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The Elusive Win-Win Balance in Mining. Part 2 – Show Your Working in the Margin

12-02-2014

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Constructive talks between mining companies and development actors do take place, but mainly in “the margin”.

In a literal sense, as business and governments met in confined rooms around the main conference halls at Mining Indaba in Cape Town last week, to discuss potential deals. There, discussions were constructive, between those courting and those being courted (with roles switching depending on the company and country).

Outside Mining Indaba, talks with trade unions to stop platinum strikes were on going, with no agreement on a new (wage) deal. Not surprisingly, at Mining Indaba, South African (branches of) mining companies, from AngloAmerican SA to Lonmin (which owns the Marikana mine where the infamous shooting took place in 2012), were among the more vocal advocates of appeasing tensions and rebuilding confidence between workers and their mining bosses. Praising the virtues of true partnerships with their workers and local communities, they stressed the need to rebuild confidence and mutual respect.

But any issues addressed, though important, did remain marginal, or rather “in the margin” in a more abstract sense. That is to say, away from some of the core priorities of most mining companies which are mostly focused on their financial viability, and away from the core challenges the extractive sector faces more broadly – for companies and governments alike.

Expectations

The central issue is the contribution of the extractive sector to the development of a country. Companies are legitimately concerned first and foremost by what’s happening within their own mines and, increasingly, around their mines. These include, among other things, health and safety issues, working conditions, housing, local communities and environmental dimensions (mining companies and associations organised good sessions on such themes). Yet, most mining companies seem to fail to recognise that good relations with their workers and local communities will not suffice to alter their tarnished public image. Governments in resource-rich countries are under increasing pressure to show the benefits that their mineral-rich soil can bring to their population – and the catalytic effect it can have on the rest of the economy. How to manage such expectations is a challenge for all.

However, this requires looking beyond the perimeter fences of the mines, and considering broader issues. Issues such as the appropriate governance frameworks (EITI is an impressive initiative in that respect), licencing and contracts structures, tax regimes, and genuine linkages with economic activity in the rest of the economy. This requires a balancing act to achieve both sustainable financial returns for the companies and sustainable development for all. Companies may rightly abhor resource nationalism (as repeatedly condemned at Mining Indaba), but if they do not seriously engage on how they can link and contribute more broadly to economic transformation priorities, they are doomed to clash more and more with governments and citizens in Africa.

Local content requirements will become the norm, so will efforts to increased revenue collection from mining and requests for mining involvement in infrastructure development, to mention just a few examples.

The Africa Mining Vision (AMV), championed by the African Union, paves the way in that direction, and international institutions are starting to follow suit (also with good sessions on infrastructure and on AMV at Mining Indaba). No one wants to kill the golden goose. So rather than adopt a negative stance based on short-term considerations, mining companies should pro-actively engage now-  at what is still an early stage of this endeavour – if they want to be part of the solution and achieved a more balanced outcome in the medium term.

A ‘social licence to operate’, as mining companies like to call their development contribution, must encompass these broader considerations. To do this, however, mining companies will need to overcome their own collective action problem. While they all stand to benefit from a broader constructive engagement, interests vary among mining companies and mining sub-sectors. Dealing with their own mines and immediate surrounding is hard enough, but does not require sector-wide coordination. It can be done on their own. Addressing nation-wide concerns risks exposing a mining company to a possible backlash, should tensions arise during discussion with the government or representative citizens. Yet, this can be done, though at times with some difficulties, as in the case of the EITI national platforms. Overall though, the Mining Indaba still seems to be a long way from moving in that direction.

Read Part 1 here.

The views expressed here are those of the authors, and may not necessarily represent those of ECDPM.

Photo: License"cc"cc Some rights reserved by opensourceway.

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Economic Transformation and TradeExtractive SectorsMiningAfrica