The changing role of mining in developing economies

Speech by Parliamentary Under-Secretary of State for International Development, Lynne Featherstone MP, to the Mining on Top conference.

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

The Rt Hon Lynne Featherstone

Many thanks for this kind introduction Lord Marland. I am delighted to be here this morning to address a topic of crucial importance for Africa. I represent the UK Government’s Department for International Development. My department leads the UK’s work to end extreme poverty by helping to create jobs, unlocking the potential of girls and women and saving lives when humanitarian emergencies hit.

So what does poverty reduction have to do with mining, you might ask? A great deal, I would argue. Let me set out why.

Africa’s mineral wealth is well known – legendary even. Africa is already the world’s top producer of many mineral commodities. It also has the greatest known reserves of many more even though – and this is important – many parts of Africa have not yet been properly surveyed for their mineral potential. Even in Zambia - generally considered to have a very mature mining industry - 60% of the subsoil remains unexplored.

But this resource wealth has generally not translated into wealth and opportunities for its citizens. Formal mining in Africa started almost 150 years ago with the discovery of diamonds on the banks of the Orange River.

Since then significant mining industries have been established throughout the continent from the Copperbelt to the gold fields of West Africa. Some of the world’s biggest mining conglomerates have their roots in Africa. But despite this wealth of mining history we would probably all agree that the continent has not reaped the full benefits of its natural resources.

I think we know full well why this hasn’t happened. There are well-rehearsed arguments under the headline of the ‘resource curse’: weak government institutions, inconsistent policies, outdated infrastructure, lack of expertise and skilled workers, corruption.

I could add unscrupulous investors with an eye on short-term profits rather than long-term value-addition to that list. This toxic cocktail breeds resentment and distrust among the majority who see their countries’ wealth being exploited to enrich the few. In the worst cases it can lead to conflict and long-term instability.

I am happy to say though that we have a pretty good idea of what needs to change. Governments need to see themselves as custodians – and not the owners - of natural resources; managing them responsibly and transparently on behalf of current and future generations.

Investors need to maximise job opportunities for local people and strengthen linkages with local markets and supply chains. They also need to promote transparency and respect for human rights in line with global best practice.

Citizens need to have the practical means and political space to monitor and – if necessary – challenge how resources are being managed. They need to be reassured that the benefits from extraction are shared fairly across society and that they are invested in their country’s long-term future. And all stakeholders need to ensure that mining delivers tangible benefits for local communities, protecting the most vulnerable in society and the natural environment they depend on.

This is where DFID can play a role. If we can jointly make these changes then mining can help drive rapid and peaceful development as it has done in Botswana. My department is well positioned to partner with governments, citizens and investors, at national and international levels, to rise to these challenges.

Let me give you some examples that I think are very relevant to the discussions at this conference.

We are investing heavily in strengthening the capacity of African governments to establish and deliver modern mining policies and regulatory frameworks. For example, in Sierra Leone we helped the government establish the Minerals Development Agency to lighten the regulatory burden on the Ministry of Mines and Mineral Resources.

We have significant mining sector support programmes in the Democratic Republic of Congo, Kenya and Mozambique. We deliver most of these in close collaboration with international partners such as the African Development Bank and the World Bank.

Through our innovative investment climate facility, called iFUSE, we can mobilise at short notice UK expertise held by other government bodies, for example the British Geological Survey which holds significant geological data and expertise relevant to Africa.

We are also mobilising new capability in Her Majesty’s Revenue and Customs, which is our tax authority, to help its peers in developing countries, starting with Ethiopia, Tanzania and a regional programme out of South Africa.

This Government is implementing legislative change here in the UK to make the beneficial ownership of companies more transparent. This will help citizens and authorities in developing countries hold to account those who may be using UK companies to conceal illegal activities.

It will also help companies better understand who it is they are doing business with. The reforms – announced in April – include a publicly accessible registry of beneficial ownership information of UK companies.

We are supporting African citizens to access information about the management of natural resources, to encourage debate and accountability. In the Democratic Republic of Congo we are funding the expansion of the ‘congomines’ website to bring together in one place disparate information about who owns concessions, how much taxes companies pay and who the ultimate owners of those companies are. We also help to train local researchers and media to analyse the information, uncover illegal behaviour and advocate for change.

Internationally, we have ambitious plans to help citizens use transparency data to hold decision makers to account, and help policy makers in decision making. For example, we aim to develop and pilot internet and mobile phone applications, and find simpler ways to present this information to communities, making complex extractives data accessible and relevant to citizens, investors and policymakers.

With your knowledge of the industry, mining companies can help us put this information in context and also make information relevant to local communities – for example by project-level reporting.

My department is also very open to working with responsible companies to help ensure that poor people benefit from mining investments. In Mozambique we are developing a programme with a private sector association to support business linkages between local small and medium-sized companies and larger investors.

We are considering, with UK Trade and Investment and several international investors, how to build the skills of East African citizens and businesses so they can get jobs and contracts in the rapidly expanding oil and gas sectors, and in the industries supplying them.  

This year, the UK Government is also chairing the Voluntary Principles on Security and Human Rights initiative. The Voluntary Principles provide guidance to extractive companies to help them to manage human rights risks around their security operations. They also provides a forum for governments, extractive companies and civil society to come together to discuss security and human rights challenges.

Getting more governments to join the initiative is a priority for the UK’s Chairmanship. We would especially like to see more African countries join us, following the excellent example of Ghana which joined the initiative earlier this year.

Leadership for this exciting agenda is coming from the highest level in our government. Prime Minister David Cameron put transparency in extractive industries at the heart of the UK’s Presidency of the G8 last year. At the Lough Erne Summit leaders committed to new measures so that developing countries reap the full benefits from their natural resource wealth.

These include the tax capacity building and beneficial ownership initiatives I mentioned earlier. The UK is determined to lead by example for transparency and therefore will apply to join the Extractive Industries Transparency Initiative later this year.

So why does that mean that there is a changing role of mining in developing countries? We now know that resource wealth will not translate into broad economic growth without a concerted effort from all stakeholders. For this reason, both governments and investors need to change their ways of working.

I have tried to set out how the UK government and my department in particular are working to help achieve better development outcomes from mining in Africa. Let me leave you with what I think are the key challenges for African governments and international investors.

Leadership from African governments is essential for this agenda to succeed. But leadership is not just about having the right policies and institutions in place – important though these are – it is crucially about setting out a long-term vision for how mining can help to transform an economy to be competitive in the 21st century.

That vision has to transcend the political cycle and needs to engage all of society to resolve the many difficult trade-offs, for example spending revenues now versus investing them in long-term development. The African Union has shown great leadership by setting out a Mining Vision for the continent which sets the blueprint for similar processes at national level.

All parts of society need to be engaged in this debate to avoid disputes between different groups and ensure that the interests of the poorest and most vulnerable are protected. Where a national consensus can be reached, technical and financial support from partners like the UK will be most effective.

My challenge to the investors present today is to fulfil your responsibility as development actors. In many African countries where you operate you will be the biggest taxpayers, the most important employers, and probably the ones who build and maintain roads and other essential infrastructure for the local economy.

It is in your interest to ensure that these contributions reinforce the wider development process of your host country and communities. Which means that you need to analyse how you can further expand your contributions, partner with other actors for maximum impact, and lead by good example for other investors to follow.

To be clear, I am not talking about spending more money on social programmes. Much more importantly your role needs to be alongside governments and citizens to improve governance of the mining sector in the long-term and help deliver economic development for all. As I said earlier, my department is always willing to work with private companies who are prepared to take their developmental responsibilities seriously.

I hope this has given you a flavour of how my department sees the role for mining in developing economies in Africa. If you are interested in following up on any of the issues I have raised then please contact my officials through the organisers of this conference. I wish you much success for the rest of the event.

Published 2 July 2014