Monthly Archives: June 2016

Africa: Public-Private Sector Ventures Key to Devt of Africa’s Mining Sector, Says AU Expert

21st June 2016

By Peterson Tumwebaze

Frank Mugyenyi is a senior advisor for the department of trade and industry at the African Union Commission (AUC), and the brain behind the new African mining treaty. Adopted in 2009, the main objective of the treaty is to strengthen co-operation and partnership between the public and private sectors to boost the mining industry on the continent. Mugyenyi was in Rwanda recently, and met local sector players to discuss how to boost the country’s and Africa’s struggling mining sector. Business Times’ Peterson Tumwebaze caught up with him to expound on this and other strategies the commission is putting in place to make the sector more vibrant and competitive.

The global mining industry is struggling right now amid drop in global metal prices. What is the commission doing to support sector players on the continent?

African Union has designed a new strategy that is expected to bolster the mining sector. The Africa Mining Vision and other initiatives are currently being domesticated by member states because they realise that supportive legal regimes, regulatory frameworks and policies are essential to build strong private sector and ensure growth across sectors, including the mining industry. Besides, public-private partnerships are some of the strategies that will help drive socio-economic transformation on the continent.

As Africa enters a new paradigm in her development, with industrialisation and structural transformation at the centre, public-private sector partnerships will play a critical role to create more jobs for the growing population and spur growth.

With the public and private sectors working together, everyone is a winner. So, the AU promotes such initiatives in the mining sector, too, to ensure it is not hard-hit by the turmoil in the global arena.

Besides, the Africa Mining Vision seeks to strengthen the licensing regime to ensure investors operate in a friendly environment.

The pact is primarily targeting mining, and oil and gas companies, as well as chambers of mines and mining associations.

The treaty comes at a time when the extractive industry is under extreme pressure from depressed commodity prices because of the continuing slowdown in the world economy, and especially in China, a key metal buyer.

The new strategy will, therefore, provide a platform of cooperation where by private sector leaders, chambers of mines, and regional mining associations can benefit from multi-stakeholder engagements in domesticating the Africa mining vision to regional and national mining visions to drive the sector’s development.

Can you specify how this strategy will benefit the mining industry?

The private sector stands to gain from reduced operational costs, and interventions that will boost productivity. For example, the mining vision seeks to build a skilled and motivated workforce which is instrumental in enhancing the sector’s productivity, competitiveness and sustainability, challenging market conditions notwithstanding.

Expenses associated with delays that result from community relations or labour issues, as well as timely and cost-effective provision of goods and services, can be realised through the vision’s compliant mineral policy and regulatory frameworks at country level.

What are some of the highlights of the pact?What should Africa do to ensure sustainable utilisation of its natural resources, such as minerals?

Under the treaty, companies commit to pay all mineral rents and royalties, and make their payments public to promote accountability. Governments are also expected to publish all legal agreements with companies and actively ensure that all commitments from government agencies, including tax refunds and granting of permits, are honoured in a timely and transparent manner. Companies subscribe to the principles of national, regional and international resource monitoring and oversight bodies and commit to fight corruption and transfer pricing.

States should adopt zero tolerance to bribery and corruption and prosecute those that promote such practices in the sector.

Sector players are also pledging to support national geological surveys with geological data, while states commit to funding of the geological surveys and relevant ministries to avail knowledge infrastructure incorporating this data to the public to allow firms make informed investment decisions.

Companies will also invest in human capacity development and support national and regional institutional capacities beyond payment of mineral taxes and royalties. Countries should support science, technology, and engineering, and mathematics (STEM) education to world standards to meet the demands for trained staff within government bodies and the sector.

What should Africa do to ensure sustainable utilisation of its natural resources, such as minerals?

Africa cannot afford to get it wrong this time round, there is no room for error… she must have it right. This can only be achieved through broadening partnerships and bringing on board the private sector to participate in policy formulation and implementation.

Without proper engagement with the African private sector and all the stakeholders, a vacuum can be creates, resulting in making of wrong choices. The scars inflicted by some of the extreme policies, such as post-colonial government protectionist import substitution industrialisation and market driven liberalisation structural adjustment policies have had lasting negative impact in many areas of the economy of the continent. so, Africa cannot afford to make more mistakes. It is important that these policies are drafted by Africans to ensure ownership and successful implementation .

So we need to learn from our past failures, and develop, and apply our own researched and tested prescriptions.

That’s why in the African Union Commission’s “call to action” Agenda 2963, the role of the private sector is paramount because it is the engine of growth.

Traditionally, partnership building has been skewed towards development partners because they fund our national budgets. However, Africa has been losing over $50 billion a year, more than official development aid flows to Africa, through illicit financial flows.

To end this resource hemorrhage, Africa requires high level private sector engagement and commitment because both governments and the private sector work for the common good.

The mining sector is not playing its transformative role yet and the “mineral curse” paradox still haunts the continent.

Besides, there are issues of transparency and accountability on the continent which affects the sector.


Canada lent billions to oil, gas and mining companies. Then it made a profit

By Mike De Souza in News, Energy | June 16th 2016

On the same day that President Barack Obama rejected TransCanada Corp’s proposed Keystone XL pipeline, a Canadian Crown corporation threw the company a lifeline.

Export Development Canada (EDC), a taxpayer-owned organization that operates as a commercial investment bank, signed two deals on that day — Nov. 6, 2015 — offering between $150 million to $350 million in loans to TransCanada, a Calgary-based company.

The timing was purely coincidental. The deals renewed an annual arrangement with the Crown corporation, which is part of a syndicate of about 20 financial institutions that are supporting TransCanada Pipelines in the U.S.

EDC signed more than $28 billion in deals with oil, gas and mining companies

Large multinational corporations regularly take out short-term loans for operations. Some of them in Canada get help from EDC for their activities abroad.

But deals like these illuminate the surprisingly symbiotic relationship between industry and the federal government. EDC has provided more than $28 billion worth of financial support to Canadian oil, gas, metals and mining companies since 2015, helping along some of the country’s industry giants. These include companies such as Cenovus, ConocoPhillips, Crescent Point Energy, Enbridge, Encana, Husky, Spectra Energy and Suncor.

The deals support industry jobs and the economic benefits that go with them. They also help generate a healthy revenue stream for the government through interest payments.

Karyn Keenan is a lawyer and the Ottawa-based director of Above Ground, an advocacy organization that researches the operations of Canadian multinational corporations abroad in order to promote accountability. Keenan says this support may run counter to other government policies, including pledges to improve Canada’s record on climate change and phase out fossil fuel subsidies, as well as its general stance against human rights abuses.

It’s a case of the government’s right hand not knowing what the left had was doing, she says.

“It means the Canadian public is making money off of loans to oil, gas and mining companies, many of whom are doing awful things… and trashing the planet,” she tells National Observer. “It’s inappropriate that the Canadian government is making money off of those things.”

The public knows little about what the companies do with the loans and financing deals they receive from their tax dollars. In the case of the most recent loans offered to TransCanada, EDC’s website only says the money can be used for “general corporate purposes” or “support for working capital.” This essentially means that the company can, in theory, use it for any purposes in the U.S., including lobbying, advertising, general operating costs or legal action.

EDC has an internal reporting process when it signs these agreements so it gets more details about how the companies are using loans. It normally declines to disclose this information in order to protect what it says are the business secrets of its clients.

Although TransCanada wouldn’t necessarily need EDC to step in financially, since it already had about 20 other banks providing it with short-term credit, the government-backed support of the Crown corporation also provides political cover, says Keenan, allowing the company to put the Canadian government’s brand on its projects.

“There’s no shortage of financial institutions out there, so why do we have a Crown corporation that’s mimicking a commercial bank?” Keenan asks.

Forsyth, a spokesperson for EDC, says that the Crown corporation is supporting oil and gas companies since they provide important benefits for Canadians.

“Oil and gas plays an important role in Canada’s export picture and sustains approximately 700,000 Canadian jobs annually. As a result, [it] is an important sector for EDC,” he explains.

The Crown corporation also supports other sectors of the economy. In 2015, it provided $104.2 billion in total financial support to Canadian companies. This included:

Information and Communication Technology companies: $4.9 billion
Infrastructure and Environment companies: $25.8 billion
Light Manufacturing companies: $9.7 billion
Agriculture, Fisheries and Forestry companies: $24.3 billion
Transportation companies: $16.8 billion

Forsyth says that all of EDC’s deals generated dividends that translated into new revenues for the federal government — $500 million in 2016 and $1.1 billion in 2014. The money goes back into government coffers to help it balance its budget.

He says EDC usually targets smaller companies to help them export products, but when asked why the Crown corporation was also giving many large corporations support, he says it was because these companies can also provide new business for other Canadian businesses through their ventures abroad.

EDC projects can have “significant” or “unprecedented” adverse effects

Keenan’s organization however, has also examined a range of mining projects supported by EDC and questions whether the federal organization does the right type of screening to avoid the wrong types of projects.

“For 20 years, we’ve been questioning their policies,” she says. “We think they’re inadequate…we don’t think they are nearly robust enough.”

Since November 2010, EDC has offered financing to 22 projects abroad with “potential significant adverse environmental or social effects that are sensitive, diverse, or unprecedented.”

This would include an oil refinery in Turkey — the Socar Turkey Aegean Refinery project that is supposed to process about 10 million tons of crude oil per year. EDC says it reviewed the social and environmental impacts of the project and concluded that it would meet or exceed “recognized good practices.”

“I can tell you that EDC abides to strong corporate social responsibility (CSR) principles for all of its transactions,” says Forsyth. “This means taking into account the impacts — both environmental and social — of the business that we support.”


Zimbabwe: Villagers Displaced By Diamond Mining Hope to See Action From Govt

13th June 2016

By Andrew Mambondiyani

Mutare — Villagers re-located to a sprawling government-owned farm complex in eastern Zimbabwe to make way for the nation’s biggest diamond field are hoping that President Robert Mugabe’s move to take control of the valued resource will benefit them.

More than 1,000 families were moved in 2009 from a village adjacent to the Chiadzwa diamond field in Marange to Arda Transau, a 12,000 hectare farm settlement about 40 km (25 miles) to the north with promises of a better life.

Arda Transau was billed as a new township with tarred roads, shops and health clinics – but seven years later the villagers say they have yet to see the promised education and health facilities while their homes are crumbling and food is scarce.

Seven mining companies licensed to mine the area were ordered in March to leave by Mugabe who accused them of robbing Zimbabwe of wealth. Mugabe took over all diamond operations in the newly-formed Zimbabwe Consolidation Diamond Company (ZCDC).

Some of the affected diamond companies – Mbada Diamonds and Anjin Investments – have since taken the government to court with the issue still pending before the courts.

While Mugabe’s move could further tarnish the country’s image as a risky investment, with investors already unnerved by his drive to force foreign-owned firms to sell majority shares to locals, the relocated villagers are hoping it will help them.

Caiphas Mujuru is one of the Arda Transau residents lobbying the government to get ZCDC to address the problems faced by the villagers who are facing severe food shortages.

“Life is really difficult here at Arda Transau. We are going hungry,” Mujuru told the Thomson Reuters Foundation.

“We had been promised honey and milk here but it is now a nightmare for us.”


When the villagers were moved, each family was given $1,000 in compensation and a four-room house but these new dwellings, painted bright yellow, have since developed cracks.

Families were promised 11 hectares of arable land including one hectare earmarked for irrigation to run small piggery or poultry projects but this never happened, the villagers say.

People in Marange hoped the diamond industry would pump money into reviving failing irrigation schemes as small-scale farmers cannot maintain or replace ageing equipment and national law requires mining companies to help local communities develop.

But the plight of the villagers has been further exacerbated by the current El Nino induced drought which has decimated the southern African nation’s crops, leaving 4 million Zimbabweans in a population of 14 million without adequate food supplies.

The villagers had the chance to voice their concerns at the Alternative Mining Indaba conference in Mutare this month comprising civic society, communities and stakeholders in the mining sector and legislators promised to help.

“We will take your concerns to the Minister of Mines (Walter Chidhakwa),” Prosper Mutseyami, legislator for Musikavanhu constituency in Chipinge district, told the villagers.

However the diamond companies maintain they fulfilled what they were expected to do for the relocated villagers.

Anjin Investments, which was a joint venture between the government and Chinese investors, said it complied with the law when it came to the relocation of the villagers.

“We did everything required by the law,” Anjin Investments’ Chief Executive Officer Munyaradzi Machacha told the Thomson Reuters Foundation in a telephone interview.

A spokesman for Mbada Diamonds, George Manyaya, said his company was happy with what they had done for the villagers and the traditional leaders had appreciated their initiatives.

But villager Blessing Mufute said the situation at Arda Transau had become so bad that many people were going hungry.

“We have been selling the few livestock we had to buy food,” said Mufute, adding relocated villagers were in urgent need of jobs, clean water, and electricity as well as food.

In a telephone interview with the Thomson Reuters Foundation, Mines Minister Walter Chidhakwa said local people should not feel they are forgotten.

He said the Manicaland Provincial Affairs Minister Mandi Chimene would work with the Ministry of Labour and Social Welfare to provide social and food assistance to the villagers.

Contractors would also be asked to work on the poorly built houses at Arda Transau, Chidhakwa added.

But James Mupfumi, who heads the Centre for Research and Development, a local non-governmental investigative organisation, is sceptical.

“It is disheartening to realise that the Mines Minister has already visited Arda Transau for Zimbabwe Consolidated Diamond Company to relocate more villagers to Arda Transau without addressing previous community grievances,” he said.


Africa Needs a Minerals Body of Its Own – Experts

4th June 2016

By Ivan R. Mugisha

Mineral experts from East Africa have proposed the formation of a continental mineral body to promote the sector and systematically break away from the “overtly exploitative” international mineral market.

They argue that prices for the so-called conflict minerals – including gold and the “3Ts” (tin, tantalum and tungsten) – are manipulated by powerful players in the developed world, leading to low prices.

These minerals are essential in manufacturing electronics and are in high demand by the international telecom companies like Samsung, Apple and Microsoft.

“It is no secret that international mineral prices are controlled and global due diligence mechanisms are stringent on minerals from Africa. The laws don’t favour us but favour mineral consumers and suppliers in the developed world. That is why you see this unfavourable cyclical price fluctuation, which I believe, is highly controlled,” Frank Mugenyi, senior industry advisor at the African Union Commission said.

“Africa needs to pull out of this exploitation and strategically reposition itself to negotiate its own minerals and be at the centre of the boom that will be created by Africa’s own demand for manufactured and industrial products.”

The World Bank projected that sub-Saharan Africa’s growth will slow in 2015 amid falling commodity prices, a realisation that has already been felt across the continent.

The effects of low prices have been worse on countries adjacent to the Democratic Republic of the Congo, which rely heavily on production of the so-called “conflict minerals” — a term most used in the West, but deemed derogatory and isolative by African sector players.

In Rwanda, GDP growth in mining has been on a downward spiral, slowing from 11 per cent in 2014 to settle at -9 per cent, according to the Ministry of Finance.

Investment in the sector has also stalled and many artisanal miners have given up the trade, much as there is hope that the curve will start to rise in the next year.

“Things will begin to improve with time. Currently, the sector has more than 480 companies. We intend to develop the mining business to a sustainable level because it is one of the prime sectors that contribute to the economy greatly. It is currently the second biggest foreign exchange earner in the country,” Jean Malic Kalima, president of Rwanda Mining Association said.

Many mining companies in the region are counting losses. For example in Kenya, the leading soda ash miner — Fluorspar Company — suspended its operations in June last year owing to sustained low global prices for its produces.

Breaking away from the international market is however seen as a radical move by some experts, who insist Africa cannot escape the global market.

“Some international mining frameworks put Africa in a disadvantaged position and make it extremely difficult to compete with mineral producers in China, the US and Europe. Much as that is true, breaking away from the international market is not practical. What we can do is lobby for stronger continental and regional laws that guarantee equality on the negotiating table,” Majala Mlagui, CEO of Thamani Group said.

Mining investors from the region met in Kigali Wednesday under the auspices of the African Union Commission, to discuss schemes to catapult countries from over reliance on unreliable international prices.

They also proposed the fast-tracking of the long-term Africa Mining Vision, which was developed by the African Union in 2009 to promote regionalism in empowering the African extractive industry, among other goals.