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GREAT insights Magazine

Between global and hyperlocal: A territorial approach to partnerships in mining

July 2017

Medinilla, A., Karaki, K. Between global and hyperlocal: A territorial approach to partnerships in mining. GREAT Insights Magazine, Volume 6, Issue 3. July/August 2017.

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The transformative nature of mining calls for an integrated territorial approach to multi-stakeholder partnerships and a better task division between companies, authorities, civil society and development partners.

The past few decades have seen a rapid rise in the scale of mineral extraction in Africa. In the 1980s and 1990s, the sector saw a rapid liberalisation, creating opportunities for primarily western multinational companies to invest in large-scale mining, and building up the expectations that countries might use their mineral wealth for national development objectives. In the early 2000s, as mineral and oil prices surged, Africa experienced a new mining boom. New large-scale operations were set up across the continent, and exploration and discoveries attracted new investors from a range of (emerging) economies such as China, India or Brazil.

The surge and subsequent recent drop in mineral prices have given countries and companies a taste of the massive economic potential of mining in Africa, yet it has also revealed many of the structural difficulties of mining in contexts of weak institutions and highly informal forms of governance. Price volatility means that companies and governments are faced with towering expectations they often cannot meet; corruption and opaque deals are commonplace, and local development impact is often more elusive than was assumed. This then leads to tensions and potential conflict between companies, communities and authorities over access to and management of resources, environmental degradation and stalled development in general.

The 2030 Agenda renewed the interest in and expectations on private sector actors as vehicles for change and development. In extractive industries, policy makers see opportunities for partnership in a variety of sustainable development goals (SDGs), particularly those that engender economic development, job creation, industrialisation and infrastructure development (SDGs 1, 8, 9), but also environmental sustainability (SDGs 6, 7, 13, 15) and social inclusion (5, 10, 16). Multi-stakeholder partnerships in line with SDG 17 are similarly seen as the way forward in bridging narrow business interests and broader national and global development objectives.

The burning question is how can such partnerships work and deliver in a sector as prone to opposition, competition, and elite capture as mining?


Understanding complexity: Interests and expectations


In theory, the extractive sector can create jobs and growth; support research and development; improve infrastructure over long time horizons; and lift entire regions out of isolation. Between theory and practice, however, lies the difficult challenge of understanding and dealing with context.

Mining takes place at the interface between the global and the hyperlocal. Resource and mineral markets are fundamentally global and the capital intensive nature of mining activities means that several of the big mining companies generate global revenues that far exceed the GDP of (some of) the countries they operate in. At the same time, a mine is almost always a local operation. The benefits and immediate effects of mining are therefore by definition unevenly spread. Every mine also touches a wide range of actors, at every level, each representing distinct interests and priorities, and each coming with a different set of expectations of what benefits and change extractive industries will bring, as illustrated by Figure 1.

Figure 1: Examples of interests and expectations surrounding mineral extraction

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Understanding complexity is therefore critical to avoiding a cycle of unrealistic assumptions, unmatched expectations and, ultimately, opposition and conflict. Mining companies often find themselves lost in translation, targeted by competing demands and expectations from all sides, and having to ‘speak different languages’ to a myriad of actors at every possible level.

Extractive industries are home to a wide range of professional communities. What one person sees as an interesting and sustainable business case can be seen as a flagrant rights violation by another, even if they work in the same organisation or agency. This calls for an integrated, cross-sectoral and evidence-based approach to the sector, and one that reflects the local and national dynamics around the mine.


From top-down territorial planning to bottom-up engagement


The territorial dimension of a mine is often used as a key selling point to facilitate investment, often in cooperation with international financial institutions (IFIs) and donor agencies. Several examples exist of territorial planning strategies around extractive industries with a combination of private and public investment. In Madagascar, for example, the World Bank supported the development of a “regional growth pole” in close cooperation with a mineral sands mine, providing loans to the government for jointly developing a seaport, road infrastructure and a business park with a view to connect the isolated southern part of the country to the global economy. These strategies tend to be based on broad assumptions of how development takes place, such as ‘building roads will catalyse local private investment’ or ‘access to infrastructure will catalyse investments and hence contributing to poverty reduction’.

Even with accompanying measures, what can appear as a strong business case on paper often fails to take account of the local political economy around a (future) mine, the power dynamics and access to resources, or the basic socio-economic fabric and local political culture. At the same time, major infrastructure and other investments are always transformative in one way or another. Expectations alone, for example, can raise the cost of real estate, alter labour market structures and attract migration, even if no real value is being created. Even limited opportunities can alter the local power structures in society as local elites compete over resources and influence. For countries and companies this can drive up the cost of investment a great deal, as positive change proves more difficult to achieve than initially assumed.

A more bottom-up and evidence-based territorial approach allows companies, governments, citizens and donor agencies to build on incentives, manage expectations on what can realistically be achieved and to make better informed and more strategic choices around mining investment projects, and may in fact also reduce (long-term) costs and risks in the process, especially when this is applied as part of a proactive multi-stakeholder process.

The starting point of any territorial approach to partnerships in extractive industries is a serious context analysis, which takes into account the structural and foundational factors of local and regional governance and the economy. A fine-grained understanding of the local and national political economy around mining, elites, their interests and what drives them to engage, oppose, or collaborate helps create more realistic ambitions for partnering with companies, authorities and communities; it also helps manage expectations, both towards the mine (what benefits can the mine bring to us?) and of the mine (what can we realistically expect to achieve?). It can help in identifying entry points, actors and potential change agents that can drive or advocate for developmental outcomes and adaptation strategies. In particular, it can help in defining which actors need mobilising and how to best empower local authorities, civil society and communities to enable a balanced engagement over sharing the costs and the benefits of mineral extraction.


Who does what? The need for balanced partnerships and long-term engagement


Applying a territorial perspective is an engagement process as much as it is an analytical one. Multi-stakeholder engagement through partnerships has the potential to bridge divides and empower communities and citizens, as well as to strengthen the role of accountable authorities to take charge of local development in a context as volatile as extractive industries. Effective partnerships can be a means of fostering a balanced environment for engagement and collaboration in the long run.

How this takes place is critical as the choice of an engagement modality can both foster cooperation and fuel conflict. Putting all the eggs in one basket, for example by financing a civil society organisation to provide basic services as part of a corporate social responsibility (CSR) initiative, may risk marginalising local authorities or cause divisions in civil society. Organising periodic consultations and meetings around the mine may lead to short-term results, yet depending on the environment, they could also mask or obscure underlying tensions that can resurface at any point.

Multi-stakeholder partnerships around extractive industries are therefore best treated as a shared responsibility and a long-term engagement that goes beyond a funding relationship.

Mining often takes place in remote rural areas, characterised by weak institutions, limited local governance and disempowered communities and civil society organisations. The starting point of many multi-stakeholder processes in mining therefore is often a profound imbalance in terms of capacity, (access to) financial resources, networks, power and influence.

In those contexts, development partners can play a key strategic role supporting multi-stakeholder partnerships and engagement and address some of these imbalances. This might be by strategically investing in those sectors where needs are greatest, or where there is real potential for value creation beyond the lifecycle of a mine. Development partners can also play a critical role in empowering marginalised actors in situations of weak governance. Local authorities and civil society are often severely disempowered and at high risk of instrumentalisation for elite interests. Strategic support to individual civil society organisations (CSOs) or coalitions of organisations with varying degrees of formalisation can offset power imbalances. Similarly, a non-instrumental approach to local authorities and decentralisation, but one that seeks to empower authorities and strengthen local accountability structure around a real development mandate, may in fact reveal opportunities in the area of mining, particularly with regard to mineral royalties and investment at local level.

All this requires development partners not only to invest in greater analysis and evidence, but also to make important qualitative changes to engagement in the extractive sector. They must look at multi-stakeholder engagement around private sector initiatives not based solely on a business case, but also through the full extent of sectoral and thematic lenses available to them, including private sector development, local governance, decentralisation and civil society support, environmental protection and climate change, etc. all of which are concerned when dealing with mineral extraction. It also requires adopting a fundamentally political way of working, a more hands-on and coordinated approach to mining areas, and offering knowledge, network expertise and leadership where necessary.

Similarly, it is crucial that agencies and practitioners, including companies, go beyond an oversimplified approach to partnerships as a business-to-stakeholder funding relationship, and recognise the many variations of partnerships – in terms of purpose, location, activities, partners’ relations and interests. Partnerships around mining ideally involve a multitude of relationships, tailored to the needs and development patterns of the region. This means that at the very minimum they are underpinned by a frank discussion of who is best placed to support which action; that they ensure critical distance and independence in those areas where needed and facilitate access and cooperation where this is most relevant.


Four implications for policy makers and practitioners


Adopting such an integrated and diversified territorial approach to extractive industries and community engagement can only take place when there is a critical mass of initiatives on the ground. It also requires the main actors to adapt the way in which they engage with one another.

  1. For companies, this means letting go. Businesses often seek to maintain control and tend to engage directly and mobilise resources where the demand or risk of instability is strongest. Balancing this approach with a longer term one that embraces diversity and shared responsibilities with (empowered) partners – whether these are CSOs, local/central authorities or donor agencies – can reduce costs and risk in the long run, and contribute to a company’s social licence to operate.
  2. For civil society, this means teaming up. Coalitions are key to overcome the potentially divisive effects of mineral extraction, to avoid instrumentalisation. They strengthen the negotiating position and overall influence on national and local processes. In more practical terms, coalitions can also improve the external funding environment for CSOs seeking to engage with extractive industries, both for private and public (donor) funding.
  3. For (local and national) authorities, this means looking ahead, moving beyond narrow elite interests, rent seeking and political survival. Local authorities are in many cases a missing link in the chain, often perpetually disempowered by national agendas, or locked in short-term electoral tactics that make them easy targets for corruption and clientelist approaches, particularly when endowed with local mining royalties. Local democratic and accountable institutions, when equipped with a strong local development mandate can play a critical role in championing national dialogue and change processes and driving local development.
  4. For donor agencies, this means stepping up. Extractive industries can be a driver of change, but should not be left in isolation. Development partners are well placed to broker and finance innovative partnerships in the sector, and can rebalance power and fill in critical gaps where needed as part of a long-term territorial strategy. Yet doing so requires them to take a more proactive position and avoid oversimplified or bureaucratic approaches that treat extractive industries as a private financer or a mere sectoral development issue.

In short, working with the extractive sector for development cannot be done in isolation, and ultimately means getting your hands dirty.

This article is based on ECDPM work on extractive sectors and CSO-business partnerships, including ECDPM Briefing Note 94 and ECDPM Discussion Papers 182, 189, 191 and 204, as well as an upcoming publication which goes into more depth on the various aspects of a territorial approach to partnerships in mining. See http://ecdpm.org/dossiers/business-civil-society-partnerships/


About the authors

  

Alfonso Medinilla (left) and Karim Karaki (right) are Policy Officers at the European Centre for Development Management (ECDPM).


Photo: Randfontein Mine, Johannesburg. Credits: Paul Saad via Flickr.


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

Economic Transformation and TradeExtractive SectorsMining