Making policies work



Making extractive sectors work for development: Mining as an engine of growth


I. Ramdoo. 2012. Making extractive sectors work for development: Mining as an engine of growth (ECDPM Presentation). Maastricht: ECDPM.

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International Conference on Mining for Sustainable Economic Development in the Great Lake Region
Bujumbura, Burundi, 22 – 23 November 2012 

Presentation transcript
1. Making Extractive Sectors work for Development – Mining as an engine of growth
International Conference on Mining for Sustainable Economic Development in the Great Lake Region
Bujumbura, Burundi 22 – 23 November 2012
Isabelle Ramdoo European Centre for Development Policy Management (ECDPM)

2. 1. Setting the scene
African countries are known to host 30% of world’s reserves of minerals and metals and over 10% of oil reserves.
But reserves are largely underestimated: known sub-soil assets is only one fifth that of OECD

• Recent discoveries, both in the continent and offshore, likely to increase the visibility of African countries on the global market
• East African countries, including a number of Great Lakes countries are likely to become producers of hydrocarbons e.g DRC, Kenya, Uganda, Tanzania
• Put together, the region will be the biggest producer of oil (and potentially gas) in Africa
• Regarding other mining products: DRC is already the largest producer of some strategic minerals such as cobalt, Rwanda is an important producer of tantalum, Zambia is a key copper producer etc.

4. 2. But are minerals Africa’s best friend?
2.1 Overall, impressive growth rates over the past 2 decades
*1. Robust growth rates despite crisis
*2. Among the fastest growing eco.
Source: Africa Pulse, World Bank, Oct 2012

*3. Attracted significant FDI, despite credit squeeze in 2009
Source: E&Y (2011): It’s time for Africa 

Poverty rate decreased by 1% on av. per annum from 57.6% in 1995 to 50.9% in 2005, and expected to reach 35.8% in 2015 it growth rates are maintained at the current level Africa’s number of MICs on the rise

2.2. But numerous challenges remain
*1. Overdependence on extractive sectors

*2. Income inequality remain high despite high GNI per capita

9. 3. Making resources work
3.1 Extractive sectors as an engine of structural transformation
Conventional wisdom: resource-rich countries have poor economic performance
Good news: Causal relationship not verified; commodity super-cycle there to stay for a while
Economic environment has evolved: more integrated and less protective
But first, need to have a conducive environment

10. We observe a delink between extraction and value addition

11. How can Governments address this?
1. Commodity cycle here to stay. Good news for 2 reasons:
a. Continued investment
b. Financial resources from minerals to foster broader development agenda
1. Consistent policies and adequate policy sequencing (coupling industrial, fiscal and trade policies in a holistic and sector-specific cluster approach: 2 channels
a. Domestic policies to foster industries policies
b. Take advantage of fracturing global value chains

12. Economic reforms and structural transformation: Setting the fundamentals
1.Addressing governance issues at all levels – governments, private sector, home countries of multinationals, donors and banking system
1. Addressing infrastructure and energy gaps
1.Reducing cost of doing business
2.Addressing crippling effects of skills, technology, research, innovation gaps;
1.Ensuring resource efficiency for a balance between sustainable consumption and production processes. 1.Good market intelligence to tap national, regional and international markets

13. (i) Channel 1: Moving up value chain: Promoting linkages
• Purpose in NOT to turn mining companies into manufacturing companies, but rather to set the right enabling environment to encourage entrepreneurs in developing manufacturing clusters.
• Requires to build competitive advantage by setting fundamentals right
• Maximising use local procurement and local content (side linkages)
• Promoting value addition within the extractive sector – involves activities in the mining cluster (downstream linkages such as smelting and refining) and activities in the manufacturing cluster (jewelry industry, metal fabrication)

14. Stages of Value Addition

15. Different types of linkages
• Backward (or upstream) linkages
• Forward (or downstream) linkages
• Horizontal (or sidestream linkages), important to link extractive sectors with other productive sectors
Important also to bear in mind the nature of different extractive sectors – sometimes some forms of linkages make more sense than others
But benefits will only take place where commercial opportunities exist = CHANNEL 2

16. (ii) Channel 2: Linking domestic industries to global value chains
• Extractive sector characterised mostly by large multinationals that are increasingly engaged in diversified activities
• Increasingly outsource parts of their value chains towards more competitive places
• Renders industrial policy complex but at the same time presents opportunities for resource-rich countries to develop win-win partnerships with such companies to conduct industrial transformation locally
• Quantum leap in productivity is essential

17. Thank you

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Trade, investment and financeExtractive SectorsPresentationsNatural resourcesRaw materialsValue chainsAfrica