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.