Strategic guideline document

Preamble

The massive increase in emerging countries’ demand for raw materials has created an unprecedented situation. There is pressure on supplies and a sharp rise in metal prices, with an average threefold increase since 2002.

The market capitalisation of the major transnational mining corporations has followed this trend. This is
evidence that the rise in metal prices is likely on average to be a long-term one.

The upward revaluation of mining assets held by companies and states increases the competition between operators to acquire rights to new mineral reserves and to secure transport routes. This global competition generates tensions of various sorts - commercial, territorial and social.

In the rush for resources that are known to be finite, Africa is the object of flattering attention. Those states whose economies depend on this primary sector see the prospect of having greater resources to finance their societies in their movement towards sustainable development. But for this opportunity to be seized, a number of challenges need to be met.

1. The distribution of the profits from extracting resources between governments, mining companies and social groups is the subject of complex, difficult negotiations that involve stakeholders with highly asymmetrical power within a changing context: historic or new industrialised countries, global industrial groups and developing countries. African leaders note that the contractual frameworks established in the past with their foreign investors do not enable them to take advantage of price rises; they are now seeking to change these conditions in order to share the economic rent from mining more equitably.

2. The proper use of mineral resources for a country’s long-term economic and social development is not automatic. GDP growth in the primary sector does not necessarily shift an economy towards processing and services, job creation and more widely shared growth. The reasons are:
 An economic model that is a self-contained concession or platform is often the rule;
 The poorly managed injection of large amounts of foreign currency may have counter-productive macro-economic effects;
 The allocation of the new resources to appropriate priorities for development is not always subject to national debate and sufficient control.

3. Insufficiently controlled extraction and processing of resources cause externalities both environmental (destruction of forest cover, water pollution, etc.) and social (working conditions on informal or industrial mining sites, impact on local communities).

In all, the known and/or potential resources of a country’s subsoil may be at the same time a source of difficulties and fragility and also a hope for the future.

Governments and major companies are the main players in the mining sector. Whatever their sovereign rights, producer countries in the South need international companies, which possess the technology and capital, to make good use of some of their resources. Governments have the double responsibility of negotiating mining contracts and properly managing the financial returns. But the constraints of global competition are considerable. A fair equilibrium can only be achieved if the international community involves itself in the matter. Turning nonrenewable natural resources into assets for development (shared growth, political stability, sustainable environment, peace) requires binding collective commitments. The responsibility of the donor country community is involved in two ways: (i) economic - the security of their own supplies via the work of the international companies based in their countries, and (ii) international mobilisation for development - more than official development assistance, which is the catalyst, it is a tax system based on dynamic local economies that will finance development in the long term. In this respect, the mining and energy sector is a major factor. It requires careful discussion of the consistency of policies for growth and development.

In Africa, French companies hold leading positions (oil, uranium, nickel, manganese). Deeply involved in local economies, they are major stakerholders in those economies and their development. France also offers training courses in earth sciences and oil and mining engineering that are open to non-nationals. Our research institutes (Ecoles des Mines, Agency for Geological and Mining Research (BRGM), Research Institute for Development - IRD) are well placed to support the acquisition of the new knowledge required to exploit and manage Africa’s resources. Not least, French international solidarity organisations work alongside their partners in the South on all the development problems that overlap with the extraction of mineral resources.

The above questions mainly concern the extraction of non-energy raw materials (bauxite, iron, copper, cobalt, gold, diamonds, etc.). These are areas immediately affected by changes in the international environment, in

which African leaders express an urgent need for cooperation. The hydrocarbon sector is also booming, as crude oil prices rise. There is a common core of knowledge between the mining and oil industries, particularly in training; consequently it is important to remain attentive to any needs that may occur in this field. But the political and economic aspects of the two businesses are quite different:
 In sub-Saharan Africa, hydrocarbons are exploited by international companies with little involvement in the host countries’ economic and industrial fabric. But existing productionsharing rules enable these countries to enjoy considerable income when prices are high. After many historical controversies, there is now an accepted international practice in oil for sharing the economic rent between the host country and the operators.
 In the case of the mining industries, the economic, social and environmental success of development projects depends on proper cooperation between governments and operators. These projects generate infrastructure for the country’s development, help train managers and qualified staff in a range of disciplines, and contribute to the creation of local sub-contracting firms. In addition to their financial effects, their impact in terms of integration and impetus for development is considerable, as may be seen from the examples of Botswana, Brazil, Chile, Mauritania, Morocco, etc.

Document

Mineral resources and development in Africa - (PDF, 4.9 Mo)