RESOURCE NATIONALISM AND MINING –
ISSUES AND POTENTIAL RESPONSES
Jon Samuel, Head of Social Performance, 19 February 2013
ANGLO AMERICAN’S FOOTPRINT
Key
Corporate and rep offices
E Exploration Offices
Platinum
Diamonds
Copper
Nickel
Iron Ore and Manganese
Metallurgical Coal
Thermal Coal
E
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RESOURCE NATIONALISM – SOME DEFINITIONS
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“Resource nationalism…encompasses efforts by resource-rich nations to shift
political and economic control of their energy and mining sectors from foreign
and private interests to domestic and state-controlled companies”
•
“The threat of tax increases, renegotiation of terms, larger participation of stateowned companies and ultimately nationalisation.”
•
“Resource nationalism, the terms used to describe situations where
governments assert increased control over the natural resources located in their
territories”
•
“Resource nationalism is a term used to describe a tendency of people and
governments to assert control over natural resources located on their territory.”
•
“Situation where producer countries want to maximise their (future) revenues
from present production by altering terms of investment”
3
RESOURCE NATIONALISM – DRIVERS
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Economic drivers:
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Socio-cultural / technological drivers:
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•
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Communications revolution
Growing intolerance of poverty, and greater expectations on business to play a
constructive role in its alleviation other than through “business-as-usual” measures
Mining generally perceived to be a part of the problem on many global issues
(climate change, water availability, biodiversity, food security, human rights etc)
Negative legacies
Political drivers:
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•
High perceived profits in the mining industry
Lack of perceived benefits to host countries / communities: “fair share”
Changing balance of power between resource owners and developers: general
industry shift from capital to opportunity constraints as demand has grown
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Emerging economies striving to have their voice heard, and to assert their national
interests as their economies and foreign interactions grow
Rise of democracy and local empowerment
As an industry we communicate poorly:
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We don’t articulate the benefits we bring in a credible manner
The risk / reward trade-off is not understood, so profits are deemed excessive
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HOW THE WORLD SEES THE MINING INDUSTRY
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RESOURCE NATIONALISM – IN PRACTICE
From our perspective…
Changing the
rules of the game
while playing
Taxes and royalties
Local content / value-add requirements
(labour, procurement, beneficiation)
State participation in mining
projects
Indigenisation (private)
Expropriation
6
RESOURCE NATIONALISM – MANIFESTATIONS IN
SELECTED COUNTRIES
Country
Tax / royalty
changes
Australia
MRRT (2010)
Royalty increase
(carbon tax)
Botswana
Brazil
Currently under review
(incl internal debate
between federal and
state level)
Chile
Voluntary royalty
increase in 2010
Colombia
Under
discussion/review
Mozambique
Talk of increase
Local content
required
State
participation
Desires for greater
beneficiations
Debswana 50/50
Pressure for local
supply contracts
(especially in oil and
gas)
Vale government
shareholding, state
ownership of
Petrobras
Indigenisation
Codelco
Will be an important
part of license to
operate
Degree of free carry
(5-20%)
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RESOURCE NATIONALISM – MANIFESTATIONS IN
SELECTED COUNTRIES
Country
Tax/royalty
Local content
required
State
ownership
Indigenisation
Peru
Negotiated
voluntary windfall
taxes
Several local
benefit schemes in
place (often
negotiated locally)
South Africa
SIMS report
suggests
increasing both
Range of
requirements
under mining
charter (likely to
increase)
Nationalisation
debate and state
mining company
Broad-based Black
Economic
Empowerment
(26%)
Venezuela
Strong focus on
community and
union benefits
Nationalisations
and expropriations.
Mixed companies
required in oil and
gas
Zimbabwe
Yes
51% requirement
(threat of
expropriation)
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RESOURCE NATIONALISM AND OIL AND GAS
Private
share of
global oil
resources
National Oil Companies account for ~55% of production and ~88% of reserves
globally (in the 1970s it was the other way around)
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DID HIGH OIL PRICES LEAD TO NATIONALISATION?
OPEC led oil market
?
Source: OPM analysis for Anglo American
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OWNERSHIP PATTERNS IN OIL AND GAS
Saudi
Arabia
18%
1960
Non-OPEC
32%
OPEC
68%
Kuwait
22%
Iran
12%
Venezuela
7%
Iraq
9%
Kuwait
10%
1980
Saudi Arabia
25%
Non-OPEC
35%
In 1960:
• World oil reserves
were 291 bn bbls;
• of which: 85% were
privately held; and
• two-thirds were in
OPEC countries,
and also privately
held
Iran
9%
OPEC
65%
UAE
5%
Other OPEC
12%
Source: OPM analysis for Anglo American
Iraq
4%
In 1980:
• Reserves were 668
bn bbls;
• of which: two-thirds
were in OPEC, and
state-owned.
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COULD THE SAME THING HAPPEN TO MINING?
?
Nationalisation
Source: OPM analysis for Anglo American
Privatization
Pressure on rents and
state-owned equity
12
COULD THE SAME THING HAPPEN IN MINING?
• Our view is that large-scale nationalisation in the mining sector is unlikely:
– Prices rises do not appear to have been the trigger for nationalisation in oil
and gas (in fact the converse appears to be true)
– There was a spate of nationalisations in mining, but these tended not to be
successful and led to subsequent privatisations or closures
– The economic rents from mining are generally much lower than in oil and gas,
– Mining operations are technically challenging to run, and require very high
levels of ongoing capital expenditure to sustain them
– Very limited ability to control markets, given wide distribution of most minerals
across the world
– The increasing inter-connectedness of the global economy makes the cost to
implementing countries of unilateral nationalisations much higher
– Governments have realised that they don’t need to nationalise: the tax
system and other policy tools provide other means
– We have a better understanding of what we need to do to respond to the
threats posed by resource nationalism
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HOW SHOULD MINING RESPOND?
• Be clearer about the existing economic impacts of the mining sector, at both
•
•
local level and at more macro levels, including addressing the resource curse
debate
Ensure that mining is seen as a responsible industry:
– Sound business ethics
– High standards of safety, health and environmental management
– Fair treatment of workers
– Good neighbours
Perhaps most importantly, deliver more effective responses to the demand for a
greater share of benefits by enhancing the industry’s contributions to local and
national socio-economic development
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RESOURCE CURSE: POTENTIAL CAUSES
Rent
Seeking
Impacts
of Mining
Terms of
Trade
Resource
Curse
Volatile
Markets
Dutch
Disease
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RESOURCE CURSE: RESPONSES
Revenue transparency and governance
reform can help to reduce rent seeking
Responsible
management of
impacts and
proactive development
initiatives can create
positive economic
contributions
Rent
Seeking
Impacts
of Mining
Reallocating factors of production
to resource sector may be efficient
Only a problem if adjustment after
resource extraction is not planned
for and / or not possible
Terms of
Trade
Resource
Curse
Dutch
Disease
The price of
manufactured
goods is also
falling
Productivity
improvements can
increase benefits to
local economies
Volatile
Markets
Volatility can and has
been managed by
instruments such as
hedging and
stabilisation funds
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WHAT ROUTES ARE THERE FOR DELIVERING
DEVELOPMENTAL BENEFITS FROM MINING?
INFRASTRUCTURE
BENEFICIATION
SOCIAL
INVESTMENT
JOBS / WAGES
OPERATION
SME
DEVELOPMENT
CAPACITY
BUILDING/
TRAINING
PROCUREMENT
TAXATION
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ANGLO AMERICAN’S APPROACH TO SUPPORTING LOCAL
SOCIO-ECONOMIC DEVELOPMENT
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Our approach to community development is based on
understanding local contexts and leveraging our core
business to create sustainable upliftment
Local
Procurement
• Leveraging our $13.8 billion supply chain
(approximately 100 x social investment
budget each year)
Local Training
and
Recruitment
• Ensuring that host communities have the
best possible chance of securing
increasingly skilled jobs on our
operations
Governmental
Capacity
Development
Enterprise
Development
Social
Investment
• Focusing in particular on how local
municipalities can use tax revenues to
provide effective public services
• Offering equity and loans on a
commercial basis to support local
entrepreneurs, both within and outside
our supply chain
• Providing grants to welfare-enhancing
initiatives where more market-based
approaches are not possible.
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* 2011 data
ENSURING WE UNDERSTAND THE LOCAL CONTEXT
• Our Socio-Economic Assessment Toolbox
(SEAT) is at the heart of our management of
social performance and developmental
issues
• SEAT is an award-winning manual that
provides extensive guidance on:
– Profiling and engaging with host
communities
– Assessing positive and negative impacts
– Managing relationships with host
communities
– Contributing to community development
• SEAT provides extensive guidance on
understanding our local context, and how we
should respond to that
• Freely available at
www.angloamerican.com/seat
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Demand-side Measures
Supply-side Measures
LOCAL PROCUREMENT
Objective
Localising Suppliers
Encouraging more suppliers to
(e.g. near-mine supplier parks)
locate in mining areas
Supplier Development Programmes
Build capability, capacity
(building capacity of existing suppliers)
and size of suppliers
Creating formal
Support for Small and Medium-size Business Startups (e.g. Emerge / Zimele)
businesses
Supporting the
Alternative Livelihoods and Micro-credit Programmes
grass-roots
Set framework, show
leadership support
Build Anglo American capacity
and incentivise
Operationalise
commitments
Demonstrate
commitment
Policy: Local Procurement Strategy
Resources:
Appropriate people and budget
SC Local Procurement Initiatives (eg
Ring Fencing)
Communication and Reporting:
Targets and KPIs
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CAPACITY DEVELOPMENT
• As a business we pay very significant sums
•
•
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•
in taxes
Clear that these revenues are not always
well spent, typically due to a lack of
capacity
Meanwhile, we often suffer because of poor
pubic service provision
We are now engaging on a structured basis
in South Africa and Brazil in initiatives to
build the capacity of host municipalities and
regions
Working with partners, we have undertaken
structured assessments and designed
tailored implementation packages
Focus is on revenue management,
accountability mechanisms and basic
service delivery
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ENTERPISE DEVELOPMENT
• Through our Zimele and Emerge schemes in South Africa and Chile we are
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now supporting over 47,000 jobs in small businesses
We provide a mixture of equity, loans and technical assistance to businesses,
and help them understand how our supply chain works
– Our ongoing procurement needs create a very strong platform from which to support
local entrepreneurs
• Currently expanding our ED initiatives to Botswana, Brazil and Peru
• Current focus areas include:
– Reducing costs: substituting social investments (i.e. grants) with enterprise
development activities (i.e. loans, equity participation and business training)
– Increasing efficiencies: in existing schemes by outsourcing some of the activities to
specialist delivery partners (e.g. Technoserve, CARE)
– Partnering with development finance institutions to increase the capital available
– Creating revenue: for example by generating captive, low-cost sources of carbon
credits
– Creating more stable host communities and a more robust and competitive supply
chain
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SOCIAL INVESTMENT
• $128 million spent on social investment in 2011, about $0.5 billion in the last 5 years
• Monitored using a Group-wide database and set of indicators to help ensure value
for money
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CONCLUDING REMARKS
• Resource nationalism has emerged in recent years as one of the
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major risks facing the mining industry
However, this isn’t a new phenomenon, and in some ways current
manifestations are less threatening than in previous decades
Some of the drivers of resource nationalism are due to poor
understanding of the economic realities of mining
The mining industry needs to do a better job of understanding and
communicating its economic contributions
It also needs to work with partners, in particular governments and
host communities, to enhance current economic contributions, with a
strong focus on leveraging the core business
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THANK YOU
ANNEXES
TIMELINE OF A TYPICAL MINE
Exploration
1
Studies
4
Development
7
10+
Operation
Closure
30+
Year from acquiring exploration permits (assumes continuous intention to develop)
• Only approx 1% of exploration targets are ever developed into mines
• Capital Expenditure for “Tier 1” mine typically between $1 and $10 billion
• Some of World’s biggest deposits have been mined for over 100 years
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MANAGING SOCIAL RISK
Respect human rights
Identify and manage social impacts
Engage employees and stakeholders
Deliver lasting, positive net benefit
Efficiently utilise resources
Obey all laws and regulations
Ensure contractors follow our standards
Set targets, review performance
Develop staff competencies
Report and investigate incidents
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SOCIAL PERFORMANCE WORK PROGRAMME
Anglo American Values and Good Citizenship
Business Principles
Policies and Standards: the Anglo American
Social Way
Group Social Strategy: Partner of Choice for Host
Governments and Communities
1. Education
and Training:
• SEAT training
• Post-grad
diplomas
• Advanced Social
Management
Programme
• ABET
2. Guidance
Documents:
• SEAT
• Mine Closure
Planning
Toolbox
3. Social
Initiatives:
• Enterprise
Development
• Social
Investment
• Capacity
development
• HIV/AIDS
• Housing
4. Leverage
Core Business:
• Local
procurement
• Local workforce
development
• Synergies from
infrastructure
provision
5. Internal
Alignment:
• Business Units
• Functional
liaison
6. External
Engagement:
• Communities
• Governments
and multilaterals
• Industry
associations
• Multi-lateral
initiatives
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SEAT: STRUCTURE
Engagement throughout
Step 1 – Profile your
operation, including
existing community
development
initiatives
Step 6 – Develop a
social management
plan
Step 2 – Profile and
engage with
stakeholders
Step 5 – Deliver
enhanced socioeconomic benefits
Step 3 – Assess and
prioritise impacts
and issues
Step 4 – Improve
social performance
management
Step 7 – Prepare a
SEAT report and
feed back to
stakeholders
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RECURRING ISSUES THAT SEAT ADDRESSES
• Access to jobs and training
• Access to land and alternative livelihoods
• Access to supply chain opportunities
• Balance / distribution of social investments
• Rivalries between stakeholder groups
• Perceptions of environmental impacts
• Health and public services
• Transport issues
• Communication and transparency
A strong
emphasis on the
level and
distribution of
benefits
Generally very pragmatic issues
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