Mining and infrastructure:
reflecting on the
experiences of Tanzania
and Mozambique
Drawing on research conducted for the Making
the Most of Commodities Project: UCT & Open
University
http://www.commodities.open.ac.uk/discussionp
apers and Robbins and Perkins (forthcoming
2012) Journal of International Development
TIPS Seminar
1 June 2012
Glen Robbins & Dave
Perkins
Infrastructure and Mining Investment
• How infrastructure influences investment
choices (in the mining activity)
– Impact on scale of pre-production set-up costs and
thus delay profitability point (potentially raising costs
of borrowing or risk profile of project). Note –
transport less of an issue
– Feasibilities will also look closely at supply chain risks
& logistics costs as these cannot be ignored – higher
levels of uncertainty in predicting delivery times and
costs are a concern.
– In some cases are a prerequisite
2
Infrastructure and Mining Investment
•
How infrastructure issues in mining influences investment choices by states
– Governments with stressed expenditure systems generally struggle to provide
up-front commitments at scale
– Donor funds and World Bank/ADB loans are key but limited when scale of
projects is considered (base of systems in place, topography, distance, user
classes)
– Other options include deals with Chinese companies/state or some form of PPP
arrangement
– Maintenance budgets tend to be limited or non-existent (a washed away bridge
or a blown sub-station might take a year or more to get fixed) – although in
Tanzania, with donor and loan support, the past five years have seen steady
improvement
– Mining activity can be seen as a revenue source for infrastructure provision via
fiscal allocations enabled because of tax/royal flows or through users charges
– Revenue flows attached with mining consumers can be used to raise funds by
states or to use in PPP deals of one sort or another (limited track record of
success and politically uncomfortable, unattractive terms due to risk perceptions)
– Often a reliance on investors in mining projects to fund infrastructure connections
(access roads, rail-heads, connections to grid, water pipes) in full at no
consumption charge discount (attractive to states as it adds to next coverage of
infrastructure and might allow previously un-served communities access to some
services with no significant diversion of state resources)
3
Tanzania and Mozambique
• Tanzania and Mozambique are in the upper-middle ranking of
African countries in terms of FDI, with its FDI stock doubling in the
first half of the 2000s and again in the second half.
– Both have been among the best African FDI performers outside
countries with oil and gas (with exception of RSA)
– These countries have overtaken traditional stronger performers in FDI
growth (Kenya, Botswana etc)
– Two thirds of growth in FDI stock since 2000 is accounted for by mining
investments
– (Source: UNCTAD and ICMM)
FDI inflows (Source: UNCTAD WIR)
Ave 1990-2000
2005
Mozambique
97
108
Tanzania
135
494
2006
154
597
2007
427
647
2008
587
744
4
Road infrastructure I
6
Road Infrastructure II
7
Investing in infrastructure
8
Tanzania’s central corridor
CENTRAL DEVELOPMENT CORRIDOR
INFRASTRUCTURE BACKBONE
Nickel Sulphide Deposits
Nickel Laterite Deposits
Gold Deposits
Cassiterite/Tungsten Deposits
Tanzania’s infrastructure
•
•
•
•
•
“Despite its geographic advantages as a potential entrepôt to its landlocked
neighbors Burundi, Rwanda, Uganda and Zambia, as well as the D.R.
Congo, there is clear evidence to suggest that Tanzania’s lack of
infrastructure is acting as a constraint on the expansion of trade and
economic activity in both the country and the region.” (Ter-Minassian et al,
2008: 8)
The World Bank’s Logistics Performance Index (World Bank 2007a) ranked
Tanzania’s transport infrastructure well below the average of other subSaharan African and low-income countries.
In the power sector losses from power failure amount to 10 percent of sales
for the median Tanzanian firm compared to only 1 percent for the median
Chinese firm. (Eifert, Gelb & Ramachandran, 2005)
Pedersen quotes Mwase as saying that the passability of Tranzania roads
declined from 70 pecent in 1970 to 30 percent in 1991 (Mwase in Pedersen,
2001: 12).
These empirical findings are corroborated by evidence from business
surveys:
– Global Competitiveness Report (2007-08)
– UNCTAD WIR (various)
– Enterprise survey (WB) and Investment climate survey (WB)
•
There have been some improvements but quite limited in terms of scale of
backlog/needs
11
The growing gap between mining
investment and infrastructure spend
•
•
Historic synergies between developing infrastructure platforms and enabling mining
extraction that also yielded a measure of linkages (synergies not just in terms of
supply and demand but also in terms of capabilities)
Slight recovery (in historical terms) of infrastructure spend in SSA (excl RSA) largely
driven by donor commitment post SAPs but growing gap as no country fiscal
capability, limited ODA and lack of private take up in PPPs. (not including mobile
telecommunications)
Tanzania conceptual image & timeline
1967 Arusha
Declaration: 60%
of all production
in hands of state
Capital
investment
1973:
Oil crisis
1975: Basic
Industrial Strategy:
Capitalist activities
outlawed
1980s: SAP &
marketisation
1997: Mining
Bill & HIPIC Mining
investment
1993: Restructuring
& reform
Infrastructure
investment
1940s
1960s
1980s
2000s
Tete Coal Basin Mozambique
Background
 Lower Zambezi
paradox:
River
basin
one o words poores regions
endowed wih vas naura
resource, energy and
indusria deveopmen
poenia
 Tee
Province
words arges unexpoied
coking coa deposis (riva
Bowen Basin in N. Ausraia)
in par due o disrupion o
civi war
commissioning o wo new mines
(Vae and Riversdae/Rio
Tino) wih ohers o oow
(82 coa exporaion icenses
hed by 33 companies)
Magniude o he
Inrasrucure
Chaenge
 Two mines abou o commence
producion & expor
 Moaize Mine (Vae) - $1.5
biion invesmen
2003/4: IFC/GoMZ secured
deveoper & signed
Framework Agreemen
2007: Feasibiiy &
icensing 2008: consrucion
commences
2011: Firs producion &
2012: irs expors
Originay 11mpa by
2014/15
2011 approva o $6bn
expansion o 22 mpa
Magniude o he
Inrasrucure
 Chaenge
Despie ong mine (cond)
deveopmen
ead imes, necessary
invesmen in rai and por
inrasrucure has no aken
pace
 Sena raiway (600km) inking
Moaize o Por o Beira has
insuicien capaciy (max 6
mpa) o hande projeced
expors even in shor-erm
(2012)
 By 2015 need capaciy o a
eas 30-45 mpa! Sena ine
consrained and canno be
deveoped o requisie
capaciy
 Uni receny, ideniicaion
o necessary souions and
Souions
 In shor-erm (2-3 years) Vae
& Riversdae (wih CFM)
panning or expansion o
capaciy o Sena ine rom 6
o 12 mpa and a concomian
expansion o Por o Beira
coa ermina;
 Vae: 3-year projec o
enabe expors hrough Por
o Nacaa
 pan o inves $1bn o deveop
138km raiway inking Moaize
on Sena ine hrough Maawi o
Nacaa ine
 ih rehab o 8km o
exising Nacaa ine and
deveopmen o coa ermina
wi enabe 30-35 mpa expors
hrough Por o Nacaa
 Acquired 51% sake SDCN he
Nacaa por & rai
Response o
Governmen o
Mozambique
 Minisry
o Transpor
&
Communicaions recognises
need o ind ST souions
whie simuaneousy
deermining a ongererm mineras ranspor &
ogisics maser pan.
 In he shor-erm he
MTC has:
Terminaed he CCFB
concession agreemen on he
Sena ine
Sancioned agreemen
beween Vae &
Riversdae/Rio Tino on
he use, sharing and
operaion o he Sena Line
Response of Government of
Mozambique
• Based on two key policy positions namely, that:
– MZ needs to use its comparative adv’ in natural resources
as a catalyst for diversified economic growth and
development
– Any strategy to promote infrastructure development must be
informed by its economic context
• …the MTC has adopted a “Strategy for the Integrated
Development of the Transport Sector” that:
– Recognises the role of the transport sector as a key
determinant of economic competitiveness, social & territorial
cohesion and levels of regional integration
– Aims to develop an integrated transport system that
facilitates investment & growth of the national and regional
economies
– Advocates adoption of development corridor planning
methodologies focused on integrated planning and
management of transport, energy and ICT infrastructure
development with linked anchor investments (mainly in the
natural resource sectors) by the private sector
Observaions and
Lessons
 In Moz here is a heighened
awareness o he need o avoid
encave deveopmen as a resu
o arge-scae minera
invesmens
• A progressive Miniser has
moivaed a shi in naiona
ranspor poicy o a poin
where sraegies o promoe
inrasrucure deveopmen mus
be inormed by he range o
iner-reaed economic
deveopmen opporuniies ha
hey may aciiae and in
urn be susained by.
• As a resu:
 eves o poiica wi appear
o be enhanced
 eves o iner-agency
cooperaion in he MZ pubic
Observaions &
Lessons (cond)
 Long ead imes o
arge-scae mining
projecs does no
guaranee imeous
deivery o requisie
enabing inrasrucure
by he pubic secor;
 MZ experience has
highighed he need
or
progressive inrasrucure
deveopmen poicy and
sraegies ha recognise
he economic uncion ha
inrasrucure perorms;
ormaised pubic secor
Observaions &
Lessons (cond)
In Tanzania he
combinaion o
governmen poicy
and he characer
o he commodiy
being mined as no
enabed opporuniies
in inrasrucure o
be expoied.
The enrance o new
Chinese mining
companies in Iron