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

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

2. Structure of presentation
1. Where do we stand in the policy debate?
2. Africa Mining Vision: The Overarching Framework
3. Regional Perspectives: Where do we stand?
4. Corporate vision: Are we there yet?
5. Strategic visions but what next?
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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
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4. Key reforms and key drivers
Contract
(re)negociatio
ns
Skills,
technology,
R&D,
Innovation
Legal and
regulatory,
including
fiscal
Key Reforms
Local content
requirements;
industr;
beneficiation
Geological
knowledge
Addressing
soft and hard
infrastructure
deficits
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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.
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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.
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7. How it works?
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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
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9. 3. Regional Outlook: Where do we stand?
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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.
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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
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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;
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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.
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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.
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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
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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
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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.
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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 govt vision, not the other way round).
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19. 5. Strategic visions: But what next?
1. 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
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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.
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21. Thank you
www.ecdpm.org
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