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Policy climate and the implementation of the AMV and EMDP

Presentation by Yao Graham, TWN-Africa at Workshop for Officials in ECOWAS on AMV and

EMDPFiesta Royale Hotel Accra

4th November 2014

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Evolution of Governance Focus since 1980s: From FDI Attraction and Managing Resource Curse to Africa Mining Vision

a. Creating enabling environment for FDIb. Managing the Resource Curse c. Winner’s Curse, Popular Resistance and

Resource Nationalismd. The Africa Mining Vision –minerals for

transformation v. managing resource nationalism

Notion of a resource curse

• Natural resource wealth leads to bad development outcomes and have focused on trying to explain why this is the case, either in general or in respect of particular regions or countries.

• Concept amalgam of various perspectives• Evidence inconclusive

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Andrew Rosser 2006• economistic perspectives that emphasise economic mechanisms; • behaviouralist perspectives that emphasise emotional or

irrational behavior on the part of political actors; • rational actor perspectives that emphasise self-interested

behaviour on the part of political actors; • state-centred perspectives that emphasise the nature of the

state; • social capital perspectives that emphasise the degree of social

cohesion in countries; • structuralist perspectives that emphasise the role of social

groups or socio-economic structure; and • radical perspectives that emphasise the role of foreign actors and

structures of power at the global level. 4

Resource Curse focus • Influence from outside• Voluntary, international, corporate, unilateral• Revenue transparency and anti-corruption – (EITI, PWYP, OECD guidelines)

• Impacts –Conflicts, less HR and social and environmental– Kimberley process, Dodd-Frank Act– Guidelines on lending (IFC, Equator, AfDB) – CSR (slew of voluntary frameworks and principles)

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What is the EITI?

• Product of Resource Curse paradigm product of confluence of views of INGOs and Blair govt. in 2003 (See https://eiti.org/eiti/history)

• The Extractive Industries Transparency Initiative (EITI) is a global coalition of governments, companies and civil society working together to improve openness and accountable management of revenues from natural resources.

• The EITI maintains the EITI Standard. Countries implement the EITI Standard to ensure full disclosure of taxes and other payments made by oil, gas and mining companies to governments. These payments are disclosed in an annual EITI Report (to see all EITI Reports, go to data.eiti.org). This report allows citizens to see for themselves how much their government is receiving from their country’s natural resources.

• African countries half of EITI, 11 ECOWAS countries part of EITI

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The Natural Resources Charter

Jim Cust, Acting Director, Natural Resource Charter - The Natural Resource Charter in Africa: a tool for national strategy and evaluation

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NRC in Africa

• Has been endorsed by the ADB and adopted by New Partnership for Africa’s Development (NEPAD) as a flagship programme

• Is working to incorporate the African Mining Vision principles in the methodology

• •Can also use the country exercises to help countries identify support provided by AMDC

• •Can also be a complement to African Peer Review Mechanism

• Implementation: Exercises by the end of 2013: Sierra Leone, Tanzania

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RESOURCE NATIONALIST TRENDS

• The forms in which resource nationalism manifests vary widely, including, among other measures:o outright nationalisation of mining companies, whether compensated or uncompensated;o increased state participation through, among other measures, a state owned mining company;o fiscal measures;o mandated beneficiation (often through the imposition of export levies);o mandatory local inputs; ando local equity and participation requirements.

THE GROWTH OF RESOURCE NATIONALISM IN AFRICA, PETER LEON- Head: Africa Mining and Energy Projects, Webber Wentzel, Johannesburg, South Africa, Toronto, Ontario, Canada, Tuesday, 5 March 2013

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Peter Leon- cont’d•Recently, the following resource nationalist trends have emerged in African mining jurisdictions:•1. The imposition or increase of royalties or mining taxes.•2. A mandatory requirement for state equity carry in mining projects.•3. Indigenisation and local equity requirements.•4. The review of mining contracts, with a view to possible renegotiation or cancellation.

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Responding to the Challenge of Resource Nationalism

• Trade, investment and aid policies of OECD powers

• The World Economic Forum’s Responsible Mineral Development Initiative (2009)

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Raw Material Nationalism and int. trade

Many developed economies, notably the USA, EU and Japan, which depend on raw material imports for the production of manufactures for export and their home markets are increasingly arguing that export taxes and other export restrictions distort trade and pose a threat to the competitiveness of their firms which depend on imported raw materials by driving up the price of their inputs while lowering them to their competitors. Moreover, the EU, which imports 70-80% of its primary resources, has declared “an open global market completely free of all distortions on trade in energy and raw materials” (Mandelson, 2008) as a key goal of the EU's trade policy. Elements of the strategy for attaining this goal include: •Negotiations in WTO regarding an EU proposal for a discipline on use of export taxes•Awareness raising in different for a including G8, OECD, UNEP•Getting binding commitments in Free Trade Agreements (FTAs) on market opening, the elimination of export duties and disciplines in other areas relevant to access to raw materials such as rules on subsidies, competition and investment.•Further precise justifiable exception grounds for restrictions.•The use of WTO accessions negotiations to get binding commitments on export duties and dual pricing•Use of Bilateral (non preferential agreements disciplines on export duties, investment, dialogue•Use of the WTO dispute settlement mechanism to challenge measures which the EU believe violate WTO rules.

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The World Economic Forum’s Responsible Mineral Development Initiative (2009)

• Initiated in 2009, “the RMDI aims at providing possible paths forward on how to govern mineral wealth in mineral-based emerging economies”.

• The RMDI is a true multistakeholder cooperation between the World Economic Forum and leading global experts in the field: coming as an initial idea out of the Global Agenda Council on the Future of Mining & Metals; working intensively with the World Bank Institute and the Commonwealth Scientific and Industrial Research Organisation in scoping and conducting research; and consulting with representatives from the Forum’s Mining & Metals Industry Partner Group, the International Council on Mining and Metals, the International Finance Corporation, EITI, the International Bar Association, and the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, as well as representatives from the public sector.

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• The events of the last few years have heightened the need for stakeholders involved in mineral development to find common ground to understand each other’s needs, perceptions and priorities.

• In 2012, significant resource-related disagreements flared up in almost every significant mining region, from Mongolia to Chile and from South Africa to Indonesia. Some, notably in South Africa, escalated sufficiently to migrate from the financial to the news sections of the national and global media (see Exhibit 2).

• This convergence of events is no accident. It is the outcome of tensions created by diverging stakeholder expectations and poorly managed consultations intended to resolve them.

• – Many governments are under pressure from their citizens to ensure they benefit appropriately from the mining industry. This includes looking beyond royalty and tax revenues. As a South African government adviser says, “I’m not sure that we want companies that are just going to dig holes. We want companies that are going to make those linkages and build our economy for the future, post-mining.”2

• – Local communities are increasingly aware that they typically bear a disproportionate share of mining impacts and costs. They are becoming more vocal in demanding larger shares of benefits as compensation and a more meaningful share in decision-making.

• – Companies are operating in a “new normal”, with falling commodity prices putting pressure on operating margins and higher capital costs leading to budget overruns in many expansion and greenfield projects. They are consequently looking to generate more value from existing investments and being more selective about new ones.

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Two Phases of RMDI

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Six Building Blocks of Responsible Mineral Development

• (1) Progressive capacity building and knowledge sharing among all• stakeholders• (2) A shared understanding of the benefits, costs, risks and responsibilities

related to mineral development• (3) Collaborative processes for stakeholder engagement throughout• the life cycle of mining projects• (4) Transparent processes and arrangements• (5) Thorough Compliance, Monitoring and Enforcement of Commitments• (6) Early and comprehensive dispute managementThe six building blocks reflect the issues surrounding many developments. They include economic and social aspects, such as issues around taxes and royalties, local suppliers and hiring, environmental questions such as water, waste and land use, as well as health and safety concerns.

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Six Building Blocks of Responsible Mineral Development

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Mineral Value Management

• Mineral Value Management (MVM) is an RMDI-developed tool designed to enhance mutual understanding of the holistic drivers of value from mining, and to provide a means to measure and communicate the needs and expectations of various stakeholders.

• MVM is based on seven dimensions that drive value creation for all stakeholders:– Fiscal (tax, royalties, etc) and legal/regulatory environment– Employment and skills– Environment and biodiversity implications– Social cohesion, cultural and socio-economic implications– Procurement and local supply chain– Beneficiation and downstream industry– Infrastructure

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Africa and RMDI

• 13 project countries: including Africa: Ghana, Liberia, South Africa and Tanzania; in East Asia: Australia, Indonesia, Laos, Mongolia and Papua New Guinea; and in Latin America: Brazil, Chile, Colombia and Peru. Site of founding initial research

• January 2014 Presidents of three ECOWAS countries spoke at (Ghana, Guinea and Liberia) spoke at WEF RMDI event

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\What Comes Next?

The Forum plans to pilot MVM at a country, regional and local-community levels in 2013, as part of multistakeholder dialogues aimed at identifying, debating and taking action on issues related to advancing responsible mineral development. Dialogues are already being established in Chile, Peru and Guinea. Other countries of focus include Mongolia and Mozambique.