DECEMBER 2013 OPTIMA - angloamerican.com/media/Files/A/Anglo-American-PLC-V2/... · its open pit Venetia mine in Limpopo Province, South Africa. The $2 billion investment will extend

OPTIMADECEMBER 2013

AFRICARESURGENT

THIS TIME IT’S DIFFERENT?

INTERVIEW: BANK OF BOTSWANA GOVERNOR, LINAH MOHOHLO AFRICA RESURGENT: PRIVATE SECTOR DRIVES CHANGE LAND STEWARDSHIP: A DUTY OF CARE ELEMENT 6: A MARKET LEADER IN SUPERMATERIALS

02 | OPTIMA | DECEMBER 2013

WELCOME

Once one of the world’s poorest countries, Botswana has become a model for economies that want to ensure their resource riches are a blessing and not a curse. And though she’d be the last person to claim it, Linah Mohohlo, Botswana Reserve Bank Governor since 1999, can take some of the credit for this achievement. In conversation with Optima, she says “Africa has finally woken up” – adding that the continent’s future progress “rests on the mobilisation of knowledge”.

Paul Collier writes here that he is optimistic Africa will avoid repeating historical mistakes “because there’s a strong awareness across the continent of the limitations of past patterns, and so there is much stronger scrutiny of government, and much more vociferous demands that they do better”.

Mining is critical not just for Africa, but for everyone on the planet. Along with agriculture, which it helps support, mining is one of the world’s two basic industries. As the article on land stewardship demonstrates, the industry is endeavouring to leave not only as small a footprint as possible, but a positive legacy for generations to come.

One of the areas that has distinguished Anglo American over the years is our determination to retain a strong in-house technical capability. Innovation continues to transform our business – as evidenced by the breakthrough scientific development of supermaterials by Element 6 (page 30), or the tactical introduction of automation in mines to improve safety and efficiency (page 38).

CONTENTS

MARK CUTIFANICHIEF EXECUTIVE, ANGLO AMERICAN

22 AFRICA: WHERE NEXT?The private sector is key to Africa’s post-commodity super-cycle progress.

30 IN OUR ELEMENTSynthetic diamonds and the origins of the universe: supermaterials company Element 6 is all about delivering extreme performance.

Editor-in-chief: Norman Barber

Anglo American plc 20 Carlton House TerraceLondon SW1Y 5ANEnglandTelephone: +44 (0)20 7968 8888E-mail: [email protected]

Optima is produced by Redhouse Lane, 14 Bedford Square, London WC1B 3JA, England

Redhouse Lane production teamEditor: Richard LomaxArt director: Colin GoadDesigner: Jorge ValleProject manager: Rosamund Croft

Distribution enquiries: Bev [email protected]

38 AUTOMATED REALITYAutomation is making mining jobs safer and more satisfying, but operator creativity is still king.

04 DIGESTSustainability recognition, a mining industry first, and an historic relocation for the diamond trade.

14 LAND STEWARDSHIPThe next big issue for the mining industry is a crucial differentiator for Anglo American.

44 ANY OLD IRON? Its discovery and use defined a pre-historical age, and from cars to skyscrapers to surgical instruments, versatile iron still underpins our lives.

MATTHEW PARRISMatthew Parris is a political columnist for The Times of London and a broadcaster for the BBC. He was a Conservative Member of Parliament in the UK for seven years, and worked for Margaret Thatcher when she was Leader of the Opposition. In 2010 he won the British Press Award for Columnist of the Year. His acclaimed autobiography Chance Witness (2002) won the Orwell Prize. SEE PAGE 48

03 DECEMBER 2013 | OPTIMA |

CONTRIBUTORS

48 BOOK REVIEW Capitalism is too risky to be left to capitalists. A new book debunks old myths about the public and private sectors.

OTHER CONTRIBUTORS BRUCE KENNEDY (PAGE 30); ADRIAAN LAUBSCHER (PAGE 38); BEN McCORMICK (PAGE 44);

The opinions expressed by contributors do not necessarily represent the views of Anglo American. Provided that permission has been obtained from the editor-in-chief, and on condition that acknowledgement is made to Optima, publications (print and online) are welcome to reproduce articles in whole or in part and to use illustrative material, except where copyright © is especially reserved.

06 SHINING EXAMPLEDiamonds and good governance have transformed Botswana from one of Africa’s poorest countries to one of the world’s fastest-growing economies. In an exclusive interview with Optima, Botswana Reserve Bank Governor, Linah Mohohlo, discusses how the country has avoided the ‘resource curse’ and is ensuring that the diamond dividend is reinvested in Botswana’s future.

CORBIS

LINAH MOHOHLOLinah Mohohlo has played a key role in one of Africa’s most successful economies as Governor of Botswana’s central bank since 1999. She is a member of the Africa Progress Panel of ten distinguished individuals, working for equitable and sustainable development in Africa. Her many awards include The Banker’s Central Bank Governor of the Year (2001) for Africa and the Middle East and The African Times Africa Leadership Award (2007). She has studied at the University of Botswana, George Washington University and the University of Exeter. SEE PAGE 06

MARTIN BEAVERMartin Beaver is a freelance writer with a special interest in sustainable development issues, which he has covered for companies such as Anglo American, Centrica, De Beers, Lloyd’s Register, National Express and Shell.SEE PAGE 14

PAUL COLLIERPaul Collier is professor of economics and director of the Centre for the Study of African Economies at Oxford University and a former director of the Development Research Group at the World Bank. His award-winning book The Bottom Billion offers solutions to the challenges facing the world’s poorest countries. His latest book Exodus (2013) examines the costs and benefits of migration. SEE PAGE 22

OPTIMA NEWS


Digest A look at recent news from Anglo American and the mining industry.

SUSTAINED EXCELLENCE

EXCITEMENT OVER BORING MACHINE

The United Nations has announced that companies may be able to apply for deep seabed mining licences from 2016.

The UN’s International Seabed Authority (ISA) has so far issued 17 exploration permits covering parts of the Pacific, Atlantic and Indian oceans, and is processing another seven applications.

The South African deep-sea mining industry is currently quiet, but has great potential. It is thought that marine gravel beaches along and near the west coasts

of South Africa and Namibia hold the world’s most valuable gem-quality diamond resources. Debmarine Namibia already has five ships mining at depths of 90 to 140 metres.

The ISA has highlighted the importance of environmental safeguards during seabed mining operations.

The seabed is ‘agitated’ during mining operations, liberating nutrients and stimulating the sea life of that area, without damaging the environment.

In a first for the mining industry, Anglo American's Metallurgical Coal business has begun using a tunnel boring machine for drift excavation at the Grosvenor coal project in Moranbah, Australia.

The machine is being used to excavate two drifts: one for transporting coal from the longwall to the stockpile on the surface, the other to provide personnel and vehicle access.

It is expected to excavate drifts at least three times faster than a road header. It will reach the coal seam, 160 metres deep, in early 2014 – bringing the project a step closer to longwall production in late 2016.

MARINE MINING ON THE HORIZON 160 m

DEEP

Anglo American’s sustainable development performance has been recognised by both the Dow Jones Sustainability Index 2013 and the Carbon Disclosure Project’s Global 500 Climate Performance Leadership Index (CPLI).

This is the 11th consecutive year that the Dow Jones Index, which serves as a benchmark for sustainability-conscious investors, has recognised Anglo American for excellence in sustainability.

The CPLI highlights FTSE Global Equity Index Series-listed companies with strategies committed to improving their environmental impact. This is the second time Anglo American has featured on the CPLI.

“We are delighted that the CDP has recognised our efforts again,” says

Mark Cutifani, chief executive of Anglo American. “In 2012 we reduced the amount of energy we used by five per cent against our business as usual plan, we are on track to reduce our emissions footprint by 3.4 megatonnes a year by 2015, and we are halfway towards our 2020 water savings target of 14 per cent.”


Increasing use by China and India will make coal the key fuel for the global economy by 2020, according to consultants Wood Mackenzie.

By 2020, the firm expects global coal consumption to rise 25 per cent to 450 billion tonnes of oil equivalent – overtaking oil, at 440 billion tonnes.

China’s domestic gas output is limited and liquefied natural gas imports are more costly than coal, leaving the country with few alternatives to coal.

“China’s demand for coal will almost single-handedly propel the growth of coal as the dominant global fuel. Unlike alternatives, it is plentiful and affordable,” says William Durbin, president of global markets at Wood Mackenzie. “If you take China and India out of the equation, under current regulations, coal demand in the rest of the world will remain at current levels.”

COAL TO OVERTAKE OIL?

De Beers has begun constructing a new underground diamond mine beneath its open pit Venetia mine in Limpopo Province, South Africa. The $2 billion investment will extend the life of Venetia beyond 2040, producing an anticipated 96 million carats and supporting 13,000 jobs – 8,000 directly and 5,000 across the supply chain.

When underground production begins in 2021, the new underground mine will replace Venetia’s open pit as South Africa’s largest diamond mine.

South Africa's President Zuma turned the first earth at the site on 22 October.

The new Diamond Trading Centre in Gaborone, capital of Botswana, held its inaugural Sight on 11 November – the first De Beers Sight to take place outside London since 1934.

The historic move is part of a 10-year sales agreement with the Government of Botswana.

Of the 81 De Beers Sightholders, 21 already have factories in Gaborone. De Beers owns sorting and valuation facilities in the city, and the country is also home to Jwaneng, the world’s richest diamond mine. Jointly owned by De Beers and the Government of Botswana, Jwaneng yields 13 million carats of diamonds a year.

25%GLOBAL COAL RISE

DIAMOND TRADE RELOCATES AFTER 79 YEARS

$2 billionINVESTMENT INSOUTH AFRICA

NEW LEASE OF LIFE FOR VENETIA

“China’s demand for coal will almost single-handedly propel the growth of coal as the dominant global fuel".William Durbin, president of global markets at Wood Mackenzie

160 mDEEP


“The primary objective has been

and continues to be to maximise the returns

from minerals and re-invest them

in productive activities.”

LINAH MOHOHLO

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Botswana, from being a low-ranked country economically, has become a middle-income country and has consistently been able to sustain one of the world’s highest economic growth rates. What is at the root of this remarkable story – good governance, sound economic management, fiscal discipline? Botswana’s impressive development record, more than anything else, is based on the growth-promoting economic policies which the country has pursued. Among the most important policy areas that contributed to Botswana’s success have been fiscal, monetary and exchange-rate policies; but also important were minerals policy, international trade policy, industrial development policy, labour market policies and policies towards state-owned enterprises and private-sector development. The adoption of such pro-development policies was the result of Botswana’s democratic political system, with its open, consultative processes which emanate from Tswana culture. And because these policy frameworks were so sound and sustainable, they have provided the country with a measure of economic, political and social stability almost unparalleled in the world. And that is despite some of the challenging economic problems which the country has and continues to face in the form of poverty, unemployment and inadequate economic diversification.

Prudent management of the economy has enabled Botswana to avoid the ‘resource curse’ which has plagued some mineral-rich countries, says Linah Mohohlo. The Governor of the Bank of Botswana tells Optima there is life after diamonds.

May we start by asking you to briefly sketch the state Botswana was in at independence?When Botswana obtained independence in 1966, it was one of the ten poorest countries in the world, with a GDP estimated at ZAR36 million (Botswana was part of the Rand Monetary Area at the time). That translates to a per capita GDP of about $80 in 1966. In today’s prices, that would be a per capita income of about $500 per annum, which is a little more than $1.25/day (the international benchmark for extreme poverty). At the time, Botswana was a predominantly agrarian society, with about 90 per cent of the population of half a million living in sparsely populated rural areas and subsisting on traditional agriculture, mainly cattle rearing. Agriculture accounted for 40 per cent of GDP then. At independence, only a little more than a third of the population had ever been to school; and, as a result of the colonial legacy, the country’s institutional and physical infrastructure was very rudimentary. There were only seven kilometres of tarred road in the whole country, and virtually no communications infrastructure. In 1966, the government had very little capacity to undertake development initiatives and, financially, it was dependent upon donor grants (mainly from the United Kingdom) to fund the entire development budget and half of the recurrent budget. Years of colonial neglect meant there were very few educated and trained Batswana who were in a position to take over the institutions of government and manage the public-sector bureaucracy.

LINAH MOHOHLO

“Botswana’s impressive development record, more than anything else, is based on the growth-promoting economic policies which the country has pursued... they have provided the country with a measure of economic, political and social stability almost unparalleled in the world.”

Over the years, following the discovery of diamonds at Orapa in 1967, how has Botswana managed to avoid the so-called ‘resource curse’ (of being an economy overly dependent upon a single commodity or resource)?Early on, Botswana recognised the potential ‘resource curse’ that might arise from the successful exploitation of its minerals. For that reason, the country adopted economic policy frameworks aimed at avoiding that curse, while promoting the sustainable development of other sectors of the economy. These policy frameworks included fiscal, incomes/wages, rural-development, trade and industrial development policy and, following the establishment of the Bank of Botswana and the national currency, monetary and exchange-rate policy.

Although Botswana’s economic success is often attributed to the discovery and subsequent exploitation of minerals, it is really prudence in the management of the economy that enabled the country to avoid the pitfalls that many minerals-led economies have suffered. The primary objective has been and continues to be to maximise the returns from minerals and re-invest them in productive activities, such as infrastructural development (schools, hospitals, clinics, roads, etc.) and human-resource development. This strategy included using some of the mineral revenues to stimulate the development of the non-mining economy. In addition, the strategy of prudent macro-economic management sought to avoid the so-called ‘Dutch Disease’. This is a situation where the exchange rate becomes over-valued and makes local production of other non-mining tradeable goods unviable.

The Debswana partnership with De Beers appears to have been extraordinarily successful for Botswana. Do you think this kind of PPP arrangement can be applied to other sections of the Botswana economy?Botswana has been exploring and implementing a variety of public-private partnerships, including in the property market for office accommodation, tertiary education and

the electricity-supply industry. Such arrangements can yield efficiency gains and financial savings by taking advantage of the relative strengths of the partners. The Public Enterprises Evaluation and Privatisation Agency has been spearheading the drive to foster consideration and implementation of public-private partnership ventures in Botswana as part of its Privatisation Master Plan. A special Public-Private Partnership Unit has been established in the Ministry of Finance and Development Planning to provide technical assistance to government ministries, departments and agencies to expedite the evaluation and adoption of public-private partnership opportunities.

Unless there are substantial new discoveries, some people have estimated that Botswana’s main diamond deposits will be approaching depletion in 20 years’ time. Against that background, could you give us some idea of the ways in which Botswana is diversifying its economy?The Government strategy for economic diversification is premised on the belief that employment creation would go a long way in reducing the incidence of poverty and in improving the standard of living of Batswana. Elements of this strategy include having a stable and sustainable fiscal policy, with modest tax burdens; promoting price stability; having sufficient foreign-exchange reserves, so that a liberal exchange-control regime could be put in place; aligning real wage increases with productivity improvements; maintaining a stable and competitive real-exchange rate; and opting for liberal trade policy through participation in regional and international trade agreements.

Over the years, Botswana has introduced a variety of incentive packages to attract investors in sectors such as manufacturing, agriculture, tourism, transport, communications, financial services and human-resources development. These initiatives have included financial assistance in the form of grants, loans, tax holidays and special low tax rates, export credits and insurance-guarantee schemes, as well as advisory services and the


INTERVIEW


INTERVIEW

“Early on, Botswana recognised the potential for ‘resource curse’ that might arise from the successful

exploitation of its minerals. For that reason, the country adopted economic policy frameworks aimed

at avoiding that curse, while promoting the sustainable development of other sectors of the economy.”

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provision of tailor-made factory shells. As a result of these policies, the economy has become much more diversified since the 1980s. Indeed, over the period from independence to 2012, real non-mining GDP grew at an average annual rate of over seven per cent; and this growth was held back by the sluggish performance of the agricultural sector, where real growth over the period averaged less than one per cent per annum.

What do you see as being the key challenges for Botswana and the SADC1 region?Botswana and the SADC region do face a number of serious challenges. There are ongoing struggles in combating HIV/AIDS, fostering sustainable economic diversification, creating productive employment opportunities, reforming the public sector so as to make it more proactive and supportive of private-sector development, privatisation of some parastatals, providing sound and sustainable social safety nets to eradicate poverty, and fostering the kinds of attitudes and values we need to achieve our visions, as embodied in the Regional Indicative Strategic Development Plan (RISDP)2.

Focusing on Botswana’s challenges, greater economic diversification is needed in order to create additional employment and income-generating opportunities and further reduce poverty, through sustainable growth. Economic diversification is also needed to reduce the country’s dependence upon and vulnerability to one export commodity (diamonds). Moreover, economic diversification is needed to help diversify the government’s revenue base and its ability to sustain the economic and social infrastructure it has invested in and the public goods and services it needs to provide to the population.

Other challenges include exogenous shocks, recurring drought, being landlocked, sparse population, lack of finance for businesses, burdensome bureaucratic processes and regulations, skilled manpower shortages, a poor work ethic, low productivity, diminishing marginal productivity of capital, a culture of dependence on government, subsidised finance and credit, corruption and high unemployment.

As one of the world’s longest-serving central bank governors, you have a unique perspective on the economics of development in Africa. Perhaps you could outline how institutions like the World Bank can be an enabling factor in uplifting African economies – for example, in such areas as power and infrastructure?Botswana has had long fruitful and mutually beneficial relationships with the Bretton Woods3 institutions, as well as with other development partners. The World Bank, the IMF and the IFC, have been pursuing their mandates to help member countries to be better able to manage their economies in sound and sustainable ways. These international financial institutions have strengths

“A poor work ethic, low productivity, a culture of dependence on government, and corruption... we face a number of challenges.”


1 The Southern African Development Community (SADC) is an inter-governmental organisation headquartered in Gaborone, Botswana. Its goal is to further socio-economic co-operation and integration as well as political and security co-operation among 15 southern African states.

3 The Bretton Woods Institutions are the World Bank and the International Monetary Fund (IMF).

2 The RISDP is a comprehensive development and implementation framework guiding the Regional Integration agenda of the SADC from 2005-2020.

in a variety of areas and they are often better able to mobilise support and resources to assist member countries. The Botswana authorities believe such interactions can contribute significantly and complement local resources directed at pursuing national goals and objectives.

Botswana pursued a variety of objectives in seeking and engaging in the interactions with the IMF. First and foremost, the Botswana authorities sought to strengthen the various macro-economic policy frameworks that could contribute to enhanced economic performance and attainment of national-development planning and Vision 2016 goals and objectives4. The interactions also sought to build local capacity for policy making, as well as for monitoring, supervising and regulating the banking and financial system, for ensuring a sound and efficient payments system and for maintaining monetary stability. In addition, the interactions with the Fund were aimed at strengthening public-sector management, on both the revenue and expenditure side.

The World Bank, especially, has been a co-operating partner in a number of development projects and programmes, not only with infrastructure projects, such as the Morupule B Power Station, but also with mining projects, such as the BCL copper-nickel mine in Selebi-Phikwe, and human-resources development programmes. It has not only provided finance, it has also provided technical assistance to help implement the projects and programmes and advice in helping Botswana to formulate and implement its development strategies

11DECEMBER 2013 | OPTIMA |

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“Botswana has had long, fruitful, and mutually beneficial relationships with the Bretton Woods institutions3, as well as with other development partners.”

4 Vision 2016 is Botswana’s strategy to “propel its socio-economic and political development into a competitive, winning and prosperous nation”. See http://www.vision2016.co.bw

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The Okavango Delta, one of the Seven Natural Wonders of Africa, is Botswana’s premier tourist destination

and public-sector reforms. The Ministry of Finance and Development Planning has had extensive interactions with the World Bank and the IMF in the areas of fiscal policy, public expenditure management, medium-term growth, national accounts statistics, tax legislation (including VAT), tax administration, revenue management and debt management, as well as having benefited from the provision of technical assistance.

The IFC has also been an active partner in a number of development initiatives and ventures in Botswana, while the IMF has been especially engaged with the Bank of Botswana, the Non-Bank Financial Institutions Regulatory Authority and the Ministry of Finance and Development Planning in supporting the policy and regulatory environment for financial-sector development. Many Bank staff members have served attachments at the IMF and have attended training programmes to strengthen capacity for monetary-policy formulation and implementation, banking supervision, the development of modern payment and settlement systems; while there have been specific interactions with the IMF to strengthen the Bank’s capacity in monetary operations, monetary policy, inflation forecasting, the SADC payments system, banking supervision, balance of payments statistics, money and banking statistics, the General Data Dissemination System and financial-sector assessment.

| OPTIMA | DECEMBER 201312

“There is a need for a more assertive approach from African leaders to translate the continent’s immense natural resources into social and economic benefits for its people.”

INTERVIEW

Linah Mohohlo participating in the World Economic Forum on Africa, held in Cape Town, South Africa, in May 2011

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Former UN Secretary-General Kofi Annan has called for a new mining vision for Africa and has opened up a debate on how best to capitalise on Africa’s natural-resource wealth. As a co-member of the Africa Progress Panel, do you have any specific views on what mining companies, and African governments, should be doing to improve their governance and strengthen their capacity to manage extractive industries as part of a broader developmental strategy? Of course, the starting point should be focused on the broader strategy of sustainable development where that entails “development that meets the needs of the present without compromising the ability of future generations to meet their own needs”5. The basic idea is that sustainable development will enable societies to maintain or improve their human well-being and the quality of life within the environmental limits and/or carrying capacity of the earth’s ecosystems. For the extractive industries, this means recognising the temporary and invasive nature of mining, and adopting a more holistic view that acknowledges society’s inherent need for mined resources and the many benefits that accompany resource extraction, processing, use and re-use. The focus on sustainability as a key objective clearly implies that minimisation of negative effects associated with the operations of extractive industries is not enough, but rather that positive steps are required to foster greater community and ecological sustainability.

Reliable and timely information is crucial in being able to properly manage extractive industries and ensure there is continual progress towards the achievement of sustainable development. Information relating to how extractive industries are contributing to environmental, economic and social objectives can help to lead to action by governments and communities to

also achieve sustainable development. Government and extractive industries need to generate and share knowledge as a basis for sound decision-making that affects the sustainable development of minerals and metals for the benefit of the communities in which they operate. Such knowledge can also prompt policy-makers and other decision-makers to introduce or modify policies to better promote sustainable development.

The governance framework can entail performance measures and codes of conduct for the extractive industries that can provide a more holistic view for assessments that encompass economic and social aspects, as well as environmental aspects related to the sector’s undertakings.

The Africa Progress Panel’s primary objective is to ensure sustainable and equitable development in Africa. It seeks to do that by tracking progress and highlighting good practices and positive changes that lead to sustained socio-economic development across the continent. The Panel also flags cases of “low quality” growth that could threaten sustainability and undermine the continent’s development chances. Indeed, the Panel has noted that African growth is heavily dependent on the export of primary, generally unprocessed commodities, and that the non-extractive sectors and manufacturing industries remain heavily under-developed in most African countries. There is a need for a more assertive approach from African leaders to translate the continent’s immense natural resources into social and economic benefits for its people.

As former UN Secretary-General and Chairman of the Africa Progress Panel Kofi Annan stated, “Africa’s future is in its own hands, but success in managing its own affairs depends on supportive global policies and agreements. There is no lack of resources, no deficiency of knowledge and no shortage of plans. Africa’s progress rests above all else on the mobilisation of political will, both on the continent and internationally.”


INTERVIEW

5 “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs.” Brundtland Report, 1987.

LAND STEWARDSHIP

JUDGED BY OUR LEGACY

The world judges mining operations both by what they take and what they leave behind. But as Martin Beaver explains, mining companies are learning

how to extract worth from an area without leaving it worthless.



Should a business be ‘hard-nosed’? That depends on what you mean. It’s only since the 1950s that the colloquial American use of the term – uncompromising, realistic – has gained common currency. Before that it was used for bullets

and shells with hard tips; and historically it was used to describe (useless) hunting dogs with a poor sense of smell. Take your pick.

In business terms, ‘land stewardship’ sounds as if it might have more to do with the last category than either of the former.

But that couldn’t be further from the truth. Rather than being a soft-bellied, corporate ‘nice to have’, land stewardship is becoming

a genuinely business-critical concern for mining companies. And, potentially, it could be a crucial differentiator for Anglo American.

The concept of land stewardship is intended to address what’s been described as the next big environmental issue after climate change: the degradation of ‘natural capital’ and the related problems of biodiversity loss and damage to ‘ecosystem services’.

Ecosystem services such as fresh water, climate regulation, protection from natural hazards and erosion control are provided for free by nature. Mining companies have an inescapable need for them and, given the extended timescales over which mines operate, they have to be protected and maintained, since replacing them could prove at best expensive, or at worst impossible.

LAND STEWARDSHIP

If an area of land contains commercially valuable minerals, it is often in the interests of local communities, national governments and indeed the global economy – as well as individual mining companies – to extract them, rather than leaving them in the ground. Minerals, and metals in particular, are essential to everyday life in the 21st century. Everyone can benefit. But the benefits are rarely clear cut.

Land stewardship is about balancing interests. National governments generally seek to maximise their income from the operations and minimise the liabilities they might face post-closure. Investors, likewise, want to maximise gains and minimise risks, while NGOs and employees have their own rows to hoe.

REALPOLITIKPlanning for mine closure is challenging because the requirements of each of these groups will vary between peoples and places, and will also change over time. That is why it is important for the mining company to maintain continuous engagement with all stakeholders and to regularly update any closure plan.

But it is the relationship with local communities that can be particularly important – relationships based on track record and credibility.

And this is hard-nosed; it is realpolitik.


PERMANENT CONTRIBUTIONLand stewardship refers to how the land we own is managed during the operation and – just as importantly – beyond the closure of the mine. And like all of the big mining companies, Anglo American owns large tracts of land, much of which is unused. In Anglo American’s case this means around 5,000 square kilometres, of which less than 20 per cent has been disturbed by mining or processing.

How this land is managed is a complex issue requiring sensitivity, imagination and perspective – not nouns normally associated with ‘hard-nosed’. Yet they have been part of Anglo American’s DNA since it was founded by Sir Ernest Oppenheimer in 1917.

In 1954, he said: “The aims of this Group have been – and will remain – to earn profits but to earn them in such a way as to make a real and permanent contribution to the well-being of the people and to the development of southern Africa.”

The geographical spread of the company is now much greater than it was in 1954, but the commitment remains. Mining companies are neither charities nor surrogate governments. They need to make profits. But how they make them is the nub of the land-stewardship issue. It comes down to how the land can best be used.


CATALYST FOR DEVELOPMENT Mining can deliver benefits to communities. It can bring jobs, electricity, piped water, telecommunications, roads.

But in its wake it can also cause problems through inflating the cost of living, unwelcome immigration, and its post-closure legacy.Mining operations also cause serious environmental damage, including the pollution of water courses.

And although the industry’s safety record is much improved, mining accidents are still estimated to kill about 12,000 people a year worldwide. According to the International Labour Organisation (ILO), while mining employs around one per cent of the global labour force, it generates eight per cent of fatal accidents.

The track record of the mining industry as a whole in the past has not been great. It has a history of abandoning – or divesting – mines rather than properly closing them. Faced with the prospect of having a mine in their backyard, a key question that most stakeholders want answered is: “What will we be left with when you’re gone?”

Anglo American tries to ensure that the net impacts of its operations are generally positive: that the company is a catalyst for development – before, during and after mine operations.

In 2012, for example, approximately 80 per cent of Anglo American’s $23.2 billion expenditure on suppliers, employees, and in taxes and royalties to governments, was spent in developing countries, with the positive economic impact extending well beyond these direct inputs. And more than $1.5 billion of its spending with suppliers went to suppliers based in the communities close to its operations.

If people living in poverty are to enjoy the benefits of mining investment, they must be able to actively participate in the potential opportunities that it brings. This requires proactive efforts on the part of companies, coupled with support from government and non-government bodies.

Anglo American’s track record is good. Since the 1980s the company’s Zimele programme has been pioneering approaches to building small, non-mining businesses in South Africa – and since 2006 in Chile. These projects currently support more than 60,000 jobs.

Anglo American is now specifically designing enterprise- development schemes for projects in Peru, Brazil and Botswana, providing infrastructure and resources to communities, while enabling them to identify and develop business opportunities independently.

LAND OWNERSHIPAnglo American owns large tracts of land, much of which is unused. In Anglo American’s case this means around 5,000 square kilometres, of which less than 20 per cent has been disturbed by mining or processing.

LAND STEWARDSHIP


In the Limpopo province of northern South Africa, a 600-kilometre water pipeline to the Group’s platinum mines will give 1.4 million people access to a reliable source of potable water for the first time.

SELF-INTERESTAnd like many mining companies, Anglo American makes substantial investments to address weaknesses in social and economic infrastructure – such as health and education – and to provide access to training, energy and credit.

This is not just altruism. Mining companies aim to combine social investment with their own self-interest – which can come in many shapes and forms.

One is their own sustainability, a key element of which is accessing new resource deposits. Miners need something to mine.

Different stakeholders often value different services that are provided by the same ecosystem. The land might be used for farming or for fun. It might be forest or wilderness. It could

be sacred. Miners must be able to demonstrate that the benefits they bring outweigh their potential impact on that ecosystem – in both the short and the long term.

Individual companies also have a commercial need to prove that the benefits they bring outweigh those that might be brought by a competitor.

Then, assuming the mine is given the go-ahead, proper land stewardship can improve its operational efficiency and reduce long-term liabilities, for the company and its investors. Put simply, it can be cheaper to do things properly.

De Beers’ Venetia mine in South Africa, for example, has reduced its overall life-of-mine closure liability by 35 per cent – at virtually no extra cost – by reversing the traditional waste-deposition strategy at this big open-pit diamond mine.

Rather than starting waste deposition close to the pit and moving in an outward direction over time, the waste is now hauled to the far

CONSTRUCTIONIn the Limpopo province of northern South Africa, a 600-kilometre water pipeline to the Group’s platinum mines will give 1.4 million people access to a reliable source of potable water for the first time.


extent of the life-of-mine deposition footprint and deposited systematically towards the open pit. This means that land rehabilitation can begin while normal deposition continues.

And that is a good thing, as some campaigning groups are critical of companies holding land that they neither use nor release back to local communities.

COMPETITIVE ADVANTAGE As a rule of thumb, rehabilitation that takes place while the mine is still working reduces environmental risks, improves the outcomes of rehabilitation, and is less costly in the long run. Avoiding nasty surprises, in term of risks and liabilities following mine closure or divestment, can also benefit both investors and governments.

Given that the industry’s overall performance has not been great in the past, land stewardship provides an opportunity for a mining house to take the lead and gain competitive advantage.

Not only does Anglo American have a solid track record in terms of Zimele and its water projects, but it has also recently launched a revised version of its Mine Closure Toolbox, which has been made available to the industry as a whole.

This toolbox was developed between 2005 and 2008 to help operations in their strategic long-term mine closure planning.

It was designed to expand the focus of planning from simply making financial provision for rehabilitation and physical closure, to planning for sustainability beyond mine closure. Its tools work together to ensure that all aspects of a mine’s closure – from the dismantling of machinery, to the potential environmental and social impacts after closure – are tackled in an integrated manner.

The toolbox emphasises community and broad-based stakeholder engagement and the importance of enduring partnerships to ensure that mines are designed, commissioned and operated with eventual closure in mind.

INVESTING IN BUSINESSThe Zimele programme has been pioneering approaches to building small, non-mining businesses in South Africa – and since 2006 in Chile. These projects currently support more than 60,000 jobs.

LAND STEWARDSHIP


POSITIVE LEGACYAnd this is because, in the view of Samantha Hoe-Richardson, Anglo American’s head of sustainable development, “we must start planning for the closure of a mine well before operations begin.

“Even at the exploration stage, we need to begin to understand the long-term, socio-economic needs of the communities that might be affected by a mine, as well as investigating the macro-geology.

“Within an operational mine, there is always the conflict between production and rehabilitation in the competition for equipment, funds and resources. But with a more holistic, long-term approach, Anglo American’s focus is increasingly on leaving behind a positive environmental and social legacy.”

Every Anglo American mine has a closure plan, which is updated annually. Every plan includes a site-specific closure vision – a vision of what post-closure might look like – with objectives and goals established in consultation with the stakeholders. This recognises that one size does not fit all. Every community and region has its own distinct needs.

It will not always be possible to put the land back to how it was before the mine, and that isn’t always the best option anyway. But decisions about the closure vision do not belong to mining companies alone. Rather they belong to the people who will remain in the area after the mine closes.

Their preferences might well change during the life of the operation, so the closure plan and vision need to be refined in

AGRICULTURECommunity engagement and collaboration are key – for example, working with CARE Brazil and other NGOs to target areas most in need, such as helping farmers increase milk and honey yields in Barro Alto.


line with their expectations. The objective should be to leave behind self-sufficient and self-sustaining communities.

“The earlier this approach is begun in the life of a mine, the more time there is to achieve the desired outcome,” Hoe-Richardson says. “It is not possible to simply fast-track good community relationships, and establish sustainable post-mining, socio-economic opportunities.

“This must be done from the outset, and continually, so that when we close a mine, what we leave behind are communities whose future is brighter for the mine having been there, than if it had never been there at all. And countries where a nation’s mineral endowment has been transformed for the national benefit – not merely consumed.”

“ When we close a mine, what we leave behind are communities whose future is brighter for the mine having been there, than if it had never been there at all.”

COMMUNITYMining can deliver benefits to communities. It can bring jobs, electricity, piped water, telecommunications and roads. In 2012, approximately 80 per cent of Anglo American’s $23.2 billion expenditure on suppliers, employees, and in taxes and royalties to governments, was incurred in developing countries. More than $1.5 billion of its spending with suppliers went to suppliers based in the communities close to its operations.

ILLUSTRATIONS: Neil Stevens

WHY AFRICA NEEDS ITS

PRIVATE SECTOR

Only a decade ago, Africa was the least prospected continent on earth but the good news is that across most of Africa (South Africa is an exception) rising commodity prices triggered the wave of investment in mineral exploration. Basic geology predicts that Africa

has far more mineral resources than have so far been discovered. If prospecting continues, this gap will narrow.

Indeed, more production is already coming on stream: Ghana, Kenya and Uganda have started (or will soon start) to produce oil, Mozambique will be producing gas soon, while Tanzania will be doing so in a few more years. Wherever you look, there are new flows appearing, expanding the contribution of natural resources to African economies even as prices fall. This will underpin sub-Saharan African growth, which will probably average more than five per cent a year for the next decade.

Besides natural resources, there are two other sources of potential growth that could raise growth above five per cent. In this regard, an important wildcard for sub-Saharan Africa is whether it is able to break into global manufacturing.

‘BUTTONOPOLIS’The critical thing about global manufacturing is that it takes place in clusters. One example of what I am talking about is the button industry. About two thirds of the world’s buttons are made in a single Chinese city, a city that makes buttons and not much else. Basically, what happens in ‘Buttonopolis’ (Qiaotou) is that lots of little firms congregate together. And what they each specialise in is not a product, but a small step in the process of making a product – in this case, buttons.

Getting to this point is very difficult but, once established, clusters of this kind can be super-competitive.

A key question for anyone thinking about Africa relates to whether and how its economies will expand, says Paul Collier. For most of the last decade or so, the global context has been benign for Africa because of the rise in commodities prices and falling global prices for many manufacturers. But now the commodity super cycle is over, the question is, what comes next?

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“Sub-Saharan African growth will probably average more than five per cent a year for the next decade.”

23 DECEMBER 2013 | OPTIMA | 5The Bujagali hydro-electric plant, opened in 2012, has doubled Uganda’s power capacity and been a catalyst for growth in East Africa

AFRICA


“... Africa has one great advantage over Asia, which is better market access to Europe

and America because of preferences poor countries have in trade agreements... I think

the next decade will be one of increasing protectionism, so Africa’s preferential trade arrangements could become really valuable

in the medium term.”

Having said that, the Chinese shoe firm currently has a problem sourcing leather. But the first movers’ decisions are premised on the assumption that other Chinese firms will come and that a cluster will develop. When that happens, they’ll really be in business. So this is what I think we’ll see in parts of Africa: as the first groups of firms become profitable, it will become more profitable for others to invest, and suddenly we’ll get explosive growth.

CATCH-UP GROWTHA third potential source of growth could come from leap-frogging technologies and rapidly increasing productivity.

We’ve already seen one leap-frog, which is telecommunications and mobile phones. But the real leap-frogging over the next decade will be in very mundane sectors. In retailing, for example, most of sub-Saharan Africa is still basically in the 19th century, technology-wise. But there’s plenty of off-the-shelf 21st-century technology available (hypermarkets and shopping malls, for example) that could increase productivity considerably. Lagos, for example, has only two shopping malls for a city of 16 million people. So, the future is big productivity gains from 21st-century methods of business applied to a rather mundane service sector, which is, of course, the big part of the economy.

Given what I have said about the potential sources of growth in African economies, I’d like to point out two other things. The first is the role of governance in growth based on natural resources, the second is about effective organisations.

GOVERNANCE OF EXTRACTIVE INDUSTRIESAfrica has been through resource-based growth before, and it mostly didn’t work: the benefits were accrued by small groups of people through processes that amount to acts of plunder. The challenge for Africa, this time around, is whether it repeats that history or learns from it. In this regard, I’m more optimistic than many that Africa will, in fact, manage to avoid repeating the patterns of the past. One reason for saying so is that nowadays there’s a strong

So, if you’re the first button factory in Africa, you’re probably going to go bust. In fact, I know the guy who ran the first button factory in Africa, and he did go bust.

For the last four decades it has been impossible to break into many markets because East Asia has been super-competitive. But, of course, they too had to break in at some point and, if you go back 40 years, all the clusters were in the developed world with only a few isolated firms in East Asia. So China got in a few decades ago, became competitive, and took off from there. But their advantages may be diminishing now: real wages are rising so fast that for the last four years China has been offshoring to low-wage Asia – countries like Bangladesh, Vietnam and so forth.

Africa also has a chance of breaking in. And it is starting to happen. In fact, Africa has one great advantage over Asia, which is better market access to Europe and America because of preferences poor countries have in trade agreements. That is why a large Chinese shoe manufacturer just moved to Ethiopia – they reckon they have a 27 per cent cost advantage there because of better market access. This is really important because I think the next decade will be one of increasing protectionism, so Africa’s preferential trade arrangements could become really valuable in the medium term.

01 Hustle and bustle in downtown Lagos, now Africa’s biggest city, with a population of 16 million – but only two shopping malls

02 Exponential growth in mobile telephony in sub-Saharan Africa has rapidly created new opportunities for sectors such as banking


“An important wildcard for sub-Saharan Africa is whether it is able to break into global manufacturing.”

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awareness across the continent of the limitations of past patterns, and so there is much stronger scrutiny of government and much more vociferous demands that they do better. The other reason is that there has been increasing global awareness that extraction industries need to meet higher standards than they have so far.

One example of this is the discussions of a recent G8 meeting hosted by Britain, the agenda of which was based on transparency in natural-resource extraction; targeting corporate tax avoidance (which is a big deal in resource extraction); and cleaning up beneficial ownership of shell companies so that money laundering will be much harder. These three priorities were endorsed by all the G8 leaders. And it’s not just words; practices are changing too. It is now mandatory in all of North America and all of Europe for resource-extraction companies to report all their payments to governments publicly. And there is more evidence of our going through a sort of quantum leap in transparency in the form of UK Prime Minister Cameron’s arm-twisting of the 18 heads of government of the UK’s overseas territories. This resulted in agreement to implement changes that, while allowing those countries to remain tax havens, will end the practices that allow for so much secrecy in relation to who owns what assets and companies. In effect, what is going on is the building of a new global environment for governance of the extractive sector.

All of this is entirely appropriate. I like to make the argument that resource-extraction companies are a bit like banks in that both are custodians of other people’s assets. And if you’re a custodian of other people’s assets, you have to know that you’re going to be held to higher standards of scrutiny than, say, a manufacturing company. For the banks, we’ve had 50 years of building the governance for that. But the extractive industries, which are the custodians of the natural assets that belong to citizens of very poor countries, are just at the start of building that governance process.

The bottom line is that I think African governments won’t be able to get away with plunder as usual, as it were.


EFFECTIVE ORGANISATIONSI want to say something about the private sector, and especially the South African private sector, because the other component to growth in Africa that has been really missing is what I want to call effective organisations –organisations that manage to increase the productivity of ordinary people.

Before 1750, the basic rule was that people would work hard to produce the equivalent of about $2 per day in value. Back then, that was true everywhere, but it is still true of much of sub-Saharan Africa. In the developed world, however, people working in and with effective organisations generate $100 a day in value.

We have known the basic principles of where productivity comes from since Adam Smith, who showed us that it is the result of two things: scale and specialisation. There is a famous passage at the start of The Wealth of Nations about pin factories, and how scale makes people more productive, because they can reap economies of scale, while specialisation allows people to acquire specialised skills rather than having to be jacks-of-all-trades.

SCALE AND SPECIALISATIONBut both scale and specialisation come with downsides. Scale, for example, makes it much harder to motivate people. If you’re in an organisation of three people, it is very hard to slack off without somebody noticing and complaining; if you’re in an organisation of 3,000 people, on the other hand, that is entirely possible. Specialisation also comes with a downside: if everybody is in a little silo, who co-ordinates the silos?

So, effective organisations are actually management teams which have succeeded in reconciling scale and specialisation with motivation and co-ordination. The main technique they use for both of these is to get people to internalise the overall objectives of the organisation so they see the big picture, which motivates and incentivises people accordingly.

In the rich world, all organisations are effective because the ineffective ones have been driven to bankruptcy in the private sector, and electoral anger has eliminated them in the public sector. But in Africa, effective organisations are still scarce: in the private sector, most people work in small informal organisations, while in the public sector, profound inefficiency is the

AFRICA

“Resource-extraction companies are a bit like banks in that both are custodians of other people’s assets. And if you’re a custodian of other people’s assets, you have to know that you’re going to be held to higher standards of scrutiny than, say, a manufacturing company.”

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“ Africa is desperately in need of more effective organisations. This is an area in which South Africa, and South African business in particular, has a very big advantage in its quest for expanding into Africa.”

South African business outreach: The original South African Breweries company has now become SABMiller, one of the world’s great brewers, operating across six continents, and with 15 brewing and beverage operations in Africa alone

norm rather than the exception. Africa is desperately in need of more effective organisations.

This is an area in which South Africa, and South African business in particular, has a very big advantage in its quest for expanding into Africa. In doing so, it will bring effective organisations to African economies while also diversifying away from South Africa-specific risk. This will be good for both African economies and South African businesses. But as they expand into Africa, South African businesses can also do something else: they can carry their skills over to the public sector.

BEATING MALARIABy virtue of being effective organisations, South Africa’s corporates must know how to motivate people and co-ordinate their activities. So much so, that I bet you don’t even think about it most of the time. But Africa’s public sector hasn’t learned how to do these things. And the results are often devastating. I saw this in Ghana, for example, where AngloGold Ashanti, a major gold mining company, discovered that there was a problem of malaria in their area and decided they’d better do something about it. They did this for purely self-interested reasons: malaria affected their workforce and reduced productivity. But the only way to deal with malaria was to run a programme for the whole area, not just for their own workers. And, over four years, they brought the incidence of malaria down by about 70 per cent.

They were so successful that the Global Fund to Fight AIDS, Tuberculosis and Malaria noticed the results and came to them and said, “You’ve done this for your neighbourhood, we want you to do it for the whole of Ghana.” At which point, perfectly reasonably, the company said, “Actually, we are a gold mining company. If you want to lower the incidence of malaria, why don’t you go to the Ministry of Health?” To which the Global Fund responded, “We tried that and it didn’t work. Why don’t you come with us to the Ministry of Health and see what they say?” So they went along begrudgingly to the Ministry of Health in Ghana, where the Ministry said, “We tried, we can’t do it. We just don’t have the organisation to do this. Will you please do it for us, using the Global Fund money?” Which is exactly what they are now doing.

Now, in one sense this is crazy. But in another sense, what’s being recognised is that an effective organisation with effective management teams can outperform an

ineffective organisation even in an area for which it is not specialised. Is this a good idea for AngloGold Ashanti in Ghana? Well, I don’t know. But I’ll say this for it, next time they get into a dispute with the government of Ghana, they’ll have an awful lot going for them.

More importantly, I think that what this example shows is the importance of challenging some of the premises of the model governments have for the delivery of public services.

PUBLIC SERVICES, PRIVATE PERMISSIONIt’s quite clear to me that states have to be responsible for the provision of public services. But what that means, really, is that they are responsible for financing it. They don’t necessarily have to provide it. Of course, there are needs across society that have to be met: education, health, water, a range of things. The key is to realise that there is no great virtue in any particular mode of how that is supplied. It has got to be publicly financed, indeed, but how it is supplied is not part of social democratic principles at all. It is only in the interest of public-sector unions, who are a particular special-interest group, to supply it within the public sector.

This isn’t how it’s seen in many places. In fact, a lot of sub-Saharan Africa has been in thrall to the 1950s European model of what a state should look like. But this

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SUSTAINED GROWTHThe sub-Saharan African economy continues to grow despite rising external financing costs, a deceleration in key export markets and weaker commodity prices.

Sources: IMF, World Economic Outlook and African Department databases; International Financial Statistics database.

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seems completely inappropriate when their organisations are so ineffective. Indeed, we now realise that there was a very particular set of circumstances in Europe in the 1950s, and that the model of the state that emerged was an historical peculiarity, not a gold standard of how to deliver public services.

Of course, the principal social benefit that business provides lies in jobs created and taxes paid. Nevertheless, I think it is true of much of Africa that public organisations are less effective than those of corporations. Indeed, businesses’ biggest asset is that they are effective organisations – that they know how to run things – much better than the government. Government struggles with motivating staff, struggles with holding other people accountable and so on, more than businesses do. By contrast, corporates have generally cracked the big challenges of management. If those capabilities were to spread to the delivery of public services, Africa would become a much better place to live.


“Businesses’ biggest asset is that they are effective organisations – that they know how to run things – much better than the government.”

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01 Jwaneng, probably the world’s greatest diamond mine, is a highly successful joint venture between the Botswana government and De Beers

02 Africa is likely to experience significant growth as productivity gains start to come through from the application of 21st-century business technologies to sectors such as financial services

ACKNOWLEDGEMENTThis article, which is based on an address given by the author to the Centre for Development and Enterprise in Johannesburg in June this year, is reproduced with the CDE’s kind permission.

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SYNTHETIC DIAMONDS

| OPTIMA | DECEMBER 201330

SYNTHETIC DIAMONDS

SUPERMATERIALS WORLDFrom kitchen cleaner to the origins of the universe, Element Six ‘doesn’t do standard’. Its bespoke approach has made it the clear market leader

in one of the most exciting sectors emerging today – synthetic diamonds. Bruce Kennedy reports from the De Beers-owned company’s newly

opened Global Innovation Centre near Oxford in the UK…

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It’s half past nine on a Tuesday morning and I’m using a black disk about five centimetres across to melt ice.

It looks like a bit of plastic and there’s nothing attached to it, but when I rest it on a sliver of ice visible through a slot in the white melamine counter-top in

front of me, I can feel the frozen stuff start to give way almost immediately. What’s more, my fingers suddenly get cold.

“You’re seeing how good diamond is as a conductor of heat,” explains Chris Wort, New Technology Manager at Element Six. “That disk is pure synthetic diamond. It means the heat from your fingers gets to the ice very quickly.”

We’re in the customer demonstration area of the Global Innovation Centre – Element Six’s recently opened research and development facility at Harwell Science Park near Oxford. Wort is talking me through some of the applications the company’s super-hard products can be used for.

The disk I’m holding is a mechanical/thermal grade of CVD diamond (see below). Its uses not only include heat-spreaders for fibre optic booster stations and amplifiers, but also the sharpening of precision grinding wheels.

Optical grade CVD diamond – another Element Six product – is transparent. “That means you can use it in applications like high power laser transmission windows,” says Wort.

“More laser power can be transmitted through a synthetic diamond window,” he adds. “About four to five times more than any other window.”

Element Six’s Global Innovation Centre is the world’s largest synthetic diamond R&D facility. Spread over 5,000 square metres, the high-specification building opened in July 2013 with UK Minister of State for Science David Willetts cutting the ribbon with Philippe Mellier, chairman of Element Six.

The innovation centre employs 114 people – including materials scientists, physicists, chemists and application engineers. It aims to be a one-stop shop for commercial synthetic diamond users.

Element Six picked Harwell because of its international reputation as Oxford’s answer to Silicon Valley in the US (not to mention to Cambridge’s own mini-Silicon Valley). With around 4,500 people working for 150 organisations in the area, the park is famous as a hub for high-tech research.

Back at the demo area, Wort is talking me through another example of Element Six’s own high-tech research. He’s holding what looks like a bottle of disinfectant spray. This bottle’s filled with water – but it’s not any old water.

“This water kills 99.9 per cent of all bacteria and germs,” he says. “It’s already being marketed in America as a replacement for kitchen cleaners like Cif.”

Wort explains the spray bottle contains a unit that uses synthetic boron-doped diamond to produce ozone in the water through an electrochemical process.

SYNTHETIC DIAMOND DUOSynthetic diamonds are made by two main

processes – Chemical Vapour Deposition

(CVD) and High Pressure High Temperature

(HPHT).

Chemical Vapour Deposition makes synthetic

diamond by creating an environment where

carbon atoms in a gas can settle, usually in a

thin film or thicker layer. The process involves

feeding gas into a chamber and passing

microwaves through the gas to generate a

plasma of carbon radicals.

There’s always carbon in the chamber, and

there can be other gases as well – hydrogen

for example. The amounts used depend on the

type of synthetic diamond being grown.

Synthetic diamonds can be grown over a

relatively large area using CVD, with the result

usually being a thick or thin layer of synthetic

diamond laid down on a substrate, which can

be removed afterwards if required. Synthetic

diamond films can also be grown on anything

that will benefit from diamond’s extreme

hardness and the very low rate at which it wears

out. This includes valve seals and cutting tools.

High Pressure High Temperature creates

synthetic diamond using a combination of

extreme pressure and heat. There are two

designs of press currently in use, but the basic

method is the same.

Synthetic diamond seeds and a carbon

source – graphite powder for example – are

placed at the bottom of the press in a metal

container along with a ‘solvent-catalyst’

such as cobalt, nickel or iron.

The inside is heated to above 1,400°C. This

melts the metal solvent-catalyst, which then

dissolves the carbon source (graphite powder)

and combines it with the synthetic diamond

seed to make it bigger. A chemical reaction

combined with the extreme pressure and

temperature within the press then forms a

synthetic diamond.

SYNTHETIC DIAMONDS

PATRICE LOIEZ


Research scientist Katharine Robertson in Element Six’s Global Innovation Centre Reactor Room, which produces synthetic diamonds for use in optical, semiconductors, sensors and water-treatment applications

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He tells me this turns ordinary tap water into a sanitising agent more powerful than any bleach.

“It’s not nasty chemicals,” he adds. “It’s ozone-ated water. Spray it on cut flowers, and they last longer as well.”

The spray is ‘green’ and has already been approved in the United States by the country’s Food and Drug Administration. It is currently sold through a global catering equipment company.

“Our business model has been clear from the beginning,” says CEO Walter Hühn. “It’s based on two things – engaging with the customer in long-term partnerships, and not only supplying standard materials. We work together with our customers on a long-term basis. We look several years down the road.”

It’s a partnership approach to R&D that Element Six believes sets it apart from its competitors.

This kind of approach could see Element Six working closely with a precision drill-bit manufacturer to make exactly the kind of synthesised diamond ‘cutters’ that the drill-bit company’s customers will need.

“It allows our customers to come up with better tools to achieve a higher price,” says Hühn.

“The Global Innovation Centre is about consolidating all our innovations,” he adds. “It’s an easy way for Element Six to interact with the outside world.”

Much of the centre’s equipment was assembled globally as well. Some of the diamond presses came from an Element Six plant in the town of Springs in South Africa. Other equipment came from company sites in the Swedish town of Robertsfors and Shannon in Ireland.

We get a look at some of those synthetic diamond presses down in one of the research labs. There are two types – the belt press and the cubic press.

Half of each belt press is underground and out of sight, but the bit we can see is impressive enough. This top half looks like a massive drill bit about two metres tall. A capsule the

size of a can of beans is fixed at the sharp end (the so-called ‘anvils’) of this section.

“The capsule is filled with graphite powder, and maybe a catalyst, such as cobalt,” says Wort.

ELEMENT SIX INNOVATIONS – THE TWO-MINUTE GUIDE

OIL AND GAS DRILL BIT CUTTERSPolycrystalline diamond (PCD) cutters are used for oil and gas drilling. Element Six has reduced drilling time for customers – as well as minimising costly downtime – by creating cutters that are faster and last longer.

PRECISION MACHININGThe aerospace market is changing. Half the materials on the European A350 Airbus and the Boeing B787 Dreamliner are composite. Manufacturers use synthetic diamond to mass produce components efficiently and cost-effectively.

Element Six 3D format milling tools have been shown to last 250 times longer than carbide-based tools.

ROAD CONSTRUCTIONElement Six helps produce ‘game-changing’ tools for road maintenance – road picks made by the company last up to 40 times longer than standard road picks.

The D Power™ Road Pick uses a PCD tip that combines toughness and high wear resistance. Combining PCD strength with the best pick design means a much longer operating life.

All this adds up to greater efficiency and productivity for roadwork contractors. That means roads can spend less time closed for works and more time open for traffic.

This technology will also soon be available for use in mining applications.


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Element Six is a member of the De Beers Group. The company, which has

2,400 employees, operates all over the world. Its head office is in Luxembourg and there are

manufacturing plants in Germany, Sweden, Ireland, South Africa, the US, the UK and

China. Element Six’s name is a reference to the periodic table – Carbon (the basis of synthetic

diamond) is the sixth element in the table.

ELEMENT SIX – WORLDWIDE


Half the materials on this Airbus A350 are composite. Synthetic diamond milling tools, because they last 250 times longer than carbide tools, help in mass-producing components more efficiently and cheaply

The top section of the press is swung into place by a pair of chunky metal claws which slide it onto the bottom half. Then the two halves start pressing – and the pressure they exert is enormous.

“It’s about the same as 5,000 cars piled on top of a tin can,” says Wort. “Or the Eiffel Tower up-ended on another tin can.”

The end result – of course – is synthetic diamond. On the other side of the lab we can see a cubic press.

This looks like six anchor-shaped and -sized chunks of metal slotted together. These chunks of metal are the pressure arms. Somewhere in the centre of this is another capsule filled with graphite. When the machine is turned on, the crushing starts.

“It’s the first time there have been belt and cubic presses in the UK as dedicated R&D tools. Having them here means we can have a quick turnaround on new prototypes. Maybe three weeks from concept to testing new oil and gas drill bit cutters, for example.”

A few metres down the corridor, and we’re in the CVD lab where synthetic diamond is made by a chemical process.

“This is the biggest CVD research lab in the world,” says Wort. “The machines make very pure synthetic diamond.”

The units work by using microwaves to break down gases into a plasma held in a chamber. The result is a synthetic diamond disk, about the size of a CD.

Bigger disks are possible – as much as 15 centimetres across. For some applications they’re worth more than $100,000 each.

“When the technology for this form of diamond synthesis was developed, it was kept secret for about 15 years,” says Wort.

Element Six’s current research includes work in electronics, precision machining and quantum computing (see right).

The company even has a hand in the Large Hadron Collider (LHC), the international project that’s aiming to unlock the secrets of the Big Bang. The LHC uses high-purity, synthetic diamond as a particle detector, allowing scientists to measure proton particle collisions.

From kitchen cleaner to the origins of the universe – it’s a spread of expertise that Element Six believes keeps it at the top of the synthetic diamond league table.

“We are the clear market leader,” says Hühn. “No other supermaterials company in the world has the wide coverage we do. We don’t just do standard. The focus is on bespoke products.

“The Global Innovations Centre is all about getting us there,” he adds. “We consolidate innovation and bring it all together with rapid prototyping and testing.

“It’s a good place for us to meet customers – and then help them succeed in their markets.”

“No other supermaterials company in the world has the wide coverage we do.”


Big Bang: Synthetic diamond is used as a particle detector in the Large Hadron Collider at Cern

SYNTHETIC DIAMONDS

THERE’S A DIAMOND NEAR YOU…

Element Six works with a wide range of partners to develop and produce new products. Here are a few examples.

HIGH-PERFORMANCE AUDIO SPEAKERSSynthetic diamonds are used in high-end loudspeakers. That’s the kind of speaker you’ll find in recording studios or post-production houses that mix sound for movies or TV shows.

The speakers use the acoustic properties of synthetic diamond to deliver exceptional clarity. They do this by extending the high frequency (treble) response beyond the range of the human ear.

Last year, Element Six and Bowers & Wilkins won The Queens Awards for Enterprise: Innovation, for the development of the synthetic diamond tweeters used in the speaker.

QUANTUM COMPUTINGWorking with Harvard University, Element Six has developed ultra-pure synthetic diamond for use in quantum computers – the next generation of computing.

In quantum-based applications, synthetic diamond acts as a host for impurities or defects. The quantum properties of these impurities can be manipulated and made to interact. Photons of light emitted by these impurities can be used to read out their quantum information.

HOUSEHOLD AND CATERING KITCHEN SPRAYSynthetic diamonds can be used to make chemical-free disinfectants for homes, hotels and hospitals. The sprays generated contain ozone, turning water into a sanitising agent.

The spray works by using synthetic boron-doped diamond to produce ozone in water. Ozone is a ‘green’ sanitiser. More powerful than bleach, it kills 99.9 per cent of known pathogens. It also disinfects and deodorises.

CERNElement Six is helping to unlock the secrets of the Big Bang. Synthetic diamond is used as a particle detector in the Large Hadron Collider (LHC). This allows proton particle collisions to be measured every 25 nanoseconds.

Element Six single crystal synthetic diamond is an excellent thermal conductor. It also has electrical insulator and radiation hardness properties to cope with high electric fields.

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Bruce Kennedy is a former BBC journalist and producer, specialising in making complex scientific and technical subjects accessible to intelligent lay audiences. For the World Service and Radio 4 he has worked on flagship programmes, including Science Today and All in The Mind. He has written two best-selling works of crime fiction and is currently working on a third.

Automation has revolutionised the way we interact with machines – so much so that we hardly appreciate the benefits brought by the ever-increasing sophistication of human/machine interaction over the past century.

“Automation is a process through which safety and productivity are optimised using machines, control systems and information technology,” says Donovan Waller, head of automation and remote control technology development at Anglo American’s Mining and Technology unit.

“A comparison between the Model T Ford and a modern luxury vehicle best illustrates the advantages of,

and reasons for, automation. The Model T had an engine, gearbox, four wheels and steering wheel – much the same as our modern-day cars. However, today, we can slam anti-lock- assisted brakes safely without causing the car to slide or veer, headlights switch on automatically when daylight fades, sensors warn us of inadvertent lane transgressions and rear-view cameras and object sensors help us position a car safely, without causing damage.”

These examples of available motor-vehicle technology fall within the semi-automated and automated classifications in the evolution of automation, specifically as operator assist. There are even autonomous vehicles, but they are programmed to drive in a controlled environment without unexpected occurrences which would require driver intervention.

In the mining industry, the automation process has not yet evolved to the level of sophistication available in motor vehicles. Most mining operations use conventional and mechanised mining methods, and the automation process is only now entering the remotely managed phase, with

Automation may be making mines safer, more productive places to work. Combining operator creativity and automation precision will provide optimal performance. Adriaan Laubscher reports.

AUTOMATION DRIVEN BY

PRODUCTI VITYSAFETYAND

...that automation assists pilots to fly an aeroplane? The well-known “auto pilot” function keeps the aircraft on course during flight. Another system assists the pilot with landing in low visibility or bad weather conditions by using a radar altimeter to determine the height above ground precisely to initiate the required landing flare (or angle) at the correct height.

DID YOU KNOW...?

01 Economies of scale: automation is driving productivity gains to match.


ALL PHOTOS: ANGLO AMERICAN

AUTOMATION

PRODUCTI VITY

...that Boeing has developed an autonomous aeroplane? The Phantom Eye, an unmanned, lightweight, hydrogen-powered, high-altitude aircraft, is used for intelligence, surveillance and communications purposes. It completed its first autonomous flight in June 2012.


AUTOMATION


can be improved through semi-automated and automated machine functions.

In an open pit, most of the operator time is spent on tasks that are tedious and repetitive, such as driving in and out of the pit along a set haulage route, which accounts for 80 per cent of truck operating time. The drive includes following pre-determined traffic protocol at intersections or on narrow haulage-route sections and waiting in queues to receive a load in the pit or to dump it at the crusher or on the waste dump. These tasks can be semi-automated or automated, even to the extent that the truck can be programmed to slow down to avoid congestion or collisions, instead of stopping and restarting, which consumes more energy and increases wear and tear.

However, once the truck reaches the loading area in the pit, the expertise and experience of the operator are beneficial in handling the continuously changing geography of the loading area. The same holds true for tipping out a load, be it dumping waste or material to be stockpiled or crushed. The operator’s expertise in selecting the best dumping point for the fastest turn-around time improves safety and productivity.

“These examples illustrate the scope for moving to a mix of semi-automated and automated machine functions,

occasional ventures into semi-automated and automated machinery (see below).

“The automation of motor vehicle functions is driven mainly by safety considerations,” says Dave Bentley, Anglo American’s Group head of technology development. “In the mining industry, safety, health and productivity motivate the drive to move forward in the automation process. We do not automate for the sake of automation, because, in many instances, operator reaction, experience and judgement assist in achieving an optimum combination of safety, health and productivity.

“We target mundane and tedious tasks for the next level of automation, as well as tasks that require accuracy and precision for a quality outcome. Accuracy and precision are not the best traits of the human being – and we do lose concentration when we are faced with repetitive, boring tasks.”

The quality achieved by automating repetitive tasks extends beyond productivity, to the operator – it improves job quality and satisfaction, because operators are freed to perform more and varied tasks, thereby improving their perspective on the production process of which they form part.

The sequence of tasks open-pit load haul truck operators face on a daily basis provides good examples of how quality

THE EVOLUTION OF AUTOMATION

CONVENTIONAL MECHANISED REMOTE SEMI-AUTOMATED AUTOMATED AUTONOMOUS

Conventional, labour-intensive mining methods with hand-held machinery.

Mechanical machinery operated by operator on board.

Line-of-sight remote mechanised mining:• Operator needs to be next to machine.• Reduced productivity.• Control of machine managed through on-board computer.

Operator-assist:Automation of certain functions to improve effectiveness.Tele-remote:Machines operated remotely from control room, with limited productivity.

Machine functionality totally automated:• Some or all machines in a section.• Machinery controlled and monitored remotely from control room.

Artificial intelligence:Machinery equipped to plan and execute mining activities based on mining model, with no intervention or interaction from an operator.

Motivated by: Safety, health and productivity.

Safety and health. Productivity, qualityand decent jobs.

Hazardous conditions, safety, health and labour availability.

Productivity, quality.

...that tractors are automated to plough fields? The tractor adapts itself to terrain conditions and adjusts its speed and turning radius automatically to complete a pre-programmed, circular route with exceptional precision and without the stop/starts associated with conventional parallel ploughing. The first driverless tractor was developed in 1940, when a farmer tied his tractor to a wheel in the centre of the field to achieve unmanned, circular ploughing.

Most mining currently operates in these areas The areas Anglo American is investigating


...that tractors are equipped with semi-automated functions to increase productivity and minimise operator fatigue? John Deere has developed a guidance system which accurately keeps a tractor on a pre-determined route to avoid overlapping and subsequent soil compaction.

OPPORTUNITIES FOR OPERATOR-ASSIST IN A TYPICAL HAUL TRUCK

Pre-collision braking and throttle. Emergency steer assist. Lane assist and departure avoidance.

Adaptive cruise control.Curve-speed control.Auto-tram.

360o obstacle detection (personnel, machines, infrastructure, terrain) and active avoidance. Traffic-sign recognition.

Fatigue compensation.Night-vision assist.Situation-aware HMI.

Reverse assist.Auto-reverse.Auto-spot (loader, shovel, excavator).Dump-assist.Auto-dump (paddock, highwall, tip).

Tyre-pressure monitoring.Active tyre-pressure adjustment.Active suspension linked to road-condition monitoring.

OTHERTraffic ‘choreography’.Operational mode optimisation (volume, energy, cost).

ABS brakes.Skid control.Traction control.


!...manufacturers have developed driver-assist systems that pave the way for operator-assist driving? Functions that warn of lane transgressions, signs of driver fatigue, pull-drift compensation on sloping roads or in cross-winds, adaptive cruise control which takes cognisance of safe following distances, and active park-assist and blind-spot information feeds.

though operator creativity assists in achieving optimum performance,” says Bentley.

In South Africa, three of Anglo American’s Coal operations and one Platinum operation are testing automated equipment – a truck and a drill at Landau and Mafube (a joint venture with Exxaro) collieries, a dozer at New Vaal and a drill at Mogalakwena platinum mine. The equipment, from various suppliers, has been fitted with automation kits to benchmark future developments towards safety and productivity.

But Bentley is clear: “Only in exceptional circumstances would one move to fully automated trucks as the norm, and such a move would be dictated by operating conditions which pose a threat to driver safety, geographical remoteness, severe weather conditions or unusual circumstances which might cause operator fatigue.”

So automation may be no panacea, but if it makes real jobs less repetitive, more efficient and safer, it has to be welcomed.

AUTOMATION

THE FUTURE IS FUTURESMART

Anglo American chief executive Mark Cutifani confirmed the Group’s commitment to technical innovation as a driver towards safety, productivity and sustainability when he launched the Group’s FutureSmart vision at the World Mining Congress held in August in Montreal, Canada.

Mark said the project will lead the industry in using innovation and technology to find safer, more efficient, more environmentally friendly and more sustainable ways to unlock mineral value. He invited the mining industry to join forces with each other in increasing sustainability in the mining industry as a whole instead of working independently on projects.

In Anglo American, FutureSmart brings together more than 50 projects that use innovation and technology to facilitate delivering greater value from broader mining activities. The FutureSmart vision has been worked on for the past four years and is now delivering new technical solutions across the whole value chain – from exploration, geosciences, mining, processing and engineering through to logistics and how products are optimised.

Adriaan Laubscher is a South Africa-based journalist of some 40 years’ experience. The consultancy he established in the 1990s provides communication and design services to the mining, medical, finance and engineering sectors.

ADRIAAN LAUBSCHER


Semi-automated functions to increase accuracy of truck/shovel alignment and automated systems to improve the accuracy and speed of the scooping and loading sequence.

Semi-automated bench-drilling to precisely position bench drill and automated bench-drilling to optimise drill rates and ore fragmentation.

Opportunity for semi-automated collision-avoidance and lane-assist systems as well as automated control systems to regulate truck speed and direction to avoid pit congestion or other stop/start situations which increase truck wear and tear.

Point at which operator takes over truck control on entering the pit, and at which point semi-automated or automated systems take over control upon exiting.

...that the so-called Google car is paving the way towards fully autonomous driving? Although the Google concept cars operate on set routes in normal traffic, based on information in computers, they do demonstrate the progression towards autonomous driving.

Operator-assist Automated

Collision-avoidance systems that alert the operator to a possible incident.

Collision-prevention systems that over-ride operator input, such as braking or accelerating, to prevent an incident .

Collision-avoidance and lane-assist systems to operate trucks in heavy fog – in Chile, fog causes up to 30 days of production loss per year at some copper operations.

Sophisticated collision-avoidance systems to prevent congestion in open pits by slowing or accelerating trucks to avoid stop/start situations which result in heavy wear.

Reverse-detection systems and cameras that assist the operator to accurately position the truck for high-wall and paddock dumping, thereby preventing wear and tear caused by excessive manoeuvring.

Automated high-wall and paddock dumping systems to improve safety, notably in high-wall dumping where the truck is reversed against a berm on an 80- to 100-metre wall, and to reduce excessive manoeuvring.


Remote bench drilling to precisely position the bench drill.

Automated bench drilling to optimise drill rates and ore fragmentation through accurately positioned drills, angled correctly and set to drill to the most effective depth.


Accurate truck/shovel alignment to reduce spillage and achieve balanced loading.

Optimised dragline/shovel alignment to reduce the time it takes the dragline to transfer material from the pit floor to the loading pile, and improve the cycle time of the shovel sequence of scooping up a load and transferring it to a truck.

EXAMPLES OF OPERATOR-ASSISTED AND AUTOMATED OPERATIONS IN THE MINING INDUSTRY

Drag line and swing shovel: improving safety and increasing production

Bench drills: increasing production

Road haul trucks: Improving safety and increasing productivity

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The cars compute approximately one gigabyte of information every second. Highway driving, with cars moving in the same direction at approximately the same speed, is more easily automated than city streets with oncoming traffic, pedestrians and intersections.

In Chile, fog causes up to 30 days of production loss per year

IRON IN THE SOUL

Iron is the fourth most abundant element in the earth’s crust and is the major constituent of the earth’s core. Nearly all the earth’s iron comes from ore deposits in rocks formed more than 1.8 billion years ago. These began forming when the first organisms capable of photosynthesis began releasing oxygen into the

world’s oceans, which combined with dissolved iron to produce haematite or magnetite.

It’s an extremely versatile substance, making up a huge range of products from cars, bridges and skyscrapers to ships, bikes and surgical implements.

In fact, without iron, it’s likely you would not be able to read this article as it has undoubtedly been used in one form or another in the production or delivery of this publication.

Such is the importance of the material that the relative level of development of human society has been measured by whether it had learned to refine iron or not, giving rise to the period in history we know as the ‘Iron Age’.

Little wonder, then, that more than two billion tonnes of iron ore2 are mined, processed and shipped every year. Most comes from China, Australia and Brazil, although substantial deposits are also found in India, Russia, Ukraine and South Africa. Australia and Brazil are the biggest exporters of iron ore.

Once a hallowed, mystical metal that fell to earth as meteorites from outer space, iron now accounts for around 95 per cent

of all the metal used today 1, as Ben McCormick reports.


IRON ORE

26

IronFe

55.845762.5

[Ar] 3d6 4s2 1.83

1 Iron ore pricing emerges from stone age, Financial Times, 26 October 2009 2 Or 1.1 billion tonnes of ‘contained’ iron, Anglo American 2012 Annual Report


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01 Conveyor belt containing iron ore at Kumba Iron Ore’s Sishen mine in South Africa

INTERVIEW

01 Making tracks: Iron ore is synonymous with the railway or ‘iron road’

02 Large pieces of haematite ore outside the entrance to Kumba’s Kolomela mine

03 Steel remains a key automotive material because of its strength, design flexibility, cost and recyclability


IRON ORE

ANGLO AMERICAN’S IRON ORE PRODUCTION

Operations: South Africa: An open-pit mine and beneficiation facility at Sishen and two open-pit mines, at Thabazimbi and Kolomela.

Projects: Brazil: Minas-Rio project under development, with first shipment due by the end of 2014

Anglo American ownership: South Africa: 69.7%; Brazil: 100%

Operation type: Open-pit mines

Annual attributable production (2012): 49.1 million tonnes.

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TECHNOLOGICAL ADVANCESExtracting the metal from the earth is a process that’s been refined over the centuries, but essentially it involves mining the rock, separating the ore out by crushing it, and smelting the iron out of the ore by heating it up.

The heating process was originally carried out by a blacksmith, who would burn charcoal with iron ore and oxygen provided by bellows. This created a crude iron that was then hammered to remove the impurities to create wrought iron.

Technology developed over time and more advanced ways of smelting iron were created, including using coking coal in a blast furnace, which is how most iron is still made today.

After mining, the orebody is crushed and screened into different sizes, which liberates some of the ore from the impurities. It can then be fed into a beneficiation plant to remove more impurities before being mixed with coke and limestone in a blast furnace.

Huge quantities of air are blown on to this mixture at the base of the furnace to heat it. Liquid iron collects at the bottom and is then tapped off and allowed to cool into what is known as pig iron, an intermediate material in the steelmaking process.

This is the iron found in most metal products we use today. But because it is too hard and brittle to be of much use, it is alloyed with a range of different elements to improve its strength, hardness and elasticity – and therefore its versatility.

By far the most widely used iron ore product is steel, made by combining pig iron, scrap steel and limestone and heating them to around 1,700°C.

Alloying elements are then added to form steel. Its properties and relative low cost mean steel itself accounts for more than 90 per cent of all metal used each year. Steel is used in an array of applications from construction and automobile industries, to cutlery and kitchen equipment, to surgical implements, and the aerospace industry.

Other by-products of iron ore include cast iron – which contains around five per cent carbon, is extremely hard and is used to make goods such as car cylinder blocks – and wrought iron, which is more malleable and corrosion-resistant and is used to make outdoor furniture and other decorative goods.

Lesser-known uses of iron include fungicides (iron sulphate), photograph development and platinum printing (oxalate of iron), ink production (iron chloride and nitrate) and protective paint (micaceous haematite). In short, it has hundreds of everyday applications.

Although China continues to be the main driver of steadily increasing steel production, new markets are appearing in south-east Asian emerging economies. Global demand for high-quality iron ore is set to increase with expanding steel output, which is expected to double by 20503.

HIGHLY PRIZEDIn 2012, iron ore (which contributed almost $3 billion) accounted for nearly half Anglo American’s underlying operating profit. The company’s subsidiary Kumba Iron Ore operates three mines in South Africa, including Sishen, one of the largest open-pit mines in the world at 11 kilometres long, 1.5 kilometres wide and 400 metres deep. It produces some of the world’s finest-grade iron ore with a high level of iron content in the rock relative to impurities.

The ore’s properties of hardness, rigidity and resistance to breaking down in transport, combined with the company’s ability to produce iron ore tailor-made to suit a particular steel mill’s requirements, means that Kumba’s iron ore is highly prized by steel plants and commands a higher market price as a result.

Anglo American’s largest current capital project is Minas-Rio in Brazil. The project in its first phase is expected to produce around 26.5 million tonnes of iron ore per annum. The first iron ore shipment from Minas-Rio is expected by the end of 2014. Around half of its exports are destined for Asia and the other half to the Middle East.


“Without iron, it’s likely you would not be able to read this article.”

ABOUT THE AUTHORBen McCormick is a business writer, award-winning editor and blogger. He writes for a wide range of business, construction and engineering magazines.3 KPMG Quarterly Commodity Bulletin, July 2013.


BOOK REVIEW

This book will make uncomfortable reading for many British and American conservatives. But not all. Professor

Mazzucato’s analysis will be cheered by at least one, now elderly, British Tory: Michael Heseltine.

Introducing his proposals this year for a government-backed economic growth strategy, No Stone Unturned, Lord Heseltine’s report begins with what the former President of the Board of Trade now regards as a confession of juvenile crime:

“My early speeches would reveal my support for the simplest of notions of the role of government. Get off our backs, cut the red tape, deregulate, lower taxes. My laughter would have been loudest at Ronald Reagan’s later joke – ‘I’ve come from the Government. I’m here to help’.”

SCHOLARLY ONSLAUGHTSince then Lord Heseltine has, he believes, seen the light. He has developed what he later described as an instinct to “intervene before breakfast, dinner and tea”.

Professor Mazzucato would agree. In The Entrepreneurial State she makes a scholarly and systematic

onslaught on the idea that government has no leadership role in business and industry. Mazzucato argues for massive, sustained and proactive State intervention in the world’s developed economies.

“So what’s new?” you may ask. What’s new is that the argument does not come from what those on the Centre-Right in Britain would call one of “the usual suspects”.

The usual suspects are found to the Left. Here, of course, the argument for intervention was heard all through the last century and is still heard in this one. From Cristina Kirchner in

Argentina to the late Hugo Chávez in Venezuela, to (even) Britain’s Labour Party Leader, Ed Miliband, we’ve heard the case for governments rolling up their sleeves and muscling in on the national economy.

Only this autumn Mr Miliband has called for a temporary statutory freeze on domestic energy prices; and in areas like health provision the Left resolutely refuses to accept that the profit motive can be compatible with just and compassionate care.

But these arguments have one strand in common: for much of the Left, State intervention is reactive rather than proactive, and designed to remedy failure rather than

MATTHEW PARRIS

THE ENTREPRENEURIAL STATE: DEBUNKING PUBLIC VS PRIVATE SECTOR MYTHS BY MARIANA MAZZUCATO ANTHEM PRESS, LONDON 2013

RADICAL READ

“Mazzucato stands on its head the conventional wisdom that risk should be the province of the private sector... Entrepreneurial risk, she argues, is precisely what the State must embrace. Capitalism is too risky to be left to capitalists.”

spearhead success: to fill a gap, to fix a perceived market malfunction. According to this perspective, capitalism slaps citizens around a bit, and the public sector, sirens blaring, arrives with stretchers to tend to their wounds and kiss them better.

A more sophisticated version of this Left critique would add that capitalism habitually self-harms, and State intervention is needed to protect the market itself from market failure: a rescue here, a subsidy there, a tax-incentive when needed, and a sharp kick wherever anti-competitive practices take hold.

This last “private-sector-friendly” (as we might call it) version of the case for State intervention meets much of the Centre and Centre-Right on a substantial swath of common ground. It is not Mazzucato’s ground. She characterises that classic centrist case for intervention like this: “Standard economic theory justifies State intervention when the social return on investment is higher than the private return – making it unlikely that a private business will invest.”

The Left has championed such thinking, and the Right (Lord Heseltine a conspicuous exception) has – somewhat queasily – gone along with some of it; but with an emphatic


proviso uncompromisingly framed as recently as last year in The Economist: –

“Governments have always been lousy at picking winners, and they are likely to become more so, as legions of entrepreneurs and tinkerers swap designs online, turn them into products at home and market them globally from a garage. As the revolution rages, governments should stick to the basics: better schools for a skilled workforce, clear rules and a level playing field for enterprises of all kinds. Leave the rest to the revolutionaries.”

None of this “mixed economy” thinking is it Mazzucato’s purpose either to repeat or to urge. She has a more radical message. Closely and minutely argued, with a wealth of supporting examples, The Entrepreneurial State makes the business case for the habit of State intervention: State intervention not even in risk-taking economic activities, but particularly in risk-taking economic activities. To put it crudely, she believes the State can and must “pick winners” – and that it is one of the key functions of government to do so.

ANIMAL SPIRITSShe stands on its head the conventional wisdom that risk should be the province of the private sector, while the public sector tidies up the broken glass after JM Keynes’s “animal spirits” of capitalism have finished their party. Entrepreneurial risk, she argues, is precisely what the State must embrace. Capitalism is too risky to be left to capitalists.

“Innovation” is key to her argument, and the role she sees for public-sector risk-taking in promoting economic growth. Her strongest supporting observation is the part defence spending has always played in the kind of risk-taking technical innovation the

private sector cannot afford; but she covers, too, in some depth, the IT Revolution, Silicon Valley, green and clean technology and the pharmaceutical industry.

Her approach is at the same time polemical, relentless, sometimes repetitive, and often makes dense reading as Mazzucato, an American-born academic now at the University of Sussex in the UK, ploughs forward with a wealth of illustration, particularly from US economic history. But she never loses her grip on its powerfully simple driving thesis.

SOCIALISED RISKSObjections and questions, however, arise. She does not duck, though her answers are not always complete or satisfactory – even to herself. How do we ensure that the taxpayers reap some of the rewards earned by the private sector when risk and R&D have been shouldered by the State (or, as she puts it, “risks that are socialised and rewards that are privatised”)?

How do we guarantee additionality, ensuring that public sector invest-ment does not simply crowd out or substitute for the private sector paying its whack?

To none of these questions do I think Professor Mazzucato offers (or pretends to) a more persuasive answer than that the State must be quick-witted, light-footed and adept at striking the right balance between ducking its opportunities on the one hand, and heavy-booted intervention on the other. Well, yes indeed. But governments are not always very intelligent at striking these balances.

She makes, however, a powerful case. So powerful that I finished the book wondering whether, if she is right, her logic should not be taken further.

If we are to accept that the private sector may be quite efficient at doing routine stuff that involves no overwhelming risk, but may hang back as an innovator – and that risk and innovation are where the State can step usefully in – then perhaps we should take the public sector away from what we call “public sector provision” (health, education, policing, administration) and leave that to the private sector? And leave to the State the business of high-risk venture capitalism and ground-breaking technological research and innovation for which (Mazzucato argues) capitalists have less appetite?

Just a thought. I wonder how that would go down at Sussex.

RADICAL READ

ARCHIVE SHOT


At a prospecting pit close to the Orapa diamond mine in Botswana, De Beers geologists (left to right) Jim Gibson, Gavin Lamont and Manfred Marx search for kimberlite indicator minerals. Two years earlier, in April 1967, De Beers announced the discovery by the three men of the Orapa pipe AK1 on the eastern edge of the Kalahari desert. Orapa, the world’s second largest diamond pipe in area, with a surface diameter of more than one square kilometre, was the foundation stone of the public-private partnership between the Botswana government and De Beers, which has been pivotal to Botswana’s extraordinary economic success over the past half-century.

ANGLO AMERICAN: ESTABLISHED 1917

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COVER:Africa rises symbolically from the sea in this sculpture in Dakar, Senegal, mainland Africa’s westernmost point and an historic hub for trans-Atlantic and European trade.

Photo by Rebecca Blackwell

ISBN 00304050

Printed by F.E. Burman. The paper is produced using a 100% chlorine-free (ECF) bleaching process and contains material sourced from responsibly managed and sustainable forests, together with recycled fibre, certified in accordance with the Forest Stewardship Council.

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DECEMBER 2013 OPTIMA - angloamerican.com/media/Files/A/Anglo-American-PLC-V2/... · its open pit Venetia mine in Limpopo Province, South Africa. The $2 billion investment will extend