Supporting capabilities and linkages across mining value chains

1. Supporting capabilities and linkages across mining value chains Understanding Africa’s Strategic Vision 2 September 2014 Isabelle Ramdoo Deputy Head, Trade and Economic Transformation Programme ECDPM

2. Structure of presentation • Where do we stand in the policy debate? • Africa Mining Vision: The Overarching Framework • Regional Perspectives: Where do we stand? • Corporate vision: Are we there yet? • Strategic visions but what next? ECDPM

3. 1. Where do we stand in the policy debate? • Increasingly unacceptable for resource-rich countries to be trapped as exporters of raw materials, and hence benefiting little from the resources; • Widely recognised, in part due to growing pressure from local population, that there is an urgent need to harness more benefits; • This has caused many African governments to rethink – both at the national level and collectively – on ways and means to better use and manage their resources, in an inclusive and sustainable manner ECDPM

4. Key reforms and key drivers • Pressure from outside • Strategic directions ECDPM

5. 2. The AMV: what is it and what ambitions? • AMV (2009) is a home-grown continental initiative designed to put the continent’s long term and broad development objectives at the core of all policy making decisions related to mineral extraction, at country, regional and continental level. • Objective: Bring equity, transparency and fairness to the mineral sector “for Africa’s economic and social transformation”. • An Action Plan was approved at the 2nd AU Conference of Ministers responsible for Mineral Resources Development, in 2011, to provide a roadmap for implementation. ECDPM

6. Marks a fundamental departure from previous models of development: strongly supports return of developmental states; • An important milestone to shift away from high dependency on raw material exploitation and exports and encourages resource-based industrialization; • An important framework,supportive of geological knowledge; strong focus on capacity and knowledge development to strengthen negotiating& managerial skills; economic linkages notably thro’ infrastructure; full potential of ASM to stimulate entrepreneurship; improved livelihoods and advance integrated rural development • First effort to find a common continental agenda to negotiate investors’ access to natural resources. ECDPM

7. How it works? ECDPM

8. Upscaling capabilities • First, geological knowledge is insufficient. Often companies know more than govts what is there under the ground; • Significant skills shortages both in terms of numbers and quality (in partic. In science, engineering, maths; technology) • High turnover and lack of specialized expertise is a major bottleneck obstructing: Better paid jobs in the mining sector; Development of linkages by home-grown supplier companies Innovation for linkages both within and outside the extractive sector • African Minerals Skills Initiative established to help countries and regions fill in this gap; notably through regional centres of excellence to build specialization ECDPM

9. 3. Regional Outlook: Where do we stand? ECDPM

10. 1. Western and Central Africa: Oil as a strategic commodity but mining is increasingly key Region mostly renown for oil and gas reserves. Home to Africa’s biggest oil producers – Nigeria, Gabon, Eq. Guinea, Congo, Cameroon, Chad etc. Recent openings of new oil fields off the coast of Guinea, region will grow more in geopolitical and strategic importance Many countries are also big mining countries: Ghana (gold), Niger (uranium), Liberia (iron ore), S. Leone, Guinea (Bauxite) etc. Region is heterogeneous, and traditionally countries have had little cooperation regarding the extractive sector. ECDPM

11. Remained quite inward looking, strongly driven by rents and their own (complex) national politics & political economy; Oil producers considered as sleeping regional partners. • Two main challenges stand out: capabilities and infrastructure • But slowly changing, given Nigeria’s stated ambition to position itself as the springboard for business in the region; • Starting by the RECs – ECOWAS and WAEMU have very advanced regional frameworks for countries to harmonize their mining regimes and legislation for more transparent legal environment. But oil largely untouched. • These are still being dealt with at the national level. Also numerous reforms: some examples for recent reforms ECDPM

12. Ex. of some country reforms: Nigeria: Content Policy (2010) to promote VA, build local capacity & improve linkages with local industry. But results mixed. 2014: New strategic directions to change industrial landscape - Industrial Revolution Plan + National Enterprise Development Programme Institutional Policy Reforms: Petroleum Industry bill to: (a) enhance exploration & exploitation; (b) increase dom. Gas supplies (c) create competitive business environment for exploitation; (d) better fiscal frameworks; (e) create commercially viable national oil company; (f) promote local content; Ghana: Reforms include: new local content rules to create more jobs and strengthen local industry in oil sector; In mining sector, Minerals and mining act (703) revised to regulate ownership of minerals, rights; royalties; dispute resolution and ASM amongst others; ECDPM

13. 2. Southern Africa: A strategic mineral location Southern Africa the most richly endowed region in minerals strategic for industrial purposes – platinum (90% world reserves); cobalt (40%), chromium, manganese, uranium etc • Reforms to review mining legislations in order to get more benefits and to stimulate beneficiation • Regional level: Interestingly, though richest region in minerals, regional cooperation quite “light” on mineral reforms. SADC Protocol on Mining dates 2000 and has no binding obligations; and a mineral policy harmonization framwk • Meant to coordinate and cooperate. And nothing on industrialization and VA. ECDPM

14. South Africa: Most diversified mining economy. But on the decline. Now wants a radical shift in mining model. Botswana: Success story in diamonds. But country specific experience, and focused on forward linkages. Zambia: Many reforms, including fiscal reforms; Wants to add more value, notably though value addition. But exports from Zambia already in refined form. Still needs to refine strategic vision. Angola: Oil has been driving the economy. Many reforms, including in exploring more the mining route (hard minerals) as the next driver. But still an “extractive model”. Focus essentially on “Angolarization” and not so much on value addition. ECDPM

15. 3. East Africa: The new oil and gas frontier • Remained for long in the shadow of the rest of Africa • Recent discoveries of gas offshore in the great lakes changing the paradigm • Becoming a strategic location in particular for Asia • REC (i.e EAC still need to clarify strategic focus). Seems still left to countries, notably through CMV ECDPM

16. Mozambique: New legal framework and business climate to encourage exploitation and LNG production; Model quite open for exports. Also has a CMV. Uganda: Setting up of a refinery conditional upon starting oil production; Priority is production for local purposes; Tanzania: Long history of mining. Hydrocarbons is new. Kenya: More diversified economic base, but not the biggest mineral producer. Port facilities used for oil/ gas exports; infrastructure (Pipeline, port, logistics etc) being used But it seems that cooperation among nations are happening “independently of” strategic regional frameworks ECDPM

17. 4. Corporate visions: Are we there yet? • Are companies changing their business models to align to different levels of ambitions put forward by policy makers? • Without corporate visions that put such issues at the core of their business models, little chance any policy will succeed in practice. • Best case of where it worked? Botswana: At one point, DeBeers made the issue of forward linkages a key part of its strategic considerations. Working jointly with the Gov they managed to attract 16 investors in the cutting and polishing industry; creating some 3,000 direct jobs. • In S. Africa, there are also cases where companies found it in their interest to move up the value chain, in particular in backward linkages. ECDPM

18. Uganda: Policy was to develop refinery at the same time as oil extraction. Initially companies resisted. Govt insisted, took 2 years, now almost there; • But not always the case. Sometimes company may simply not be interested in expanding the scale of their local suppliers through local sourcing, because they have already established supply chains and markets; • But if things have to change, important to ensure alignment of visions (towards govtvision, not the other way round). ECDPM

19. 5. Strategic visions: But what next? • Address contextual challenges: • Provide incentives; get business climate right; reduce costs of doing business; improve competitiveness; work on product quality and reliability; provide cost effective infrastructure; access to finance; skills shortages; etc 2. Consultation and coordination is essential: • Within govt, among different departments • Between Govt and mining companies; • At regional level: regional integration is key for economies of scale, in particular regarding infrastructure and logistics; • Across regions: AUC is working towards continental integration; • At the international level: some global public goods such as transparency; governance etc require global efforts ECDPM

20. 3. Be clear about the policy measure taken and what it implies concretely. For example: local content/ indigenization policies are not the same as policies supporting beneficiation/ value added/ linkages devt. One does not automatically lead to the other; Ghana for ex. had a vision for backward linkages from gold (giving preference to local firms and employment) but these are not part of vision for local development; Eventually policies were driven by companies themselves but not by policies); 4. Be aware that different types of linkages require different types of capabilities 5. Most businesses are driven by profits, so if they think it makes business sense to develop linkages or to source locally, they will most likely do so. ECDPM

21. Thank you www.ecdpm.org www.slideshare.net/ecdpm