West across the Indian Ocean from Perth is a continental land mass three times Australia’s size and over thirty times its population. With around 30 per cent of the world’s mineral reserves, the continent of Africa is integrating ever closer with Australia. Tom Richardson reports.
African mining

A graveyard of old mining equipment in Namibia, southern Africa, where mining is the single most important contributor to the economy. Photo: sosij / Foter.com / CC BY-ND

Foreign direct investment in Africa has increased from $9 billion in 2000 to over $80 billion in 2012 and Australian companies have been at the forefront of this investment revolution.

Foreign Minister Bob Carr recently told an Africa Down Under conference that there are currently 200 Australian resource companies involved in 650 projects in 37 African countries. One in 20 companies listed on the Australian stock exchange has an investment in Africa. All in all, Africa hosts the largest number of overseas Australian mining projects: around 40 per cent of all projects overseas are in Africa.

The Australian government’s Agency for International Development (AusAid)  has also joined the private sector in increasing African investment. Some of this support is through AusAid’s Mining for Development Initiative.

MP Kevin Rudd told an Africa Down Under conference the initiative is “a $140 million program open to all countries on the [African] continent. If you wish to send your officials, your legislators, your regulators, your technicians across in search of whatever skills you need, then we are opening this program to the entire continent to use our training institutions for that purpose.”

AusAid is also supporting Africa development in two separate projects, the implementation of the African Mining Vision (AMV) and establishment of the African Minerals Development Centre (AMDC). The AMV is a set of principles agreed on by African union ministers responsible for mineral resources development and adopted by the African Union Assembly Heads of State.

However, accusations that Africa’s resource wealth is being exploited on an old colonial basis remain, with Western and Chinese investors alike looking to gain their share of the mineral wealth.
“The continent’s natural resource sector is currently hemorrhaging – leading to a significant loss of development revenue,” Abdalla Hamdok, the deputy executive secretary of the United Nations Economic Commission for Africa (UNECA), said. “African countries must improve capacity to physically audit mineral resource production and rents, enhance the skills of officials in negotiating fiscal issues and effectively monitor compliance with taxation laws.”

Hamdok said that in dealing with foreign investment, African nations should negotiate fair deals for workers, equitable resource rents and agree social development commitments to local communities. “Contracts must be negotiated or renegotiated to optimize revenues and ensure fiscal responsiveness to windfalls, all the while in a manner that does not discourage investment.”

Currently, most countries in Africa do not have a mining strategy that reflects their long-term development aspirations. The AMV is mandated to change this. “AusAid funded an AMV awareness campaign targeted at government decision makers and the mining industry in Africa. The campaign included featured articles in business magazines, development of a website and e-bulletins,” an AusAid spokeswoman said.

The AMV also calls “to explore strategies for investing windfall earnings and mineral resource rent into sovereign wealth funds, including stabalisation and infrastructure funds.” Sovereign wealth funds to invest the profits of Africa’s mineral wealth would help sustainably build African countries future prosperity, allowing future diversified investments in health, education and infrastructure projects.

AusAid will also contribute $AU5 million to support the establishment of the AMDC. The Centre aims to provide practical support to the AMV. Wilfred Lombe, the Centre’s interim coordinator, said, “It aims to contribute to the development of a highly skilled and knowledge-driven mining sector which delivers greater economic and social benefits as a result of higher productivity levels.”

An AusAid spokeswoman said the AMDC funding aimed “to develop policy and licensing issues, geological and mining information systems, governance and participation, artisanal and small-scale mining, investment and diversification, human capital, communication and advocacy.”

Lombe said, “Support from Australia has helped stimulate interest from other funding partners who initially may have been skeptical of yet another new institution in Africa.”

Since Australia committed in August 2012, Canada has announced $15 million funding over five years and other potential donors are interested. The AMDC is also supported through a partnership between the African Union, UNECA and the African Development Bank Group (AfDB) – a multi-lateral development bank for Africa.

In July 2012, the Australian government committed to a future membership agreement with the AfDB. It is the only G20 nation in the world not yet a member, except Russia. Other countries such as the USA and UK have had membership since 1983.

The 2013-14 Commonwealth Budget includes a commitment by Treasury to purchase $88.2 million worth of shares in the African Development Bank and an initial contribution, administered by AusAid, of $160.9 million to the African Development Fund.

This commitment is expected to bring benefits. “Membership would provide Australia with access to new Africa networks, increasing the development of our support in Africa. The AfDB also plays a role in improving governance, transparency and accountability, including in the mining industry, providing support on legislative frameworks, capacity building and raising environmental and social standards,” an AusAid spokeswoman said.

For now though the Australian government remains on the outside of the AfDB.  It is though leading international support for the AMV and AMDC.  With time, these two initiatives aim to help African mining benefit African people.