The mining industry predicts that Africa will be the continent of the future. However, this will always be the case if government’s approach mining corporations in a predatory manner. Instead of partnering with the sector for long-term growth, Africa’s governments adopt a predatory strategy that appeals to populist rhetoric. Given its natural wealth, Africa should be ripe for the picking in the 21st century, especially as humanity nears a shift to renewable energy sources.
Among the many resources found in the continent are 40 percent of the world’s gold reserves and titanium, phosphates, and cobalt. The continent also contains about 80 percent of all manganese and 60 percent of the world’s precious stone diamond reserves. Oil and natural gas reserves account for 12 percent and 8 percent, respectively. It can be see how many African nations are dependent on the commodities industry for their economies. Mining, for example, accounted for 70% of African exports in 2015, 28% of the continent’s total GDP, and 42% of all government income. Crucial producers’ reliance on commodities has increased throughout the course of this century. As of 2016, mining accounted for 91.5 percent of Botswana’s overall exports, up from 90.5 percent in 2015. In the Democratic Republic of Congo, this dependence grew from 72.4% to 91.1%, Burkina Faso from 8.2% to 76.6%, and 76.3% to 82.6% in Guinea.
The growth of the digital and green economies and the resulting demand for commodities such as rare earth minerals, coltan, and copper all promise more in the future. In 2040, the African Development Bank expects natural resources and the extractive sector to provide government revenue above 30 billion dollars a year. Africa has the potential to be the mining superpower of the future. However, if governments continue to manage mining corporations in a predatory manner, this will always be the case.
Desperate for income and private resources, African governments attack the industry with high-tax regimes and other “redistributive” methods instead of embracing it as a long-term development partner and playing to populist rhetoric. Miners who could otherwise be long-term development partners are often exposed to interference, corruption, and rent-seeking to get what they want. On the other hand, communities around mines rely heavily on mining companies, a duty that the government often abdicates without a second thought.
As a result, there are often more extraordinary value addition and beneficiation to go along with it. However, these calls are often incorrect, ambiguous, or incomplete, even if they are not technically wrong. They often disregard the amount of mineral ore that has already been processed.
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That governments find themselves in a challenging position is undeniable. According to the United Nations, more than half of the people in African nations heavily reliant on the extractive industry live on less than $1.90 a day. According to the World Bank, a 1% rise in consumption leads to a 0.69 percent decrease in poverty in these Sub-Saharan African nations. The increase may be as much as 2 percent in other places as well. Rather than more labor-intensive agriculture, industry, or tourism, Africa’s development has come from the extractive (mine, oil, and gas) sector. The mining industry is a tempting personal piggy bank for the wealthy to overcharge the general people — a classic “win-lose” situation.
When Africa’s population reaches 2.5 billion in the next generation, it will be necessary for the continent to manage all growth sources properly. Limiting development is not an option for Africa’s 472 million poor, who make up 67% across the globe. Hence, the mining industry’s potential role as a development partner should not be underestimated. They are commonly seen as fixed investments, making them an easy target for extortion before the resource runs out. The action explains why Zambian mining firms, for example, have been subjected to over 20 tax regime changes in the last 20 years, slicing and dicing company margins, destabilizing revenue estimates, and eroding investor confidence.
Mining in Africa will need to move from ad hoc measures, affected by short-term political interest, towards a more coherent, inclusive, and strategic strategy to secure income streams and extract more value from mining. First and foremost, the current narrative must change from focusing only on financial gain to emphasizing total developmental importance. For instance, employment does not stop with mining work. Mining creates three to five indirect employment for everyone it makes directly. Like mining, which generates $3 in the local economy for every $1 spent, manufacturing generates $3 for every $1 spent. Similarly, every million dollars invested in CSR has a beneficial impact on 20,000 people’s lives. Mining also has a cascading effect on local PAYE and spending on goods and services.