation -Infrastructure creation Slide 6 Harnessing the Potential of Natural Resources: A Daunting Challenge for Policy Makers Slide 7 The Challenges The irreversibility challenge The creation challenge The investment challenge The distribution challenge The governance and macro-economic challenge The capacity challenge Slide 8 The irreversibility challenge Given the non-renewable nature of the resource, how to balance the relative costs of access and the choices/preferences of the present relative to the future? Which policies can ensure sustainable exploitation of mineral resources and inter-generational equity? How to manage resource stress? Slide 9 The creation challenge How to create and sustain mineral wealth that is consistent with social preferences for environmental quality and social and cultural considerations? How to ensure an efficient, equitable and predictable legal, regulatory and fiscal regime that encourages mineral creation? How to be a competitive mining destination, but avoid a race to the bottom? Slide 10 The investment challenge Once you create mineral wealth, which is transient, how to transform it into permanent wealth? How to create a stream of wealth that outlasts finite mineral resources? How much ought to be saved and how much should be invested? Who should invest? In what? Where? Slide 11 The distribution challenge How to share benefits from mining equitably (e.g. local vs national)? What is fair? What form should the allocation take? What are the eligibility criteria? Who has the highest priority? How to reconcile conflicting interests? Slide 12 The macro-economic and governance challenge How to address externalities such as declining and unstable commodity prices? How to address the Dutch Disease? How to enhance the public interest in wealth conservatism? How to avoid rent seeking and corruption? What social compact to pursue (APRM NPoAs)? Slide 13 The macro-economic and governance challenge (2) How to manage revenue out of mining? How to enshrine and operationalise the right to access to information and ensure that decisions are taken with participation of affected stakeholders (The Aarhus Convention)? How that ensure accountability (Oversight committees, parliamentary watch dogs)? How to ensure that right institutions are in place to monitor compliance of obligations? Slide 14 The capacity challenge How to balance aspirational goals and the reality? What set of policies, laws, standards, guidelines should countries formulate which are congruent with their capacity to enforce them? How to bridge capacity gaps and asymmetries between host countries and TNCs [ contract negotiations; transfer pricing How to address capacity gaps at sub-national level (decentralisation)? Slide 15 What should inform policy responses? Slide 16 The development paradigms: They shift Nationalizations in the 1970s Reforms in the late 1980s and 90s: The Washington Consensus 21 st Century: The search for a new social contract for mining From market/institutions fundamentalism to more policy space for experimentation and the rebirth of the development state: Goodbye Washington Consensus, Hello Washington Confusion (Dani Rodrik, 2006)? Slide 17 Stage of the development in a minerals cycle Nascent mineral economy: Requires mineral investment flow Youthful mineral economy: Rapid mineral expansion, Dutch Disease Early-Mature: Slowdown of mineral output, promote sectoral diversification Late-mature: Decline in mineral output, boost skills acquisition Slide 18 Policy responses to a minerals- driven cycle (Richard Auty) StageCharacterMacro effectsPolicy response NascentMineral investment flowExchange rate pressureCreate rent tax, build capital funds, establish revenue stabilization funds, grant Central Bank independence YouthfulRapid mineral expansionExchange rate appreciation, Dutch Disease effects Sterilize windfall rents, expand domestic absorptive capacity Early-MatureSlowdown of output mineralGrowing tax and foreign exchange constraints Substitute new tax sources, encourage domestic savings, promote sectoral diversification Late-MatureDecline in mineral outputPersisting tax and foreign exchange shortages, rising unemployment Depreciate real exchange rates, boost skills acquisition Slide 19 Local context Culture and mining history Capacity to administer the sector, and manage and restructure the economy Strength of private sector, CSOs, CBOs The learning curve process followed by a country Local politics and power game, expectations and social bargains (Bomani Commission in Tanzania) The countrys bargaining power In short: There is no universal recipe! Slide 20 Looking ahead: Can The AMV Deliver for Africa? Is it a wish list? Slide 21 The Africa Mining Vision : Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development Slide 22 The process Task Force: AUC, ECA, AMP, AfDB, UNCTAD, and UNIDO and UEMOA Draft informed by outcomes of several meetings and initiatives: JPoI, Yaounde Vision on ASM, AMP SD Charter and Mining Policy Framework, 2007 Big Table, ISG, SADC + UEMOA harmonization efforts Discussed at the First African Union Conference of Ministers of Mines in October 2008 Endorsed by AU Summit in Feb 2009 Slide 23 The tenets Recognition of important role of MR to Africas economies Transform finite NR capital and transient wealth into lasting forms of capital beyond the currency of mining Broader understanding of benefits From comparative to competitive advantage: A developmental, transformative, knowledge-driven and integrated mining sector with downstream, upstream and sidestream linkages Slide 24 The tenets (2) A sustainable and well governed sector: resource rents are well managed; distributed and smartly invested; intergenerational equity, environmental and material stewardship and CSR respected; safe, healthy and advanced; and stakeholders empowered Mining as a key component of a diversified and globally competitive economy Unbundle the minerals complex (from exploration to fabrication, markets and mine closure) to bundle: Entry points for localization identified Slide 25 Tenets (3) A sector that anchors the development of a competitive infrastructure base through local and regional economic linkages Optimal exploitation of finite resources at all levels (large and small-scale) and of all types (high and low value) A sector that puts Africa geo-politically and strategically at its right place in the global international capital and commodity markets Slide 26 Why the AMV ? Need to have an African common voice Resource endowment: Comparative advantage to harness Top producer, but most minerals exported as raw materials: Potential for mineral beneficiation is great More favourable political economy:Failure of the Washington consensus opens room for more policy space Merely regulatory role for the state being questioned: Return of the developmental state Slide 27 Why the AMV (2)? Although RBIs are not a new mantra in Africa (Lagos Plan of Action), in general, mining has not delivered broad-based development: We can learn from successful RBIs (e.g. Nordic countries) Despite swings in commodity prices, resource intensity theory (resource use flattening at US$16,000/GDP) suggests that demand for minerals might continue to be strong if China and India (and other emerging economies) continue to grow: This and other factors might support prices (Gold is up!) Slide 28 Why the AMV (3)? Other sectors dont have the same rents: Better resource rents in the mining sector can catalyze growth of other less competitive sectors China and India: Reshaping the ball game ( more competition for Africas acreage strengthens the continents bargaining power) Resource nationalism and assertive governments: Pendulum can swing to host countries, but dont kill the goose that lays the golden eggs Governance gains: Growth of non-state actors (CSOs) democracy, APRM, less monopoly of the policy space Slide 29 Why the AMV (4)? Tri-sector partnerships and public participation: Being mainstreamed New age miners: Embracing developmental and transformative approaches; triple bottom line (financial success, contribution to social and economic development, and environmental and material stewardship) We can learn from good practices: Nordic clusters Scholars are championing for a better mining sector Slide 30 Why the AMV (5)? Chinas environmental concerns: Cannot continue to be the only worlds factory; this offers opportunities for relocation of downstream and upstream activities to Africa Strategic stockpiles: A fashionable concept again (New European non-energy raw materials strategy). Can Africas bargaining power be strengthened? Tacit endorsement of the Angola model (???): (Zoellick The end of the Third World? Modernising Multilateral