World Bank Mining Activities in Africa Policy Framework and Country Experience

1. World Bank Mining Activities in Africa Policy Framework and Country Experience Gotthard Walser Oil, Gas and Mining Policy Division The World Bank Group AfDB-WBG Experience-Sharing Meeting Tunis February 12-13, 2007

2. World Bank Mining Activities in Africa Policy Framework and Country Experience • Mining in a changing world • Mining policy: guiding principles and criteria • Country experiences • Issues and challenges

3. 1. Mining in a Changing World

4. 1.1 Mining in a Changing World Decade of the 1980s Late 1990s — present • Macro/Sector reform • Liberalization • Some privatization of SOEs • Owner/operator of mining assets • By-stander in emerging economies • Awakening, acceptance • Benign neglect • Dominance of Markets • Shrinking State • Decentralization • Regulator/administrator • Leading force in investment • New responsibilities • Role of NGOs • Fully integrated • Awakening, acceptance Macro-Economic Government’sRole in Mining Private sector inEmerging Econs Environment Social Focus

5. 1.2 What does this Mean for Governments? CountryCompetitiveness Mining SectorSustainability “Leaving somethingof value behind” Investmentenvironment Infrastructure Sound and stable: • Macro-economic management • Legal and regulatory framework • Fiscal conditions • Institutional/admin- istrative capacity Availability of: • Physical infra- structure • Services • Sound and Responsive: • Environmental management system • Community relations • Equity in rent sharing • Stakeholder participation • Code of conduct/ethics

6. 1.3 Continuing Push for Sustainable Mining Development • : • Local communities continue to assert more strongly their views on extractive industries developments that impact them • Industry bodies, business based organizations and civil society groups are continuing to actively promote the sustainability agenda • The importance of sustainability in extractive industries has been reaffirmed on the international political stage • National and local governments remain key players in fostering an enabling environment for sustainable development at the national and community level

7. 1.4 Current and Emerging Issues High prices • Continuing commodity price boom leads to even greater push for sustainability & increases its scope, but creates new interest groups, often making needed political reforms harder New Players • China and India are important contributors to demand and are also investing in extractive industries abroad – changing the traditional playing field • Africa: Significant mineral (and petroleum) potential—could be leading location for new investment but weak governance and capacity make sustainable development all the more difficult Governance • Including but beyond corruption and transparency • Long-term capacity development, dispute settlement mechanisms, contingency contracts & renegotiations, government legitimacy

8. 1.5 The Importance of Sustainability What is Sustainable Mining Development? • For World Bank-supported projects: • “Financially viable mining development that takes place in an environmentally and socially responsible manner with sound governance that provides lasting benefits to the communities where mineral development, production and transportation take place”. Sustainable Mining Development is essential: • If a mining project is to contribute to effective and lasting poverty reduction at local and regional levels • To avoid major conflicts around mining developments • For mining to contribute to political legitimacy and national level policies and priorities • For the sustainability of a profitable mining industry

9. 1.6 Why Sound Governance Is Critical Poor macro & national level governance = benefits wasted: • Government income spent unwisely, used to promote wrong economic policies, booms mismanaged, culture of corruption • Supports ‘sustainability’ of poorly functioning political and economic institutions, illiberal democracies • Creates new political economy & opposition to further reforms • Can destroy the most well-conceived sectoral reform Poor sector governance = social/environmental harm • Long-term sustainable development highly unlikely • Irreparable damage to local communities, especially indigenous peoples • Contributes to social conflict, even civil war • Leads to demands for contract renegotiation, even nationalization • Harms legitimacy of national government with repercussions for national level governance

10. 2. Mining Policy: Guiding Principles and Criteria

11. 2.1 Guiding Principles for the World Bank Group in Mining • Strengthen governance and transparency • Ensure that extractive industry benefits reach poor people • Mitigate environmental and social risks • Protect the rights of people affected by extractive industry investments Source: World Bank Management Response to Extractive Industries Review

12. 2.2 Criteria of a Successful Policy Framework for Mining Development • For these guiding principles to be attained, the policy framework must meet the criteria below; where any are missing, further reform &/or capacity building is needed • A satisfactory macro framework is indispensable • Government must be reasonably credible and legitimate--it is crucial to be able to avoid political economy traps in which elite groups capture a disproportionate share of benefits • Political institutions must allow for effective participation and the ability to make transactions over time—no ‘winner-take-all’ mentality

13. 2.3 Criteria of a Successful Policy Framework for Mining Development • Benefits must be widespread at both the national and local levels • Local capacity building for both governance and transferable occupational skills development must be a continuous and adaptive process • Long-run capacity building for implementation, monitoring, evaluation and enforcement is institutionalized • Stakeholders have a flexible and adaptive approach to new developments in the sector

14. 2.4 Public vs Private Sectors Role in the Mining Development Sequence USD/km2 MINE DEVELOPMENT >10,000,000 1,000,000 DETAILED EXPLORATION PUBLIC FUNDING 100,000 PRIVATEFUNDING 100 REGIONAL EXPLORATION MINERAL RESOURCES ASSESSMENT REGIONAL GEOLOGICAL MAPPING 10

15. 3. Country Experiences Madagascar Mauritania Zambia

16. Gambia Guinea Bissau Morocco Tunisia Algeria Libya Egypt Mauritanie Mali Niger Sénégal Sudan Tchad Eritrea Benin Burkina Faso Guinée Nigeria Djibouti Sierra Leone Côte d’Ivoire Togo Ethiopia République Centraafricaine Ghana Liberia Cameroun Guinea Eq. Somalia Congo République Démocratique du Congo Uganda Gabon Kenya Rwanda Burundi Tanzania WB Mining T.A. Projects In Africa Angola Malawi Madagascar Zambia Moçambique Zimbabwe Namibia Botswana Swaziland South Africa Lesotho

17. 3.1 Madagascar (i) Two Projects: • Mining Sector Reform Project: • 1998-2002: USD 5 million • Main policy and legal reform; initial institutional reform (mining cadastre); ASM and environment • Mineral Resources Governance Project: • 2003-2008: USD 32 million • 2007-2010: additional 8 million • Governance: Institutional reform (environment, inspectorate, geological survey, gemmological institute), decentralization, formalization of ASM and trade, integration of large scale mining, community development, geological infrastructure and promotion

18. 3.1 Madagascar (ii) • Policy reform (1998) • Legal reform: • New Mining Code (1999, rev. 2005) • Large Scale Mining Investment Law (1999) • Institutional reform • Bureau du Cadastre Minier (2000) • Institut Gemologique de Madagascar (2004) • Cellules Environmentales Minieres (2006) • Inspection Miniere (2007) • Service Geologique de Madagascar (2007) • Restructuring the parastatal mining and petroleum agency OMNIS into an oil agency (2008/9?)

19. 3.1 Madagascar (iii) • Facilitating regional integration of large scale mining projects – 4 “new” projects: • Consultation process and regional/local coordination committees involving mining companies, government authorities and communities • Regional resources assessments (Dynamic Mineral Resources Management) • Regional/Community Development Plans, based i.a. on the resources assessments • Regional/Community Development Funds

20. 3.1 Madagascar (iv) • Artisanal and small-scale mining (ASM) • Legalization of ASM (“mobile” cadastre); support to establishing associations • Technical and management capacity building • Fiscal revenues decentralization • Management capacity of local authorities • Gemstones and gold trade formalization, fiscal issues • Value chain: development of local cutting and polishing, jewelry (IGM role) • Integration of ASM into local development plans

21. 3.1 Madagascar (v) • Land use management: • Mineral resources • Geological, geophysical and geochemical survey of about 60% of the country • Set up of a multi users data bank = core system of the Geological Survey • Environment and social vs mining: • Conflict prevention and management: “Mines-Forest committee”: large and small scale mining • Environmental base line surveys • Environmental mining units

22. 3.2 Zambia (i) • Several projects: • ERIPTA (multi-sector; closed) • Policy, legal and institutional frameworks • Privatization of State owned ZCCM (closed) • Social services: water and electricity in mining towns • Copperbelt Environment Project: • 2003-2008; USD 55 million • Remediation of GoZ and ZCCM environmental liabilities (as part of privatization process) • Strengthening of GoZ environmental regulations enforcement capacity • SEED (multi-sector): • 2005-2010; USD 5 million • Adjust policy, fiscal and regulatory frameworks to high commodity prices and mining boom • ASM (see Madagascar)

23. 3.2 Zambia (ii) • Copperbelt Environment Project • Legal definition of liabilities and of who should remediate them has facilitated the privatization process at a time commodity/Cu prices were low • Plan based on private and “public” environmental management plans, approved by environmental authority (ECZ) • Capacity building – and implementation – on site closure processes, incl consultation, resettlement and technical “best practices” • Comprehensive environmental data bank for monitoring • Major case: lead contamination affecting a 50,000 community (Kabwe) • Communities and local authorities involvement in sites remediation and maintenance • Main issues: • Sustainability of financial and institutional environmental management mechanisms • But, major issue: active mining operations and private sector represent still >90% of contamination flows..

24. 3.2 Zambia (iii) • SEED: • Earlier agreements between GoZ/ZCCM still based partly on “negotiations”, incl. e.g. fiscal aspects • GoZ would like to re-negotiate as it feels it does not benefit as it should under higher commodity prices. • Improve capacity to negotiate? Or Reduce room for “discretionary” negotiation through legally pre-defined agreements? (cf Madagascar, Mauritania, Chile, Peru..) • Zambia has data banks: data banks are important; more important is to learn how to use them and to share the information..

25. 3.3 Mauritania (i) • Two – and a half – projects • Projet de Renforcement Institutionnel du Secteur Minier (PRISM I): 1999-2004; USD 15 million • PRISM II: 2003-2008, USD 18 million + additional USD 5 million on oil

26. 3.3 Mauritania (ii) Basic reform: • Legal framework: • Mining Code and Mining Agreement Law • Regulations, incl. environmental • Institutional reform: • Mining cadastre – one of the most performant in Africa, 2nd only to Madagascar • Environmental mining service and Environmental Information and Management System (SIGE) for EIA evaluation and monitoring) • Geological and Mining Information System (SIGM) for promotion and land use management • Geological Infrastructure • About 70% of country covered with geological, environmental, geochemical and airborne geophysical data

27. 3.3 Mauritania (iii) Mining and Local Economic Development: • Socio-economic development based on the SOE SNIM iron mine within the Zouerate (mine) to Nouadhibou (port) 700 km corridor: small businesses development, economic diversification, social services, renewable energy, water resources development. • Additional water resources would allow the development of new mines

28. 4. Issues and Challenges • Regional instead of a country-by-country approach: • Western Africa • Great Lakes: trade roads • SADC • Institutional sustainability: everybody recognize the importance of institutions. But why government and international aid agencies are reluctant to set up long term financing mechanisms? • “Newcomers”: how to react? Increased flexibility to keep “competitive”? But what about environment and social? • Convince IMF, WB – and ADB? –, and Finance Ministries economists that local management of locally generated revenues is key to EI based development • EI Funds..

29. Thank you!