The wealth that Africa is letting escape

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The African continent is one of the world’s biggest mining areas. As such, it should make good use of the upsurge of prices, which affects the majority of ores. Unfortunately, it’s not so simple.

By a stroke of luck, these last years were marked by an upsurge in the price of mining products which should directly benefit Africa, which extracts thousands of tons each year. Along with Australia, Canada, and South America, the continent is one of the greatest mining areas of the world. Ore extraction is a predominant activity, ore being the primary export in almost half of the African countries, among them South Africa, Botswana, the Democratic Republic of the Congo (DR Congo), Mali, Guinea, Ghana, Zambia, Zimbabwe, Niger, Tanzania, Togo, and Mauritania. Consequently, other countries like Angola, Sierra Leone and Namibia have also developed a significant mining sector.

Most of these countries owe this development to the modernization of their mining codes in the first half of the 90’s. As a result, if the production totals of all countries are added together, the continent is positioned as the top world producer of several mining products such as platinum, gold, diamonds, phosphate ore or manganese ore, and possesses first-rate reserves of bauxite, uranium, or coltan (columbite-tantalite)—a mineral which is a key component of smart cards. Half the world’s gold reserves are found as well in the region of Witwatersrand, in South Africa. To a lesser degree, the continent also extracts copper, zinc and iron ore, whose prices have skyrocketed in recent years on the international markets, pulled by worldwide demand, in general, and industrial demand in particular, notably that of China. Between 2000 and 2006, the price of gold rose from 260 dollars per ounce to more than 700 dollars per ounce; the price of platinum leaped from less than 400 dollars per ounce in 1999 to more than 1,200 dollars in early July 2006; and the price of steel (most manganese is used in steel) has tripled since 2001, when the price of uranium was multiplied by five.

In Africa, these soaring prices mainly led to a surge in prospecting and should accelerate the opening of new mines, notably those with the highest extraction costs. As proof of Africa’s importance on the global scale, the continent allegedly benefitted from 17% of global spending on mining research in 2005, behind Australia (23%) and Canada (19%), according to one study by the Southern African Development Community (SADC) and the European Union. This is to the satisfaction of the handful of multinational companies that dominate the mining sector today, such as some South African companies headquartered in Johannesburg, and notably AngloGold Ashanti, a partnership between the Ghanian group Ashanti and mining giant AngloGold. Others, like AngloAmerican, premier mining group of the world today headquartered in the United Kingdom, also originated in this part of Africa. One of its principal subsidiaries, De Beers, still has its head office there, and controls the diamond commerce of the region, and notably, in Botswana, where it is a shareholder and manager of the country’s only diamond-mining company.

Despite these few exceptions, the main multinational companies operating on the continent are Australian, Canadian, British or American. Besides South Africa, it should be noted that Africa does not boast any such mining giant as could be expected from a continent so rich in natural resources. Australia, another mining stronghold, has long been home to some of the world’s leading mining groups, such as Rio Tinto and BHP Billiton, a merger of Australian BHP and the South African Billiton. Both have corporate headquarters in London and Melbourne. The relative absence of an African mining group goes hand-in-hand with the very poor development of the local industrial fabric. It is difficult to say which led to the other.

Without transformation, mining yields little.

The mining sector in Africa, although it represents a very significant percentage of exports in a score of countries, contributes relatively little to local economies. For example, in Namibia, mineral extraction, primarily diamonds, constitutes about 55% of all export value, but represents only 10% of the GDP and employs less than 5% of the population. In Zambia, a producer of copper and cobalt, mining activity supplies three-quarters of export value but represents only 3 or 4% of the national GDP and employs about 11% of the working population, as much as the manufacturing sector. In 2002, at the height of the Morila gold mine, one of the most significant in Africa and in the world, the sector represented scarcely more than 11% of the national GDP, while in the same year, gold constituted 64% of the country’s total exports. Classic explanations of this phenomenon include the rarity of local mining groups and the absence of industries transforming the existing natural resources. As a result, the significant profits realized by mining are not reinvested in the region; foreign groups have a tendency to call on foreign banks; and mining products are exported in raw form. Many experts reiterate the explanation furnished by Antonio M.S. Pedro, creator of a study on mines and economic growth for the African Economic Commission: “Certain developing countries are not persuaded of the role of mines as growth drivers. That explains why their mining activity is typically capital-intensive, largely foreign-owned, managed by expatriates, and features imports (principally equipment) purchased abroad. They also maintain that the output, job, and revenue multipliers and training potential are lower in the mining sector than in other sectors like manufacturing.”

How to protect the environment

Without transformation or industrial use, Africa will not really benefit from mining activity as it is too cyclical and ultimately not profitable enough. Worse still, some even suggest that mines would be harmful. This is notably the opinion of creators of the company No Dirty Gold, an initiative launched by the NGOs Oxfam and Earthworks and supported by dozens of village community groups. The campaign has a dual purpose: to raise consumer awareness on the extraction of gold commonly featured in jewelry, and to lobby the large international mining groups to persuade them to respect the environment and the local populations. “I recently visited the new mine operated by the Newmont Group in Ghana”, explained Radhika Sarin, international coordinator of the campaign. “During the first phase of mine development, 10,000 farmers were displaced or lost their land, with no offer of replacement land. During the upcoming second phase, 10,000 more will be affected.”

This campaign against dirty gold follows those led some years ago against blood diamonds, those diamonds that finance or financed armed conflicts in Sierra Leone, the Democratic Republic of Congo, or Angola. Other campaigns involve other ores, like coltan, which financed the DR Congo conflict. Another campaign goal is to raise awareness of the consequences of mining on the environment and the local way of life, as mining uses a lot of chemical products, sometimes erodes soil, and upsets local culture. “Often, huge reservoirs of water are built near mines, because the water is used in the gold extraction process”, notes Radhika Sarin. “The most serious consequence of the presence of these stagnant waters around the mines is the development of malaria. Certain companies, such as AngloGold Ashanti in the Obuasi mine in Ghana, are mindful and lead an active policy against malaria. Others do nothing.” Mining consequences on health and the environment are scarcely made up for by the improved living conditions of local populations. Some work at the mine, but modern mining methods strongly cut back on the number of non-qualified employees. Mainly, merchants benefit from the workers’ arrival. Still it should be remembered that after twenty years at most the mine will close, and the village will find itself once again without resources if no other activity is developed in the meantime.

Multinational mining companies take these criticisms increasingly into account in the interests of their corporate image. Mark Moody-Stuart, president of AngloAmerican, told BBC in a recent interview: “We employ a large number of people in Africa. And we pour a total of almost 3 billion dollars into them, which is more than what we give our shareholders. Of course, as a business, we have to make money. But it doesn’t mean that there are no benefits for the other people involved, like the government, our employees, the suppliers, and others.” In spite of this, and despite the enormous possibilities that exist, ore extraction has still not sparked—or even helped—Africa’s economic development, while countries like Australia, Canada, and to a lesser degree, South Africa have leaned on this sector to build economies that are among some of richest in the world today. After all, even if the mines, like petrol, are not at all a solution to the problems of the continent, they bring in currency and revenue to the State, so many potential levers for governments that would not have decided to “rest on their mines”.

“Ces richesses que l’Afrique laisse échapper”

Frédéric MAURY

Jeune Afrique, 30.07.2006.

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