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The case for mineral resources management and development in Sub-Saharan Africa
Lloyd A. K. Quashie
"Sustainable development" implies that economic activity should be designed to create wealth for the use of present and future generations. If natural resources cannot be developed and exploited to create wealth for the nation, the result may be poverty and deprivation. Crisis management soon takes over from sustainable economic development. So far, experience in Sub-Saharan Africa for the past 20 years would indicate that almost all the countries in this region have suffered negative growth; that is, the economies of Sub-Saharan Africa are in a state of decline and the development of the rich natural resources has come to a virtual standstill. The Sub-Saharan region has turned into a region of "beggar nations" in the midst of plentiful natural resources. In this regard, the least harnessed resources of this beautiful continent include minerals and energy.
The economic crisis has become endemic and is now becoming pandemic in the region. A solution to the problems must be found in order to reverse the condition of exponential decay and bring the countries back on the track of viable and sustainable economic growth.
The thesis of this paper is that the road to sustainable development and growth of the Sub-Saharan economies will be mainly via rational development and exploitation of the mineral and energy resources rather than by agricultural development. The track record of the SubSaharan economies since independence, and certainly for the past 20 years, would support the argument that agriculture has so far failed as the engine for economic development in most countries of mainland Sub-Saharan Africa. For example, countries such as Côte d'lvoire, Senegal, and Kenya have succeeded for only a limited period in using agriculture and agro-based industries as an "engine" for the sustainable growth of their economies.
On the other hand, countries such as Botswana, Zimbabwe, and, more recently, Ghana have proved that a country with a strong minerals industry and a cheap energy resource can aspire to positive economic growth that can be sustained, depending on the life of the resource and changes in demand, and can also provide the necessary catalyst for the development of other sectors of the economy. This growth pattern has also been the backbone of the sustainable development of certain industrialized countries such as the United States, Canada, some West European countries, and Australia. Other highly developed countries lacking or with only limited mineral and energy resources, such as Germany (i.e. former West Germany) and Japan, have had to import the necessary mineral raw materials and fuel energy to feed and sustain their huge industrial base for economic growth.
The industrialized countries would rather hoard or subsidize agricultural production, much to the detriment or the disadvantage of the developing countries, in particular Sub-Saharan Africa, which provide most of the mineral raw materials and part of the fuel energy for the industrialized countries. Production of selected minerals by the leading producing countries in Sub-Saharan Africa in 1989 is shown in table 14.1 and the value of minerals exported in 1989 in table 14.2.
In order for Sub-Saharan Africa to recover from its development stagnation, it is imperative that a new development agenda be forged, with more emphasis on the exploration, development, exploitation, and rational management of its mineral and energy resources for sustainable economic growth. Curbing population growth or demobilizing the public sector of the economy cannot open the gates to sustainable development in the medium to long term. Preserving the pristine countryside in the interests of good environmental practice and health would also cause the otherwise necessary industrial development of the subregion to stagnate. A happy medium has to be found between unguarded development and sustainable development that takes into account the health of the population and the preservation of a sound environment for future generations.
Table 14.1 Sub-Saharan Africa: Major mineral producers and share of world mine supply, 1989 (volume of selected minerals)
Source: World Bank (1992: 1).
Table 14.2 Sub-Saharan Africa: Value of mineral exports, 1989 (US$ m.)
Source: World Bank (1992: 2).
a. Excludes aluminium exports of about US$300
million from Ghana and Cameroon.
b. Over 95 per cent of SSA's mineral production is estimated to be exported and available statistics do not readily permit a separation of the value of production and the value of exports.
Africa is almost certainly endowed with enormous mineral resources yet to be discovered. Exploration for these mineral resources has not been conducted in a systematic manner since independence in the Sub-Saharan countries. As such, the full impact of the minerals industry sector on the economies of these countries has been minimal or non-existent. The countries that could boast of a significant minerals industry sector are: Botswana, Ghana, Guinea, Zaire, Zambia, Zimbabwe, and the Republic of South Africa; including oil, one would add Nigeria, Gabon, and Angola (see table 14.3). These countries, however, had a mining tradition during colonial times and in several cases even before. Some governments built strong geological surveys, mining, and metallurgical departments, which conducted geological mapping and exploration of known mineral deposits (usually ancient artisanal mining sites) for allocation to mining companies for development and exploitation. The mining leases granted by the colonial governments virtually gave the companies perpetual mineral rights and tenure on very disadvantageous terms to the colonies.
Upon the attainment of independence, these countries enacted new mining laws, which vested the minerals resources in the state. The countries therefore achieved sovereign rights over the mineral deposits (including petroleum and natural gas) with a view to exploiting these resources, this time more to the benefit of these sovereign nations. However, with the exception of the Republic of South Africa, and recently Botswana, none of the Sub-Saharan countries can boast of a strong and viable minerals industry sector in their economies that could contribute to sustainable development in the coming decades. So far, attempts to develop the mineral resources of these countries have been limited to half-hearted policy reforms and the enactment of mining legislation and investment codes, which have failed to attract the necessary investment in the minerals industry sector. Many factors have contributed to the poor performance of the minerals industry sector of the Sub-Saharan countries. However, before proceeding to discuss these factors, I should like to examine the new slogan "sustainable development" as it may be applied to mineral management and development in the Africa region.
Table 14.3 Sub-Saharan Africa: The economic contribution of mining, selected countries, 1989
|Country||Formal mining exports(US$ m.)||Mining exports as % of total exports||Mining value- added as % of GDP||Mineral taxes as % of total taxes|
Source: World Bank (1992: 3). a. Estimate.
Minerals occur naturally in the subsoil and they have to be discovered by systematic exploration. Their distribution in the subsoil is governed by certain physical and chemical principles, host-rock characteristics, and the structural history of the mineral location. Unlike crops, minerals cannot be planted, watered, fertilized, or made to grow to produce "food" to feed the nation. The mineral endowment of a country can be made available for utilization only through sustained investment in systematic exploration, development, mining, and processing. The minerals that can be developed, mined, and processed economically should occur in such proven quantities and grades that they may contribute to the wealth and growth of the economy when exploited. A viable mineral enterprise should also be able to generate sufficient funds from operations to finance further exploration and development of the mineral resource base for future exploitation, otherwise the enterprise will perish. Without exploration for ore reserves there can be no sustainable development of a mining enterprise and the sector cannot contribute to economic growth for the future wealth of the nation.
In the minerals industry, "sustainable development" would therefore imply sustained investment in exploration and development to access economic ore deposits for extraction and for use at a profit. There are, however, certain imperatives for the development of a strong and viable minerals industry sector. It needs a realistic management and administrative policy that takes account of the needs of society and, at the same time, guarantees equitable distribution of the wealth generated by the mineral asset to the investor and the host country. This mineral development policy should be stable in the long term in order to attract the much-needed investment in the sector, which, by its very nature, is "high risk" and requires long lead-times for development, start-up, and operations. Above all, society is now demanding that mining operations should, in addition to contributing to wealth, be environmentally friendly and sustainable for the use of future generations. This is what a rational and realistic mineral development policy has always been about. This policy has been described as a "mineral conservation policy" by economic geologists, and progressive mining laws and regulations include provision for such a policy. Sustainable environmental practice should be compatible with good mining industrial practice. Good mining practice should also take into account the health and safety of the workers and the people living near the mining operations.
Furthermore, mineral conservation requires that the depletion rate of the mineral deposit should be in balance with the rate of discovery of mineable reserves and in accordance again with good environmental practice. Environmentalists have tended to confuse conservation of the natural resource and environment with preservation, an attitude that may preclude the utilization and development of natural resources.
If all these factors and policy issues are brought into harmony under mineral development legislation and fiscal regimes that are realistic and dynamic, sustainable development of the minerals industry could be carried out for economic growth to meet the basic needs of the population, while conserving the natural resource base for the socio-economic needs of future generations in a sound environment. However, Botswana should be singled out for special mention as the only country that has been able to develop its mineral sector as an "engine" for economic growth during the past 10 years.
The country is blessed with minerals of very high intrinsic value, a realistic mineral legislation policy, and a relatively stable investment climate. After many decades of massive investment in agriculture and agro-based industries, Botswana has shown that agriculture alone cannot suffice to sustain economic development. Many constraining factors have contributed to the near-stagnation of the development of the minerals industry in the Sub-Saharan economies. These factors occur in varying degrees from country to country, but those that are fundamental and common to all the countries are identified briefly below:
· a lack of investment in systematic geological mapping and exploration, and inadequate technical data on the mineral endowment;
· a weak institutional and policy framework for mineral development and exploitation;
· inadequate fiscal and financial regimes for mining development;
· poorly developed infrastructural bases, including transportation, communications, and engineering services;
· a lack of cheap, reliable energy resources for industrial projects;
· the deterioration of the economic performance of the Sub-Saharan countries, exacerbated by deteriorating terms of trade and inadequate pricing of primary mineral commodities produced by these countries;
· the unusually high cost of capital for mining projects in the region compared with the capital cost of similar mining projects in SouthEast Asia, Australia, and South America;
· the perception by the international mining community of an unstable "investment climate," political instability, and corruption in Sub-Saharan Africa;
· the scarcity of indigenous professional and technical manpower capable of formulating viable policy reforms, estimating the feasibility of mineral development projects, or negotiating equitable joint-venture mining agreements with transnational corporations.
Despite these difficulties, the Sub-Saharan countries should be able to develop their mineral resources as an "engine" for sustainable growth and in an environmentally friendly manner. The continent is endowed with enormous mineral potential, including: diamonds, gold, silver, the platinum group metals, emeralds, rubies, and other semi-precious minerals, bauxite, manganese, nickel, cobalt, copper, cadmium, chrome, lead, zinc, and other non-ferrous metals, iron ores (hematite and magnetite), cassiterite, rutile, ilmenite, zirchon, monazite, mica, vermiculite, limestone, gypsum, barytes, potash, phosphase, kaolin, "granites" for dimensional stones, and other industrial minerals. Africa is also known for proven reserves of high-quality petroleum, natural gas, peat, lignite, and coal with low sulphur content (i.e. Gondwana coal). African countries are yet to develop these rich mineral resources and exploit them for industrialization and sustained growth. The World Bank (1989: 122) describes the "relative mineral abundance" as a "mixed blessing" to many African countries. It could also be described as a situation of poverty in the midst of plenty!
However, the failure to develop the full potential of the minerals industry in the Sub-Saharan economies is not entirely the fault of the governments concerned. Certain important exogenous factors have also contributed to the near-stagnation of the development agenda of the African countries. For the past 20 years, Africa has missed the investment boom of international finance in mineral exploration and development. Most of the mining investments have been directed away from Africa to South America, Canada, Australia, Papua New Guinea, and the fast-growing countries of South-East Asia (see fig. 14.1). Some of these apparently more attractive countries have little comparative advantage in terms of political stability. In fact, there is evidence that many of the transnational corporations that were operating profitably in Africa during colonial times pulled out of Africa just before or immediately after independence to invest in mining ventures elsewhere. Fortunately for Sub-Saharan Africa, many of the ventures have failed in those countries and the Africa region has another opportunity to attract the transnational corporations back to the very high-grade near-surface ore deposits of the continent that they virtually abandoned more than 20 years ago. The country most likely to offer stiff competition for scarce mining venture capital over the next few years is Australia. However, the mining companies of Australia have already committed most of their sales contracts for the supply of mineral products to Japan and the ASEAN countries, which until recently have been experiencing an economic boom.
In today's Sub-Saharan Africa investors will find the host countries more realistic in asserting their sovereign rights over natural resources. The private sector will be encouraged to participate in the development of mineral resources without undue intervention from the state. Governments are more prepared to confine themselves to the roles of good landlord and regulator of the industry. Investment codes have been enacted that have entrenched in them special bene fits and incentives for investing in the mining sector.
More competitive and stable fiscal and financial regimes have been passed into law with guarantees for the repatriation of capital and profits. However, the host countries also expect a fair and equitable share of the revenues generated from the mining operations for financing sustainable development and the growth of their economies. Having undertaken painful macroeconomic reforms in order to attract foreign investment, these countries will expect that joint-venture mining projects would not be operated as offshore or enclave enterprises and that they would be more integrated into the domestic economies and become net foreign exchange earners. Import substitution projects would be encouraged only if it could be demonstrated that they would conserve foreign exchange, that the products would be of high quality, and that they would be sold at competitive prices. Host countries would also expect that the plant employed for added-value processing of minerals and mineral products would utilize proven technology that reduces unit costs and does little or no damage to the environment.
Fig. 14.1 Comparison of minerul production in Africa, Asia, and Latin AmericaCaribbean for eight selected minerals and metals, 1960-2000 (1985 [IS$ billion) (Note: actual and projected gross value of production of aluminium, copper, iron ore, zinc, nickel, lead, tin, and gold. Source: World Bank 1992: 5)
As discussed above, in my view agriculture has failed to provide a satisfactory engine for growth in the past two decades in several SubSaharan countries. The monocultural export economies of developing countries, and of Africa in particular, have suffered heavily from worsening terms of trade. Apart from poor agricultural commodity prices, war and drought have exacerbated the situation in the region. The devastation of the human ecology and the environment by war and plunder is often overlooked or taken for granted by the so-called animal lovers and Greenpeace activists. There is also evidence that large-scale farm mechanization and the application of chemical fertilizers have damaged the soils in some areas of intensive agricultural development, although Sub-Saharan Africa uses less chemical fertilizer than any other major global region. However, it must be recognized that countries whose economies are "mono-mineralic" are also vulnerable to the vagaries of the international mineral market, with the exception to some extent of the countries that produce precious minerals such as gold and gemstones.
Countries that are endowed with both large areas of fertile/arable land and mineral resources stand the best chance of stable economic development. The majority of African countries fall into this category. The Republic of South Africa (RSA) is the only country with a strong and long-lasting mining tradition in the Sub-Sahara that has successfully developed its minerals industry as the backbone of its economy, including the agricultural sector. It should also be noted that the mining industry of the RSA is fully integrated into the domestic economy with minimal foreign exchange content in the cost of operations. The country possesses efficient and competitive import-substitution industries, and the minerals and metals exporting companies are net foreign exchange earners. There are no "enclave" or "offshore" transnational enterprises in the RSA. The government regulates and intervenes to rescue the industry during bad times and participates in the revenue via royalties, not by equity holdings. The fundamental difference here is that the currency of the RSA is freely convertible into prime currencies and has purchasing power. This makes the investment climate very attractive, in spite of political instability.
The objectives set more than 30 years ago by many Sub-Saharan countries to exploit their mineral and energy resources for import substitution and value-added production of manufactures have not been achieved. Although there are indications of mineral deposits of economic value, the exploration effort in many countries has been inadequate or non-existent. Informal artisanal mining, particularly for gold, diamonds, emeralds, rubies, and amethyst, and small-scale quarrying for industrial minerals and aggregate are the main activities in the mining sector.
Large-scale mining of iron ore, non-ferrous metals (e.g. copper, bauxite, manganese, nickel), petroleum products, and coal is undertaken by transnational corporations in economic enclaves, and the products are exported as concentrates with very little or no added value. For the foreseeable future, many of the SubSaharan countries will be unable to establish downstream processing/ extraction plants to refine and produce finished products of metals and mineral substances. The continent will for a long period remain a primary producer of metal and mineral raw materials for the industrialized countries of the North. As such, environmental degradation and pollution are more likely to occur at the mining and ore-dressing stage. Those countries that would like to establish downstream plant for the production of finished products should beware of the dumping of obsolete technology by companies that may be forced to sell old plant owing to the environmental regulations of their home countries. For the present and immediate future the areas of environmental concern include the following mining-related activities:
· large-scale open-pit operations (e.g. porphyry copper deposits, bauxite, lateritic nickel, manganese, phosphate rock, oxidized gold ores, and placer deposits);
· large-scale dredging operations in rivers with extensive drainage systems and in beach sands;
· roasting of refractory ores containing arsenic, sulphides, and radioactive substances;
· open-pit coal mining and processing of coal and briquetting;
· small-scale mining, especially alluvial mining of gold and diamonds, and the use of toxic chemicals and unsafe mining methods by artisanal operators;
· metallurgical processing, extraction, refining, and manufacture of metals and chemicals for local use and for export to earn foreign exchange.
Environmental impact assessment of the above mining activities and control measures should be instituted with the objective of conserving the environment for the well-being of the present generation and for future use. There is an urgent need to develop an implementable environmental policy that will promote the efficient extraction and utilization of the mineral and energy resources of Africa in order to achieve sustainable growth. Failure to explore, access, and develop the natural resources for fear of damaging the countryside will bring only economic stagnation, poverty, disease, and degradation of life in the Sub-Saharan countries. Environmental preservation is not the same as environmental conservation. Furthermore, preservation of the natural resources should not be confused with conservation of the ecological equilibrium of an area. The former attitude is fraught with hypocrisy and the latter takes account of the realities and imperatives of sustainable development and sustainable economic growth. It is the great industrial countries that are the greatest polluters of the earth's environment. The African countries should learn some useful lessons from the industrialized countries if they are ever going to break the spiral of decay and poverty in the midst of plenty. The natural resources must be harnessed for economic development and growth. There is no other alternative for Africa's survival and sustainability in the global environment.
Minerals have to be mined where they are found. Fortunately, they are usually found in remote locations where industrial activity is nonexistent, and the environment itself is sensitive to sudden change. As such, an environmental impact assessment must be carried out by the investing company in cooperation with decision makers of the government. Both sides must be environmentally aware so that environmental protection needs may be determined realistically before the implementation of the mining project. Preliminary information gathered in a "green-field" area should provide the baseline or reference point for future assessment and monitoring of the impacts of the mining operations on the environment. Many industrialized countries of the North, particularly in Eastern Europe, with long histories of mining minerals, processing, and the use of low-grade fuels, are now paying the price for not tackling the problems of damage to the health of the population and complete destruction of the environment.
However, legislation that sets standards for environmental protection should not be onerous or non-implementable. It should be dynamic and, as much as possible, should be project specific because every mining project is different and specific to a particular area.
Finally, it is very important that management and the entire workforce on a mining project are made aware of their responsibilities to the environment in which they are working and making a living. Many of the workers may not originate from the area and management must endeavour to maintain this awareness from top to bottom throughout the life of the project cycle. Environmental impact studies and assessment methods are relatively new in the curriculum of minerals industry schools. The Sub-Saharan countries should strengthen their institutional capacity to monitor environmental impacts through sustained training. Training of indigenous personnel in environmental work should be provided for in all agreements with developers. Training in environmental assessment methods is an area where the bilateral and multilateral organizations could make a valuable contribution to human resource development for capacity-building in Africa.
I hope that I have been able to put the case for the need to institute a rational, pragmatic, and, above all, realistic policy reform in SubSaharan Africa for the sustained exploration and development of its minerals and energy resources for the creation of wealth on an exponential basis to sustain the improved well-being of its longsuffering population and for the survival of future generations. What Sub-Saharan Africa has experienced so far is the decay of economies supervised by incompetent governments, the majority of which have no democratic mandate to rule their people. I refuse to believe that Africa cannot succeed. Given the right political atmosphere, free from utopian and unworkable foreign ideologies, the intelligent and enterprising people of Africa, at all levels of society, can and should be allowed to develop the economy for sustainable growth. Africa is not short of intelligent, capable, and experienced people. They have been prevented from participating in the development process for the past 30 odd years, during which private initiative, entrepreneurship, and the private sector of the economies were destroyed. I pray that it will not take that long to rebuild the mining sector and bring African countries back to the path of sustainable development and social equity.
World Bank. 1989. Sub-Saharan Africa: From Crisis to Sustainable Growth. Washington D.C.: World Bank.
---- 1992. Strategy for African Mining. Technical Paper no. 181. Washington D.C. World Bank.
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