The History of Mining in Africa
An evolving mining sector: historic enabler of progress in Africa.
Africa has long exploited its mineral resources. In fact, the oldest mines in the world are to be found in Africa such as the Ingwenya mine in Swaziland, which was exploited 20,000 years ago for iron ores for rock paintings. In addition, there are thousands of ancient gold and base metal mines across the continent.
In general these mines were integrated into the local pre-colonial economies, providing essential raw materials and high value goods for trade (gold, copper). With European colonial conquest, African mining became integrated into the economies of European countries, providing raw material for their industrialisation.
With independence, Africa’s leaders became preoccupied with enhancing the contribution of the minerals sector to the economic and social development of the continent. In the 1960’s and 70’s, in line with the then prevailing strong assertion of national sovereignty as a follow-up to the end of colonialism, the dominant thinking was that this development could be achieved only if the state had significant or, indeed, full ownership of mining enterprises.
That thinking led to the nationalization of large private companies. In a number of countries, such as Ghana, Guinea, and Zambia, the State took over control of the industry. Hopes were raised that the nationalized sector would be the engine of growth and rapid industrialization, which would provide more significant economic benefits to the nation and improve livelihoods of the people.
However, among others, the following factors contributed to the stagnation and, even, decline of the nationalized mining industry: Political interference in business decisions; lack of or inadequate respect for managerial and technical expertise; low reinvestment leading to capital consumption; inability to access finance; and depression of mineral prices.
By the late 1980’s, much of Africa’s mining industry was in a state of crisis and underperformance. This forced government attitudes to change. There was a fundamental paradigm shift and redefinition of the role of state, from 100% ownership and control, to deregulation and almost complete withdrawal. Many African countries embarked on a radical reform process with the aim of attracting foreign direct investment to rehabilitate their moribund minerals and mining sector.
To this end, state enterprises were privatized and efforts and resources were deployed to improve the investment climate. New mineral policies, and legal, regulatory and administrative frameworks more favourable to private investors were formulated and established. Emphasis was put on security of tenure and strengthening of mineral rights. Comprehensive packages of incentives for the mining investor in terms of reduced taxes and royalties were also approved. Associated with a rise in mineral prices, this resulted in a mining boom, increased foreign direct investment and an influx of mining capital, technology and skills.
However, by the late 1990s and at the start of the 21st Century, critics started to argue that the resource boom and the ensuing efficiency gain and rise in export earnings in many mineral economies in Africa were producing questionable welfare gains and development outcomes. They considered most reforms narrow minded and more geared towards attracting foreign investment and promoting exports and less towards fostering local development. It was further argued that the reforms were sectoral-centered and did not take into consideration macro-economic objectives that could spur broader developmental objectives and that they only favoured FDI over local capital development.
Others pointed out that although the benefits of mining to certain national economies could be evident, local costs (environmental impacts and social and cultural disruptions) associated with mining especially to local communities were not being adequately compensated for. Criticism was also vented on the magnitude of special incentives offered to mining companies, which arguably reduce the share of rent on which African governments depend to fund their social and development programmes. There is also the argument that mining has not fulfilled its poverty reduction role and poverty reduction has not been mainstreamed into mining policies, often due to weak linkages into the local, regional and national economies.
The fact that most of the reform process was government-centered has also been a cause of concern. It has been argued that as a reflection of asymmetrical power relations, processes for communication, consultation and decision-making would tend to favor bipolar initiatives (government and private sector) and outcomes and would not be sufficiently representative and participatory. Thus, development outcomes could be narrow-minded and only take into consideration government and mining companies’ perspectives, without due regard to the views and aspirations of local communities and civil society at large.
In response to new pressures on the minerals industry for an equitable share of benefits and maximization of local impacts for sustainable development, the minerals industry has started searching for a new social contract for mining that could result in integrated development, with diverse economic linkages and increased social well-being, livelihood security and reduced vulnerability of poor communities, but bearing in mind the localised nature of mineral endowments which requires the balancing of local benefits with sustainable national poverty alleviation strategies. New contractual arrangements and legal instruments to facilitate increased participation by local communities and other stakeholders, as well as new revenue (derived from royalties, income tax, land tax and lease rents, etc) distribution mechanisms for sharing, at local level, portions of centrally collected rents, are being considered as responses to the challenges posed by this new development paradigm.
With the same objective, tri-sector-partnerships involving government, the private sector and local communities are being tested to improve government, private sector and local community relations and the social and development outcomes of mining at local level. The same applies to public participation to secure consent for government and industry actions. However, within any polity, a delicate balance has to be struck between resource rent disbursements to resource-rich and resource-poor regions. Ultimately, both are served through investment into physical and human infrastructure, to underpin future national competitiveness.
Some mining companies are departing from their previous approaches to development and community relations, variably characterized as “Strictly business”, and “Practical partnerships” to adopt “less instrumentalist and more holistic” corporate social responsibility charters and development approaches that have a better potential to significantly uplift and empower local communities. Also, there seems to be a broader understanding that sustainable development in the mining sector means that mineral development around the globe should be sustainable in environmental, economic and social terms, taking into consideration market dynamics, technological innovation, community involvement, health and safety, environmental impacts, and institutional setups. Thus, it is beginning to be understood by the corporate world that successful mining companies and industries will be assessed according to a triple bottom line, namely financial success, contribution to social and economic development, and environmental stewardship.
This principle guided the Global Reporting Initiative (GRI) in preparing the mining and metals sector supplement of its reporting guidelines. The GRI guidelines for mining were completed in 2004 and contain social, environmental and economic indicators that cover several aspects including revenue capture, management and distribution; value-added disaggregated to country level; compensation payments to local communities; employee benefits beyond those legally mandated; and, description of equal opportunity policies or programmes, to name a few.
Excepts from Africa Mining Vision, adopted by the African Union (AU).