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ECONOMY-AFRICA: Economies Must Diversify, Reduce Focus on Mining

Kristin Palitza

CAPE TOWN, Jun 10 2009 (IPS) - The global financial crisis has taught African governments a lesson. More than ever, they recognise the need to diversify their countries’ mining operations as a key defence against economic instability and cyclical swings.

“The economic, climate change and food security crises are all linked. They cannot be tackled separately. We need a new development model that provides security, stability and addresses peoples’ needs,” former United Nations secretary-general Kofi Annan told delegates at the World Economic Forum on Africa, taking place in Cape Town, South Africa, from Jun. 10-12.

“Everyone needs to contribute. Business has a key role, as do Africa’s trading and donor partners. But the primary responsibility to make it happen rests with Africa’s political leaders,” he added.

Resource management needs a long-term, not a one-night-stand approach.

-Frans Baleni, NUM

When discussing who should be responsible for implementing such diversification strategies, however, government officials and private sector representatives passed the buck from one to another.

Mining companies blamed governments for not sufficiently supporting social, educational and skills development within the sector, while government officials claimed mining companies showed interest only in fulfilling minimum social and environmental requirements.

“Mining must be responsible and rise to the challenges of keeping the environment sustainable,” said South African minister of mining, Susan Shabangu, warning that “at some point, our resources will come to an end.”


“For our economy to grow, there needs to be a diversity in thinking,” the minister said, suggesting bigger investments in South Africa’s Information Communication Technology (ICT) industry as an example.

Shabangu appealed to the private sector and civil society to enter partnerships with government to collaboratively develop regulatory mechanisms, such as social acts or labour laws. She further said mining companies needed to balance investors interests, with their obligation to create skills and employment.

Immediately thereafter, Shabangu reminded the audience that while social and environmental aspects of the mining industry were important, “we have to compete globally.”

Contradicting Shabangu, Preston Chiaro, chief executive of energy and minerals giant Rio Tinto, claimed mining companies already go the extra mile by investing in social and educational schemes in the communities in which mines are located. This move, he said, will benefit both the private sector and the public in the long-term.

Breaking the resource curse

Natural resources have been both a blessing and a curse to African countries. Mining has contributed towards economic growth and infrastructure development, created jobs and increased foreign currency earnings. But exploration of natural resources has created a legacy of corruption, exploitation, environmental devastation, displacement through migrant labour and thousands of workplace injuries.

“Resource management needs to have a long-term, not a one-night-stand approach. We can’t just rip resources out of the ground,” warned South African National Union of Mineworkers general secretary Frans Baleni. He demanded better regulatory mechanisms that ensure economic growth while creating jobs and protecting environmental sustainability, stressing that without legal restrictions, governments will not be able to hold the private sector accountable.

“The fact that South Africa continues to export raw materials and then re-imports [the goods manufactured from these resources] is a problem,” added Baleni. He believes this predicament can only be solved if the private mining sector shows willingness to let governments police exportation of natural resources.

Zambia’s Minister of Mines and Minerals, Maxwell Mwale, agreed with Baleni. He called for more decision-making power for governments over the management of natural resources in their own countries.

While disputing rumours that Zambia plans to nationalise its copper mining industry, he confirmed the Zambian government intends to become a 26 percent shareholder of the country’s mining operations.

“We need to be able to influence decisions to balance approaches and create peace and stability in the country,” Mwale said. “Even investors don’t want to be in unstable countries.”

Copper, Zambia’s core natural resource, brings in 80 percent of the country’s foreign exchange earnings. “Mining has a huge impact on government budgets, so if mining operations close down, this has very serious social consequences,” he explained to justify the need for government to influence private sector decisions.

Mwale further cautioned that copper resources were slowly but surely being depleted in Zambia and suggested investing in other key economic sectors, such as agriculture and tourism, to sustain the country’s economy going in the long term.

Liu Guijin, special representative oN African Affairs of China’s Ministry of Foreign Affairs, described China, a relatively recent player in mineral exploration on the continent, as a saviour of many mining jobs on the African continent.

“We make positive contributions. We will increase investment, not to lay off workers and increase production,” claimed Guijin. Trying to dispel common fears, he promised China has no interest in attaching political constraints on investments in Africa.

The Zambian population remains sceptical of China’s intentions, however. Earlier this month, Zambians protested the take-over of closed Luanshya Copper Mines (LCM) in the country’s copperbelt by Chinese-owned Non-Ferrous Metals Mining Company (NFCA).? In 2005, 49 miners died in an accident at the Chambishi Mine, which NFCA had taken over in 2003.

Chinese investment is unpopular in Zambia, due to high levels of workplace injuries as well as poor wages and working conditions at Chinese-run copper mines, together with resentment over rapidly-growing influence of Chinese traders in the clothing industry.

Mwale echoed the sentiments of Zambian citizens, noting that it was difficult for Zambians to find a foothold in their own mining sector. Contrary to Guijin’s assurances, foreign mining companies tended to employ workers from their own countries instead of giving jobs to Zambians, Mwale lamented. This was made worse by the fact that banks were reluctant to give Zambians loans to start mining operations, while they readily lent money to foreigners with more collateral.

Despite his calls to develop alternatives to mining, Mwale acknowledged the importance of the mining sector within Zambia: “Although we have no choice but to diversify, this doesn’t mean we want to kill the industry.”

 
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