Africa’s mineral wealth – blessing or curse?

Africa is undoubtedly a rich continent, endowed with some of the world’s most sought after precious metals.

According to information on the website mbendi.com, Africa produces more than 60 metal and mineral products and is a major producer of several of the world’s most important minerals and metals including gold, PGE’s, diamonds, uranium, manganese, chromium, nickel, bauxite and cobalt.

Platinum, coal, and phosphates are also mined on the continent.

“It is interesting to note that Africa’s contribution to the world’s major metals (copper, lead and zinc) is less than 7%. As a result silver production is low (less than 3% of the world’s production) due to the fact that most silver is produced as a by product of lead – zinc and copper mining,” it says.

It adds that, although underexplored, Africa hosts about 30% of the planet’s mineral reserves, including 40% of gold, 60% cobalt and 90% of the world’s PGM reserves – making it a truly strategic producer of these precious metals. And africaminerals.com also reports that some of the largest, and richest,  mineral deposits in the world have been found in Africa.

Mark Jeffery writes that mining has come to dominate the export earnings of many African countries. In 2005 minerals accounted for more than 80% of exports in Botswana, Congo, DRC, Guinea, and Sierra Leone and more than 50% in Mali, Mauritania, Mozambique, Namibia and Zambia. By 2008 sustained demand from a burgeoning Chinese economy had seen prices for minerals reach new heights.

Despite this wealth, it is known that Africa is poor, while the companies mostly foreign that exploit these minerals on the continent are very rich.

Jean Noel Francois, the Acting Director, Department of Trade and Industry at the African Union (AU) Commission has said at the second conference of African Ministers responsible for mineral resources and development December 12, 2011 in the Ethiopian capital Addis Ababa, that even though Africa’s mineral resources are fuelling growth and development in many industrialised and emerging economies of the world, Africa still remains poor, under-developed and dependent on donor assistance for national budget support.

He further reiterated the fact that Africa consumes very little of its own mineral resources and exports most of it as raw materials, “with little or no local value addition and beneficiation.”

Dr. Stephen Karingi of the Economic Commission for Africa (ECA) cited figures showing how much the mining companies are making in Africa. “The  figures are there for all to see,” he said, “in 2010 alone, net profits for the top 40 mining companies grew by 156% to $110 billion and the net asset base of these companies now exceeds $1 trillion.”

To address this inequality and depressing economic situation where Africans live with and walk on wealth and still remain poor, among others African Head of States adopted the African Mining Vision (AMV) after the very first meeting of African mineral resource development ministers held in Addis Ababa in late 2008. The AMV was subsequently endorsed by the African Heads of State and Government at the February 2009 African Union Summit.

And according to Jeffery, what sets the AMV apart is that it extends policy beyond a narrow focus on mining itself. For the AMV there is more to it than to managing the extraction of resources and then finding optimal ways to collect and apportion the revenue.  It is not that these things are not  important – rather, the AMV approaches the issue differently. Central to the AMV approach is to put development outcomes at the heart of mineral regimes.

And at the second conference of African Ministers responsible for mineral resources and development, Senior Officials made the following recommendations:

(i)    Member States should reform the fiscal framework in order to optimize  benefits from the mineral sector;

(ii)    Member States should explore the possibility of renegotiating existing contracts to secure a fair share of the rent;

(iii)    Member States should align their development strategies to their long term national development goals;

(iv)    Member States should ensure transparency in the collection and
use of mining revenues;

(v)    Governments could explore the use of equity participation in mineral ventures to capture a greater share of benefits;

(vi)    Governments in collaboration with partners should build capacity of oversight bodies.

African leaders can turn the resource curse into blessings, by implementing the AMV – which is seen as a challenge.

It is however not all gloom for Africa, as Dr. R. Anthony Hodge has argued. The leading authority on sustainable development in mining has said in an article publishd in the ‘Sunday Monitor’, a Ugandan publication, that more than $5 billion have been devoted to new mining projects in Ghana in the past two decades. Dr. Hodge is also the President of the International Council on Mining and Metals (ICMM). According to him, “during that time, the national poverty rate has fallen 12 percent.”

He said of Ghana’s 138 districts, its four mining districts have the lowest poverty levels in the country outside the capital, Accra, adding “effective disease control programmes have been a key component of this success.”

Mining has been going on in Ghana for over 100 years, and gold is the main precious mineral that is mined in the country.

Commenting on mining companies’ contribution to Ghana’s healthcare system, Dr. Hodge said between 2005 and 2007, in Ghana’s Obuasi district, the mining firm AngloGold Ashanti developed a malaria control programme that brought the incidence of malaria down by 73 percent – with an average monthly reduction of 4,550 cases.

He also cited the Lubombo Spatial Development Initiative — a partnership between mining company BHP Billiton, the governments of Swaziland, Mozambique, and South Africa, and local organisations –  which has helped reduce malaria deaths by nearly 80 percent in southern Africa.

“This initiative is widely regarded as one of the most successful public-private partnerships to control disease and drive regional economic growth,” he said, adding, “such examples show that mining firms can make a significant contribution to both a country’s economic development and its social well-being.”

It is beleived that the AVM will serve as the catalyst to spur major reforms in the mining sector in Africa, that would subsequently make it possible for African countries to derive the benefits due them from the mining industry and use that to drive economic and social development.

By Emmanuel K. Dogbevi

Email: [email protected]