UNCTAD Secretary-General's
High-Level Multi-Stakeholder Dialogue on Commodities
in the context of UNCTAD XII
28-29 January 2008
Key Trade & Development Issues:
An African Perspective
By
Mr. Siyanga Malumo
Director, Fieldstone Africa, South Africa
The views expressed are those of the author and do not necessarily reflect the views of UNCTAD
HIGH LEVEL MULTI-STAKEHOLDERS DIALOGUE ON
COMMODITIES:
Key Trade & Development Issues:
An African Perspective
Presented by:
Siyanga Malumo
Director, Fieldstone Africa
PALAIS DES NATIONS, GENEVA
28-29 JANUARY 2008
AFRICA’S DILEMMA
“Given A Choice I Would Prefer to Keep Our Copper
Underground for Another Century, Than to Give It Away
for Nothing, As We are Doing Now.”
“If This Man Called Mineral Boom Really Exists, How
Come He Does Not Want Us To See Him Here Where The
Mines Are?”
“People Don’t Eat Statistics! We Are Told The Economy Is
Growing, But Our Eyes Only See Misery All Around!”
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HISTORICAL PERSPECTIVE:
• Pre-colonial Period: Basic Mining
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Low Technology
Limited Market Objectives
Predominantly Local consumption
Barter Trade
• Colonial Period:
-Adventurer Exploration
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Industrial Exploration/Production
“Mother Country” Markets
Other Markets
Social Responsibility
Racism
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HISTORICAL PERSPECTIVE:
• Post Colonial (Independence) Period :
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Nationalisations
Development-Orientation
Low Investment Capacity
Low prices
Decline in Production
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THE PRESENT
• Ownership:
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Mostly Privatised
Exit of Mining Giants
Preponderance of Secondary Players
Onerous Agreements (in Favour of Investors)
Unstable Ownership (Frequent Dilution of Ownerships)
• Investment /Finance Strategy:
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Highly Geared (Symbolic Equity, More Debt)
Procure Mines/Concessions Cheaply
High Write-offs (To Reduce Tax)
Long Tax Holidays
Maximum Income Externalisation
Minimum Income Flow to Host Country
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THE PRESENT
• Operation Strategy:
– Outsource (More than 80% of Key Activities)
– Establishment of Private (Individual) Companies by
Shareholders/Managers (To Win Outsourced Contracts)
– Highly Mechanised
– Low Local Employment
– Low Local Content
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THE PRESENT
• Marketing Strategy:
– Maximum Pricing
– Extra-Africa Trade Direction
– Non-Traditional Customers (China, India, Far East Focus)
• Social Responsibility:
– Avoid (or Barest Minimum) Responsibility
– Oblivious to Local Infrastructure Deterioration
– Blind Eye to Poverty in Vicinity
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THE CHALLENGES
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Overdependence on Mining (One or Two Commodities)
Lack of Economic Diversification
Vagaries of International Commodity Prices
Deteriorating Terms of Trade (Impact of Oil Imports Versus Revenue
from Mineral Exports)
• Desperation for Investment Versus Maximisation of National Revenue
(for Development)
• Tax Structure Sophistication of Investors Versus Ill-Equipped Local
Official/Negotiators
• Internationally Accepted Tax Write-offs Versus Need for Equitable
Distribution of Mining Revenues
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THE CHALLENGES
•
Weakness or Absence of Mining Laws (to Guide Investment, Operations, Safety, Social
& Environmental Responsibility)
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Lack of Proper/Effective Planning (e.g. Power Crisis in Eastern/Southern Africa)
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Impatience of Citizens (Especially in Mining Areas)
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How To Ensure The Benefits from Mining Are Share By All Citizens
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The Scourge of Corruption
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The Curse of Democracy
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The HIV/AIDS Pandemic
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Climate change (e.g. Current Rains in Southern Africa)
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THE SOLUTIONS: DEVELOPMENT
• Equitable Burden (Development) Sharing:
– Mining To Make Discernible Contribution to Development
– Renegotiate Mining Development Agreements
– Mining Companies to Pay “Decent” & “Reasonable” Taxes &
Royalties
• Improve Terms of Trade:
– Continue Diversifying Export Destination (Balance Between
Traditional And “New Customers” (South-South)
– Avoid Signing Contracts (Normal/Forward) Without First
Establishing Tangible Benefits to the National Economy
– Diversify National Energy Mix
– Institute National Energy Saving Policies
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THE SOLUTIONS: DEVELOPMENT
• Economic Diversification:
– Refine (or Introduce if Non-existent) National Economic Diversification
Strategy
– Demonstrate Discernible Benefits to The Economy, Public & Private
Sectors
– Define & Effect Clear Road Map (With Milestone) for Implementation
– Put Resources into the Programme
– Need for Value Addition Strategy
• Policies:
– Refine (or Introduce if Non-existent) Clear Mining Policies (Covering
Investment, Operations, Safety, Social & Environmental Aspects)
– Institute Policy Implementation Mechanism
– Ensure Incentives (for Successful Implementation) and Penalties (for
Failure)
– Ensure Policy Buy-in, Nation & Sector-Wide
– Give Legal Teeth to Policy Implantation Mechanism
– Prioritise Local Content (in Terms of Investment, Technology,
Partnerships & Access to Finance)
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THE SOLUTIONS: CORPORATE
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Ownership:
– Public Private Partnerships
– Need to Include local Investors
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Investment/Finance:
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Government (As PPP Investor) To Have Say In Financing Structures
Insist on Least Cost Funding Structures
Agree on Win-Win Approach to Taxation & Royalties (Principles of Equity)
Need for Share Flotation on Local/Regional Stock Exchanges
Operations:
– Need Local Content
– Need for Local Employment
– Need for Training of Nationals
•
Social Responsibility:
– Mining Companies to Commit to Minimum Social Responsibility (Schools,
Hospitals, Vocational Training Programmes)
– Mining Companies to Commit to Strict Environment Rules
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THE END
LA FIN
FIM
ASANTE SANA
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