Making policies work

GREAT insights Magazine

Embracing the complexity of mining for development – Editorial

July 2017

Bilal, S. 2017. Embracing the complexity of mining for development - Editorial. GREAT Insights Magazine, Volume 6, Issue 3. July/August 2017.

Share Button

Extractive resources have the potential to bring significant wealth to a country. Whether this translates into sustainable development is a totally different ball game. The rich-endowment of natural resources is often a mixed blessing, and at times a genuine curse.

In the context of the UN 2030 Agenda for Sustainable Development, the extractive sector touches upon most, if not all, the sustainable development goals (SDGs). The size of extractive operations and the significance of the sector for some resource-rich countries means that it dominates not only specific local areas, their economies, the communities and surrounding environment, but has also implications for the country as a whole: its economic structure, governance and ultimately, its development path.

In practice, this results in a complex web of interconnected issues and actors. It is also reflected in the wide range of perspectives on extractive-related questions.

Traditionally, international institutions and partners in particular have focused on the governance dimension of the extractive sector. Based on the observation that natural resources are often poorly managed in developing countries with weak institutions, and that the rents generated are captured by vested interests for their own benefit rather than the general interest, efforts have been put on combating corruption, promoting the rule of law, as well as greater transparency and accountability. OECD Guidelines, and in particular the the OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas are voluntary guidelines, whereas the US Dodd-Frank Act, the EU transparency and accounting directives and the recently adopted EU conflict minerals regulation are all examples of state-led regulatory endeavours to improve extractive-related governance. The Extractive Industries Transparency Initiative, and Publish What You Pay are illustrative of parallel initiatives by non-state actors.

In addition, international partners seek to positively influence the management and governance of natural resources through dedicated financial and technical support to resource-rich developing countries. Aid conditionality, as in the case of budget support for instance, has also been one of the mechanisms used.

On the other side, mining companies are legitimately concerned first and foremost by their returns on investment, the key responsibility towards their shareholders, and thus what’s happening within their own mines and, increasingly, around their mines. Beyond the direct positive contribution that mining might bring, including to local communities, mining companies (at least some of the major ones) are increasingly seeking to promote responsible practices as part of their long term sustainability strategies. These include, among other things, health and safety issues, working conditions, housing, local communities and environmental dimensions, often collectively referred to as a ‘social licence to operate’. Yet, such endeavours cannot be undertaken by the companies alone, and the phrasing adopting by Rio Tinto, which prefers to adopt the strategy of ‘partnership to operate’, might better reflect the task at hand.

Better understanding the potential impact of extractive activities, benefits and challenges, at a local level is therefore important. So is the need to improve the governance and management of natural resources, which is a necessary requirement. But it is not a sufficient condition.

First, instead of focusing on best practices, as many international actors do, more emphasis should be put on context analysis and ‘good fit’ approaches, taking explicit account of political economy dynamics, so as to increase the chances of leading to effective improvements in practice.

Second, the extractive sector should not be an enclave in the economy, and approached as such by domestic and international actors. The extractive sector can play a pivotal role in the industrialisation and economic transformation of resource-rich countries, stimulating more inclusive and sustainable growth.

This requires looking beyond the perimeter fences of the mines, and considering broader dimensions such as governance frameworks, the structures of licensing and contracts, taxation, and genuine linkages with economic activity in the rest of the economy through local content policies, innovation, skills development and education, entrepreneurship, infrastructures, and territorial development approaches, to mention just a few.

The Africa Mining Vision (AMV), championed by the African Union, paves the way in that direction at a continental level, and international institutions should follow suit. The challenge is to translate vision to concrete national and local actions.

Given the multitude of interests and stakeholders at stake, cross-fertilisation through dialogues and partnerships is a requirement for any successful endeavour. Mining for development does imply going beyond mining.

This issue of GREAT Insights tries to bring together this wide range of perspectives, taking mining as a starting point to address more fundamental dimensions of the sustainable development agenda.

We hope you will appreciate these insights and welcome you comments and contributions.

This article was published in GREAT Insights Volume 6, Issue 3 (July/August 2017).

Economic Transformation and TradeExtractive SectorsMining