Cocktail for Success
• The measures Africa can take to benefit from its resources
Lilongwe – Following reports that Malawi got a raw deal from its mining agreement with Australia-based Paladin Africa Limited (PAL), Malawi earth scientist Grain Malunga has urged African countries to set up effective mineral regulatory institutions.
PAL operates Kayerekera Uranium Mine in the country’s northern region.
Malunga says Africa’s future lies in political stability, competitive industry and effective minerals legislation along with favourable fiscal packages that can best be handled by a set-put comprising of ministries of mines, departments of geological survey and minerals marketing agencies working with environmental officials.
He says while the world’s insatiable appetite for technological development has led to African countries becoming more aggressive in pursuit of FDI, governments should strive to develop effective legislative frameworks to safeguard the continent’s interests.
“Local success factors for stimulating Africa’s mining sectors lie in developing clear mining development policies and legislation, political stability, competitive fiscal packages and a stable investment climate.”
A recent report by African Forum and Network on Debt and Development (AFRODAD) shows that if properly managed, natural resources have the potential to transform national economies in developing countries.
“In the absence of sound policies and procedures governing natural resources, mineral resources can be a source of economic instability, social conflict, and lasting environmental damage,” says the Zimbabwe-based think-tank.
AFRODAD notes that failure by African governments to harness revenue from natural resources for development is a result of poor mining and investment policies and the machinations of the investors who have established intricate ways of evading taxes.
“The onus is, therefore, upon the national governments to develop and implement concrete policies that govern investments in the extractive industry and also address the problem of illicit financial flows,” says the AFRODAD report.
The think-tank notes that “the majority of those responsible for negotiating contracts on behalf of the general citizenry support policies that disproportionately benefit the investors at the expense of the nation, thereby raising suspicion that the responsible government officials are corrupt”.
Malunga adds to this saying mines ministries must be capacitated in terms of human and financial resources to negotiate better deals, including in terms of environmental protection and worker safety.
He suggests creation of share-ownership schemes to protect local interests.
Malunga says minerals marketing agencies can hold shares on behalf of the government.
“The shares can later be diverted to local citizens and will help reduce capital flight,” he advises.
AFRODAD board chair, Opa Kapijimpanga, says it is saddening that the African continent is richly endowed with high-value natural and human but its peoples remain poor. According to Brown Zvenyika Motsau, who has conducted extensive research on income disparities in the minerals sector, the average earnings of a South African mining CEO is R55 000 a day while the average income of an Australian mineworker is A$108 000 per annum.
“In ZAR terms the Aussie worker would be earning more than R800 000 per annum or an equivalent to US$91 119 while the average wage of a South African mineworker is R88 000 per annum, an equivalent to US$10 000,” says Motsau.
He says the profits of the top nine mining companies in South Africa averages R34 billion.
Kojo Busia, who is the UN Economic Commission for Africa’s Governance and Public Administration Division, says there is need for transparency throughout the value chain of mineral resource production.
Busia advises African countries to develop fiscal social contracts between the state and society.
“There is also need for systems and structures for citizen participation throughout the entire value chain,” he says.