1. THE AFRICAN MINERALS DEVELOPMENT CENTRE A case for mineral led development World Bank Group and AusAID Sponsored Pre-Mining Indaba Event 4 February, 2013 Cape Town, South Africa United Nations Economic Commission for Africa (UNECA) 1

2. Mining and development – Australia a typical case Mining has driven Australia’s industrial development and foreign trade Mining has built Australia and opened up the remote interior – ie provided infrastructure and services The industry is proudly Australian but real strength is not the resources Real strength lies in people, technology and world class research and training institutions ie high technical capacities Australia has localised cutting edge exploration, extraction and processing technologies, and is one of the biggest suppliers of mining technology and the world’s largest supplier of mining software (60%) Australia is a world leader in managing environmental impacts and its community engagement provides a global standard – ie good governance Key attribute of companies is fair dealing – ie equity and efficiency 2

3. Where is African mining? Industry is an enclave - has very weak links with other economic sectors, except with transport and energy upstream Firms import more or less all their inputs and export all output without much processing. Export trade figures indicate mining is major forex earner – but earnings do not enter national economy except for operational needs The most important skills are done by expatriate labor, increasingly now even low level jobs! Ownership of assets and operations are all in foreign hands Environmental and social responsibilities are not always honored - CSR is discretional and philanthropic! 3

4. WHAT IS THE AMV? Driven by persistent poverty and under development despite window offered by the exponential upswing in commodity prices – persisted since 2003. The African Heads of State and Government adopted the Africa mining vision (AMV) in February 2009 Its goal is to create a - “Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development” It seeks to integrate Africa's mineral sector into the continent's social and economic development process – a blueprint for minerals-led development 44

5. Key drivers – unequal benefits sharing Share of revenue by commodity 2005-2010 Average returns for the top 10 ($bn) Source: PWC review of global trend sin the mining industry (2011) Top 40 Results: Revenues up 32 Net profit up 156% Op cash flows grew 59%, Total assets →$1 trillion Net debt down to $46 billion The benefits are not being shared equally. Poverty is rampant and underdevelopment persists – Current approach cannot develop Africa; window of opportunity is not working out!

6. Amidst sustained demand for minerals 6 GoldLeadCopperIron oreNickelZincPGMsOther Source: Raw materials data (2010) Demand for mineral commodities has soared since about 2003 - China leads current global consumption

7. And a sustained commodity price boom 7 Selected commodity prices And mineral commodity prices have increased exponentially since 2003

8. The AMV principles for development 8 AMV Diversified & competitive industry with economic & social linkages Transparent, accountable sector with optimized rents used on economic and social development Good governance rooted in development with equity in benefits sharing among stakeholders ASM improves rural livelihoods & integrates into rural economy Environmen tal & social responsibili ty Knowledge economy at all levels of mining value chain thru enhanced human and institutional capacities The AMV requires a broad range of expertise and partners to implement – the Heads of State asked ECA, AUC and ADB to establish the African Minerals Development Centre (AMDC) to achieve this

9. AMDC work streams Policy and licensing Development Goal – The mining sector in Africa supports a broader share of social and economic development objectives Mineral policies lack dev. objectives –focus is on tax & equity participation Fiscal terms are poorly designed Transfer pricing is common – Africa losing $50 bn per year! Embed dev objectives in policy & legal frwks Optimise NPV of resource rents Legislate against transfer pricing Build value chain analysis capacity Establish SWFs Explore infrastructure funds Establish long term community dev funds Invest in broader national capacity building 9 NowMedium termLong Term

10. AMDC work streams Geological and mining information systems Development Goal – Enhance use of geological and geospatial information to manage long-term developmental outcomes Geo mapping and exploration activities are very limited Geo information data bases are poor Geo spatial data manipulation capacities are weak Improve national geological surveys Increase mapping and exploration activities Strengthen geological and mineral exploration databases Improved quality of pre-competitive geological exploration activities Improved national capacities to manage geological and geospatial information objectives 10

11. AMDC work streams Governance and participation Development Goal – A socially and environmentally accountable sector that provides broad benefits to all stakeholders Weak transparency and s/holder participation Regulation and management of environ and social impacts is poor Human rights are violated Power asymmetry prevent equity in distribution of benefits Improve policy and institutional space for transparency and participation Build stakeholder capacities to understand the mineral value chain Embed CSR in long term development f/works Improved equity in benefit sharing eg with communities and local authorities Improved human rights in Africa’s mineral sector Improved social and environmental management of the sector in Africa 11

12. AMDC work streams Artisanal and small-scale mining Development Goal – Increased income for the ASM sector leading to improved livelihoods of rural communities Sector is poorly regulated often with illicit activities Most operations are subsistent and not viable Technical skills and technology use are poor Environmental and social management is poor Upgrade knowledge, skills and technologies in the ASM sector Develop programmes to improve viability of ASM operations Embed ASM into rural development strategy or local economy A viable ASM contributing to local and national economy Strengthened skills and capacities of ASM operators Reduced negative environmental, health and welfare impacts from ASM 12

13. AMDC work streams Development Goal - Mining sector makes a significant contribution to African resource-based industrialisation and social economic development Sector is poorly linked to other economic and social sectors There is little R & D into new processes and creation of mineral value added Poor infrastructure limit opportunities Need policies that encourage innovation and beneficiation Local content policy Link beneficiation with industrial dev and other sector strategies Explore collateral infrastructure & mining investment eg SDIs Greater diversification of national economies Improved economic linkages within the national economy Improved availability of infrastructure for collateral economic and social use 13

14. AMDC work streams Building human and institutional capacities Development Goal – to create a knowledge based a mining sector that underpins an internationally competitive African industrial economy Mineral development institutions are currently weak Human skills are poor at various levels of the mining value chain General stakeholder understanding of value chain is poor Diversify E & T funding to include private sector Include development objectives in mining E & delivery Build stakeholder capacity to participate in decision of the mining value chain A mining sector with a competitive skills base and high productivity levels Strengthened capacities of stakeholders to make decisions affecting the mineral value chain 14

15. 15 Who must do all this? AMDC is being implemented as an AU project of the member States (AU) by the AUC, ADB and ECA and will report progress to Heads of State every two years through AU Conference of African Mining Ministers Extensive partnerships are envisaged (many under discussion) eg with AMSI, World Bank (several levels), private sector eg RMDI, research institutions, CSOs, etc AMDC will not duplicate existing expertise, rather coordinate this for the benefit of the African mineral sector. To be financed by member States and several key financing partners, notably Australia, Canada, Sweden and World Bank Will start operations in third quarter of 2013 15

16. 16 Key drivers..success factors A shared goal and belief that mining in Africa has to play a developmental role as has happened elsewhere Strong leadership and ownership by African governments over development outcomes A shared understanding of the roles of different stakeholders and space for the roles to be played A shared understanding of the key drivers and and the associated benefits and costs A shared understanding that implementing the development outcomes is the responsibility of all stakeholders Strong partnerships and ownership of outcomes by all stakeholders 16

17. 17 THANK YOU ! THE AFRICAN MINERALS DEVELOPMENT CENTRE A Tool for Structural Transformation! And Development www.africaminingvision.org