World Bank Mining Activities in Africa Policy Framework and Country Experience

1
World Bank Mining Activities in Africa Policy
Framework and Country Experience

Gotthard Walser Oil, Gas and Mining Policy
Division The World Bank Group
AfDB-WBG Experience-Sharing Meeting Tunis February
12-13, 2007
2
World Bank Mining Activities in Africa Policy
Framework and Country Experience

1. Mining in a changing world
2. Mining policy guiding principles and criteria
3. Country experiences
4. Issues and challenges

3
1. Mining in a Changing World
4
1.1 Mining in a Changing World
Decade of the 1980s
Late 1990s present

• Macro/Sector reform
• Liberalization
• Some privatization of SOEs
• Owner/operator of mining assets
• By-stander in emerging economies
• Awakening, acceptance
• Benign neglect

• Dominance of Markets
• Shrinking State
• Decentralization
• Regulator/administrator
• Leading force in investment
• New responsibilities
• Role of NGOs
• Fully integrated
• Awakening, acceptance

Macro-Economic
GovernmentsRole in Mining
Private sector inEmerging Econs
Environment
Social Focus
5
1.2 What does this Mean for Governments?
CountryCompetitiveness
Mining SectorSustainability
Leaving somethingof value behind
Investmentenvironment
Infrastructure

• Sound and stable
• Macro-economic management
• Legal and regulatory framework
• Fiscal conditions
• Institutional/admin- istrative capacity

• Availability of
• Physical infra- structure
• Services

• Sound and Responsive
• Environmental management system
• Community relations
• Equity in rent sharing
• Stakeholder participation
• Code of conduct/ethics

6
1.3 Continuing Push for Sustainable Mining
Development

• Local communities continue to assert more
  strongly their views on extractive industries
  developments that impact them
• Industry bodies, business based organizations and
  civil society groups are continuing to actively
  promote the sustainability agenda
• The importance of sustainability in extractive
  industries has been reaffirmed on the
  international political stage
• National and local governments remain key players
  in fostering an enabling environment for
  sustainable development at the national and
  community level

7
1.4 Current and Emerging Issues

• High prices
• Continuing commodity price boom leads to even
  greater push for sustainability increases its
  scope, but creates new interest groups, often
  making needed political reforms harder
• New Players
• China and India are important contributors to
  demand and are also investing in extractive
  industries abroad changing the traditional
  playing field
• Africa Significant mineral (and petroleum)
  potentialcould be leading location for new
  investment but weak governance and capacity make
  sustainable development all the more difficult
• Governance
• Including but beyond corruption and transparency
• Long-term capacity development, dispute
  settlement mechanisms, contingency contracts
  renegotiations, government legitimacy

8
1.5 The Importance of Sustainability

• What is Sustainable Mining Development?
• For World Bank-supported projects
• Financially viable mining development that
  takes place in an environmentally and socially
  responsible manner with sound governance that
  provides lasting benefits to the communities
  where mineral development, production and
  transportation take place.
• Sustainable Mining Development is essential
• If a mining project is to contribute to effective
  and lasting poverty reduction at local and
  regional levels
• To avoid major conflicts around mining
  developments
• For mining to contribute to political legitimacy
  and national level policies and priorities
• For the sustainability of a profitable mining
  industry

9
1.6 Why Sound Governance Is Critical

• Poor macro national level governance benefits
  wasted
• Government income spent unwisely, used to promote
  wrong economic policies, booms mismanaged,
  culture of corruption
• Supports sustainability of poorly functioning
  political and economic institutions, illiberal
  democracies
• Creates new political economy opposition to
  further reforms
• Can destroy the most well-conceived sectoral
  reform
• Poor sector governance social/environmental
  harm
• Long-term sustainable development highly unlikely
• Irreparable damage to local communities,
  especially indigenous peoples
• Contributes to social conflict, even civil war
• Leads to demands for contract renegotiation, even
  nationalization
• Harms legitimacy of national government with
  repercussions for national level governance

10
2. Mining Policy Guiding Principles and Criteria
11
2.1 Guiding Principles for the World Bank Group
in Mining

• Strengthen governance and transparency
• Ensure that extractive industry benefits reach
  poor people
• Mitigate environmental and social risks
• Protect the rights of people affected by
  extractive industry investments

Source World Bank Management Response to
Extractive Industries Review
12
2.2 Criteria of a Successful Policy Framework for
Mining Development

• For these guiding principles to be attained, the
  policy framework must meet the criteria below
  where any are missing, further reform /or
  capacity building is needed
• A satisfactory macro framework is indispensable
• Government must be reasonably credible and
  legitimate--it is crucial to be able to avoid
  political economy traps in which elite groups
  capture a disproportionate share of benefits
• Political institutions must allow for effective
  participation and the ability to make
  transactions over timeno winner-take-all
  mentality

13
2.3 Criteria of a Successful Policy Framework
for Mining Development

• Benefits must be widespread at both the national
  and local levels
• Local capacity building for both governance and
  transferable occupational skills development must
  be a continuous and adaptive process
• Long-run capacity building for implementation,
  monitoring, evaluation and enforcement is
  institutionalized
• Stakeholders have a flexible and adaptive
  approach to new developments in the sector

14
2.4 Public vs Private Sectors Role in the Mining
Development Sequence
USD/km2
MINE DEVELOPMENT
gt10,000,000
1,000,000
DETAILED EXPLORATION
PUBLIC FUNDING
100,000
PRIVATE FUNDING
100
REGIONAL EXPLORATION
MINERAL RESOURCES ASSESSMENT
REGIONAL GEOLOGICAL MAPPING
10
15
3. Country Experiences

• Madagascar
• Mauritania
• Zambia

16
Tunisia
Morocco
Algeria
Libya
Egypt
Mauritanie
Mali
Niger
Sénégal
Sudan
Tchad
Eritrea
Benin
Burkina Faso
Guinée
Nigeria
Djibouti
Sierra Leone
Côte dIvoire
Togo
Ethiopia
République Centraafricaine
Ghana
Liberia
Cameroun
Somalia
Guinea Eq.
Congo
République Démocratique du Congo
Uganda
Gabon
Kenya
Rwanda
Burundi
Tanzania
WB Mining T.A. Projects In Africa
Angola
Malawi
Madagascar
Zambia
Moçambique
Zimbabwe
Namibia
Botswana
Swaziland
South Africa
Lesotho
17
3.1 Madagascar (i)

• Two Projects
• Mining Sector Reform Project
• 1998-2002 USD 5 million
• Main policy and legal reform initial
  institutional reform (mining cadastre) ASM and
  environment
• Mineral Resources Governance Project
• 2003-2008 USD 32 million
• 2007-2010 additional 8 million
• Governance Institutional reform (environment,
  inspectorate, geological survey, gemmological
  institute), decentralization, formalization of
  ASM and trade, integration of large scale mining,
  community development, geological infrastructure
  and promotion

18
3.1 Madagascar (ii)

• Policy reform (1998)
• Legal reform
• New Mining Code (1999, rev. 2005)
• Large Scale Mining Investment Law (1999)
• Institutional reform
• Bureau du Cadastre Minier (2000)
• Institut Gemologique de Madagascar (2004)
• Cellules Environmentales Minieres (2006)
• Inspection Miniere (2007)
• Service Geologique de Madagascar (2007)
• Restructuring the parastatal mining and petroleum
  agency OMNIS into an oil agency (2008/9?)

19
3.1 Madagascar (iii)

• Facilitating regional integration of large scale
  mining projects 4 new projects
• Consultation process and regional/local
  coordination committees involving mining
  companies, government authorities and communities
• Regional resources assessments (Dynamic Mineral
  Resources Management)
• Regional/Community Development Plans, based i.a.
  on the resources assessments
• Regional/Community Development Funds

20
3.1 Madagascar (iv)

• Artisanal and small-scale mining (ASM)
• Legalization of ASM (mobile cadastre) support
  to establishing associations
• Technical and management capacity building
• Fiscal revenues decentralization
• Management capacity of local authorities
• Gemstones and gold trade formalization, fiscal
  issues
• Value chain development of local cutting and
  polishing, jewelry (IGM role)
• Integration of ASM into local development plans

21
3.1 Madagascar (v)

• Land use management
• Mineral resources
• Geological, geophysical and
• geochemical survey of about
• 60 of the country
• Set up of a multi users data bank core system
  of the Geological Survey
• Environment and social vs mining
• Conflict prevention and management
• Mines-Forest committee large and small scale
  mining
• Environmental base line surveys
• Environmental mining units

22
3.2 Zambia (i)

• Several projects
• ERIPTA (multi-sector closed)
• Policy, legal and institutional frameworks
• Privatization of State owned ZCCM (closed)
• Social services water and electricity in mining
  towns
• Copperbelt Environment Project
• 2003-2008 USD 55 million
• Remediation of GoZ and ZCCM environmental
  liabilities (as part of privatization process)
• Strengthening of GoZ environmental regulations
  enforcement capacity
• SEED (multi-sector)
• 2005-2010 USD 5 million
• Adjust policy, fiscal and regulatory frameworks
  to high commodity prices and mining boom
• ASM (see Madagascar)

23
3.2 Zambia (ii)

• Copperbelt Environment Project
• Legal definition of liabilities and of who should
  remediate them has facilitated the privatization
  process at a time commodity/Cu prices were low
• Plan based on private and public environmental
  management plans, approved by environmental
  authority (ECZ)
• Capacity building and implementation on site
  closure processes, incl consultation,
  resettlement and technical best practices
• Comprehensive environmental data bank for
  monitoring
• Major case lead contamination affecting a 50,000
  community (Kabwe)
• Communities and local authorities involvement in
  sites remediation and maintenance
• Main issues
• Sustainability of financial and institutional
  environmental management mechanisms
• But, major issue active mining operations and
  private sector represent still gt90 of
  contamination flows..

24
3.2 Zambia (iii)

• SEED
• Earlier agreements between GoZ/ZCCM still based
  partly on negotiations, incl. e.g. fiscal
  aspects
• GoZ would like to re-negotiate as it feels it
  does not benefit as it should under higher
  commodity prices.
• Improve capacity to negotiate? Or Reduce room for
  discretionary negotiation through legally
  pre-defined agreements? (cf Madagascar,
  Mauritania, Chile, Peru..)
• Zambia has data banks data banks are important
  more important is to learn how to use them and to
  share the information..

25
3.3 Mauritania (i)

• Two and a half projects
• Projet de Renforcement Institutionnel du Secteur
  Minier (PRISM I) 1999-2004 USD 15 million
• PRISM II 2003-2008, USD 18 million additional
  USD 5 million on oil

26
3.3 Mauritania (ii)

• Basic reform
• Legal framework
• Mining Code and Mining Agreement Law
• Regulations, incl. environmental
• Institutional reform
• Mining cadastre one of the most performant in
  Africa, 2nd only to Madagascar
• Environmental mining service and Environmental
  Information and Management System (SIGE) for EIA
  evaluation and monitoring)
• Geological and Mining Information System (SIGM)
  for promotion and land use management
• Geological Infrastructure
• About 70 of country covered with geological,
  environmental, geochemical and airborne
  geophysical data

27
3.3 Mauritania (iii)

• Mining and Local Economic
• Development
• Socio-economic development based on the SOE SNIM
  iron mine within the Zouerate (mine) to
  Nouadhibou (port) 700 km corridor small
  businesses development, economic diversification,
  social services, renewable energy, water
  resources development.
• Additional water resources would allow the
  development of new mines

28
4. Issues and Challenges

• Regional instead of a country-by-country
  approach
• Western Africa
• Great Lakes trade roads
• SADC
• Institutional sustainability everybody recognize
  the importance of institutions. But why
  government and international aid agencies are
  reluctant to set up long term financing
  mechanisms?
• Newcomers how to react? Increased flexibility
  to keep competitive? But what about environment
  and social?
• Convince IMF, WB and ADB? , and Finance
  Ministries economists that local management of
  locally generated revenues is key to EI based
  development
• EI Funds..

29
Thank you!