Changing world means mining will be held to higher standards
• Businesses in Africa cannot ignore moves towards equity, accountability and transparency
The Mining Indaba is over, but what should we take from it? Many of us tend to look at the nuts and bolts and figures, but there are bigger dynamics at play, not just in SA but throughout the world.
Alex Grose, the MD of the indaba, was right when he stated during the opening address that “mining is back up”. But back up in what sense?
The keynote speaker, Zambian economist Dambisa Moyo, gave a clear indication of things to come, mentioning that the outlook for populist movements was good. I can only agree — governments all over the world are capitalising on it.
Apart from this, the most important element from the indaba was the emphasis on the principle of shared prosperity and responsible investment. Partnering with black people, communities and workers in general is the backdrop for a more equitable future for all in Africa. A new era looms for business; companies will have to be smarter and not just concentrate on the nuts and bolts. Africa is about relationships — and these will have to be carefully managed.
In the past, miners and African governments got along just fine, in part due to the relative ease with which it was possible to “have it your way”. It was cheaper to pay $1m to a government official than it was to invest $50m in infrastructure development, social upliftment and equitable sharing of the profit. Money could easily buy approval. Mining companies often functioned in remote areas of Africa or in highly unstable environments, including rebelheld territories, conveniently away from the public eye.
The absence of social media allowed for a “no one really cares” attitude towards social, environmental and governance needs. In addition, international scrutiny was limited and there were no stringent measures in place to punish those implicated in bribery. Companies were immune to the shifts in international geopolitical dynamics.
Now a magnifying glass is trained on the industry. In the past the banking sector was able to stand on the sidelines and supply funding as required. This, too, has changed.
In a recent scathing article, Claude Kabemba of Southern Africa Resource Watch, who has witnessed the effects of mining on his home country, the Democratic Republic of Congo, lashed out at the banking industry in SA. He said that although all banks subscribed to the Code for Responsible Investing in SA, the UN Principles for Responsible Investment and the Equator Principles, there “is no compelling evidence that the banks undertake due diligence before funding mining projects”. Was this through ignorance or was it deliberate, he asked.
Many mining projects had negative social, environmental and governance consequences for affected communities, yet “most deals are mired in secrecy”, he concluded.
The industry should be concerned about the developments. In SA we have the ANC’s “ninepoint plan” for economic transformation. Finance Minister Pravin Gordhan has stated that there were concerns that some companies were still implicated in illicit financial flows, erosion and tax avoidance. President Jacob Zuma has said that the “scale of inequality and exclusion in the country had to be confronted urgently”.
It does not stop there. This sentiment is echoed across Africa, with President Macky Sall in Senegal pushing a new mining code. It will not be long before others follow suit.
The UN Economic Commission for Africa, one of the drivers of the African Mining Vision, which places long-term and broad development objectives at the heart of all policy making, has been relatively inactive since 2014 but is poised to make a comeback, with a new head to be appointed soon.
On the other side of the equation there are indications that US President Donald Trump is planning to issue an executive order targeting the controversial Dodd-Frank rule that requires companies to disclose whether their products contain “conflict minerals”. This could counter Africa’s efforts to take control of the mining industry and it could fuel greater instability.
These are dynamics that need to be taken into consideration. Grose was right: mining is back up — in the limelight.
The scuffle between Anglo American CEO Mark Cutifani and Mineral Resources Minister Mosebenzi Zwane sums up the mood in the industry. The one refers to “false and misleading images of the industry”, while the other believes the government should have free rein. One is supported by populist movements that are growing rapidly internationally and the other is supported by financial interests.
These are the geopolitical dynamics at play today. Are we sitting with an example of the prisoner’s dilemma, where one will eventually betray the other to serve their self-interest, or can we reach a win-win compromise solution?
The smart company of the future will embrace these challenges, but on its own terms. According to Daniele Vare, diplomacy is the art of letting someone else have it your way.
Although legal frameworks can provide a degree of certainty, they are no guarantee.
Unstable geopolitical dynamics could rapidly alter the way business is conducted in Africa. For business, it is wise to avoid trying to make it up as they go along, but to conduct a proper geopolitical risk due diligence to underpin a solid corporate foreign policy.
MANY MINING PROJECTS HAD NEGATIVE SOCIAL, ENVIRONMENTAL AND GOVERNANCE CONSEQUENCES FOR AFFECTED COMMUNITIES