Address Of The Patron Of The TMF, Thabo Mbeki, At The 2017 Mining Indaba Ministerial Symposium: Cape Town, 5 February, 2017

“MINING, A NEW WAY OF ENGAGEMENT”.

Director of Ceremonies,

Honourable Ministers,

Our Corporate Leaders,

Ladies and Gentlemen:

First of all I would like to thank the Mining Indaba Team, including South African Minister Mosebenzi Zwane and the other distinguished partners responsible for this Indaba, for giving me the opportunity to speak here today.

In this context I take this opportunity to add my own warm words of welcome to all the delegates and delegations who and which have come to Cape Town and South Africa from outside our country.

Namkelekile, and as the Ghanaians say – Akwaaba! and in kiSwahili – Karibuni! As-Salaam Alaikum!

We have here gathered today a very educated group of practitioners among others in the area of mining.

As these educated persons you will of course be familiar with the Latin expression – ex nihilo nihil fit – out of nothing, nothing comes.

I say this not to invite the Symposium to engage in a complex philosophical discussion about this Latin expression.

Happily all of us present in this room are wearing clothes and shoes and carry bags and papers, have access to microphones and listening devices and, of course, the disguised curse and open benefit of modern technology represented by computers and mobile telephones.

None of these, from our clothes to our mobile telephones come from ‘nothing’.

All these come from material resources drawn from nature, including through the mining of materials both on the earth surface and beneath our soils, and the application of extant and evolving human knowledge to these resources to transform them into the products which end up as our clothes, mobile telephones and other products.

Thus, in the context of this Symposium, it would be correct to say that a great deal of the material base which provides the goods which help to define a better life for all human beings is produced by the mining industry.

Practically or literally this means that the mining industry is a critically important player in terms of providing all humanity with the material resources which confirms the truth of the statement that ‘out of nothing, nothing comes’.

In other words it would not be possible to provide the goods and services which humanity needs to better the human condition without the provision by the mining industry of the metals, minerals and fuels which make it possible for this humanity to produce these goods and services.

Thus does is it become correct to repeat the observation – ex nihilo nihil fit!

I believe that it is the understanding of this concrete social reality, rather than preoccupation with philosophical matters, which must inform an honest answer to the question confronting this Symposium – Mining, a new way of Engagement!

Meeting here in Cape Town, the Mining Indaba has as its central objective the definition of an agreed role of the mining industry in terms of helping the billion Africans to achieve the goal of a continuously sustained and sustainable better life for themselves.

This assumes especial importance because, clearly, mining will for a relatively long period, remain one of the main drivers in terms of its contribution to the creation of new wealth as reflected in the African Gross Development Product (GDP).

An important reality in this context is that the largest investment in building and sustaining mining operations in Africa will, for many years, be made by the private sector, and therefore the private mining companies.

However, exactly because of its importance it is inevitable that the African Governments will pay particular attention to what happens in the mining industry.

This Government attention will inevitably focus on such matters as the ability of the mining industry to contribute to the fiscus, to create employment opportunities, and to contribute to overall economic development, including the process of industrialisation.

Considering everything I have said, it has seemed to me that the mining companies operating in Africa, many of which are represented at this Mining Indaba, must consciously and in deliberate manner define their role in the context of the obvious objectives which are pursued by their African host Governments.

Naturally, at the same time, these companies must continue to focus on achieving the objective inherent in the functioning of all companies in a capitalist economy of expanding the wealth of their shareholders.

Fortunately, with regard to everything I have said, there has also become established the concept and practice of the notion and practice of what is described as ‘corporate citizenship’.

As I have said, mining is central to the achievement of the goal to achieve a better life for the African masses, including and especially within the context of the pursuit and realisation of the universally agreed Sustainable Development Goals (SDGs).

To achieve these goals will require common action by Government, business, labour and the rest of civil society.

I am convinced that in this context our companies or corporations must truly focus on the very important matter of what the concept and practice of ‘corporate citizenship’ actually means.

This also signifies that especially Government and the trade unions must also understand clearly what their necessary cooperation with such ‘corporate citizens’ means in terms of their own conduct.

Before I go further with regard to the matters I have raised, and with your permission, I would like to make some comments on the broader matter of what our Continent is trying to do with regard to its overall future.

Put broadly, I would like to believe that the Continent is involved in a complex and inter-dependent process which seeks to achieve its all-round and sustained development.

The recent January 30-31, 2017 African Union Ordinary Assembly of Heads of State and Government approved a Report submitted by President Paul Kagame of Rwanda on the important matter of the ‘Institutional Reform of the African Union’.

This Report had been commissioned by the previous Assembly held in Kigali, Rwanda in July 2016.

It was commissioned because the Assembly was concerned that the African Union was not functioning effectively as the Continental instrument charged with the task to pursue the achievement of the many strategic goals which Africa has set itself.

Related to this, the Kigali Assembly deferred to its January 2017 Session the election of the vital executive organ of the Union, the AU Commission.

This was because the Assembly felt that it had not been presented with a sufficiently broad spectrum of candidates from whom it could elect the required Commission. Because of this none of the candidates could secure the prescribed two-thirds majority required to elect each of the Commissioners.

Accordingly it was only at the January 2017 Session that the Assembly and the Ministerial Executive Council were able to elect the new AU Commission, barring the remaining two Commissioners who will be elected during the July 2017 Session of the Assembly.

In sum this means that the January 2017 AU Assembly (i) adopted a Programme to achieve institutional reform of the AU, and (ii) elected the executive organ, the AU Commission, charged with the task to carry out its work as prescribed by the institutional reform programme.

What all this means is that the contemporary African political leadership used the January 2017 Assembly to make the bold statement that it is determined to ensure that the African Union actually succeeds to implement its decisions, thus to move further away from the danger of being in good measure a mere ‘talk shop’.

In this context I would like to mention two important matters on which the AU and the Continent as a whole have been and are focussed.

These are the two inter-related issues of (i) the entrenchment of democracy on our Continent and (ii) what is described as ‘silencing the guns by 2020’.

With regard to the first of these matters the agreed AU policy is encapsulated in the important and prescriptive ‘African Charter on Democracy, Elections and Governance’.

This is a detailed policy document which, if implemented by all member States of the AU, would contribute enormously to entrench both the practice of the involvement of the people in determining their destiny, and ensuring that disputes are resolved by peaceful means rather than resort to violence.

Happily in this regard we have the very recent example of the forceful intervention of ECOWAS in The Gambia, supported by the AU and the UN, which resulted in the resignation of former President Yahya Jammeh and the accession to power of the democratically elected President Adama Barrow.

Positive as this was, there are nevertheless some situations on our Continent which stand contrary to the objectives contained in the ‘African Charter on Democracy…’

Hopefully the Institutional Reform of the AU adopted last month and the related new AU Commission will help seriously to address this challenge, inspired by what has been achieved with regard to The Gambia.

Relevant to the task ‘to silence the guns by 2020’, are the Constitutive Act of the AU, the ‘Protocol’ which defines the tasks of the AU Peace and Security Council (PSC) and related subsequent decisions.

I believe that it is obvious that to a greater extent than during the period of the OAU, through the AU Africa has paid greater attention to the critically important task of the prevention and resolution of violent conflicts on our Continent.

Despite this our Continent continues to experience serious violent conflict. It was to communicate its resolve to end these conflicts that the AU took the decision ‘to silence the guns by 2020’.

Again our hope is that the new AU Commission, functioning within the context of the new Institutional Reform, will indeed do everything necessary to achieve this now time-bound objective, reinforced by progress that would be made with regard to achieving the goals detailed in the ‘African Charter on Democracy…’

So far, relevant to the strategic African objective I have mentioned of achieving its all-round and sustained development, I have cited a tripartite interaction among:

  • an effective implementation structure, the African Union;
  • progress in the entrenchment of democracy and good governance; and,
  • similar progress in ending violent conflicts.

However it is obvious that the strategic objective of achieving Africa’s all-round and sustained development cannot and will not be realised in the absence of a fourth element, which is the sustained and equitable improvement of the socio-economic condition of the billion Africans.

We must therefore speak of a quadruple interaction, adding this latter objective to the three I have listed, thus to say that what Africa needs is a quadruple interaction among:

  • an effective implementation structure, the African Union;
  • progress in the entrenchment of democracy and good governance;
  • similar progress in ending violent conflicts; and,
  • sustained and equitable socio-economic development.

This brings us back to the matter we were discussing earlier of the role and place of mining on our Continent.

As all of us present here today know very well, the hard reality is that many of the challenges relating to an effective AU, to entrenching democracy and good governance and avoiding violent conflicts have to do with what one might call the availability and distribution of wealth!

It is a matter of common cause that the mining industry is an important creator of wealth in many of our African countries and therefore its success is central to the health of these countries and therefore our Continent as a whole.

In this regard the April 2016 IMF Regional Economic Outlook for Sub-Saharan Africa entitled ‘Time for a Policy Reset’ says:

“About half of sub-Saharan African countries are net commodity exporters and, unlike other regions, the importance of extractive commodities exports has risen since the 1990s, putting the region among the world’s most commodity-dependent regions, broadly at par with the Middle East and North Africa region. As a consequence, though higher extractive commodity prices have in part supported the strong growth of the past decade or so, the region’s exposure to commodity price volatility has also increased––a trend that is coming to haunt these countries now.

“The most exposed countries by far are the oil exporters. For them, the commodity terms-of trade shock, which captures the income loss from price fluctuations in terms of GDP, has been particularly marked since mid-2014…

“Comparatively, metal exporters in the region have tended to be less affected. This is because they are exposed to a wider range of commodity exports, and commodities play a less prominent role in their economies. Also, many of them are oil importers, so the impact of the commodity price slump has been partly offset for them by the decline in their energy import bill. That is not to say, though, that they will not be affected; there are thresholds for the price of their commodity exports, under which mines close, and jobs are lost, as has already been witnessed in some countries, with substantial detrimental impact on activity.”

Of course, as all of us know, for many years our Continent has been very concerned to diversify its economy, including through industrialisation. The observations made by the IMF which I have just cited emphasise exactly this imperative to diversify and therefore give more resilience to the African economies.

Accordingly, to respond to the matter of “Mining, a new way of engagement”, the theme of this session of the Mining Indaba, I can think of no better way than strongly to urge that we continue to focus on the implementation of the Africa Mining Vision which you know very well.

This includes the Africa Mining Vision Compact which was launched by the AU Commission and the African Minerals Development Centre during last year’s Mining Indaba, as the Symposium knows.

You may also recall that at that launch Ms Fatima Denton of the UN Economic Commission for Africa said: “We believe [the compact] is an important – and exciting – step towards even greater collaboration and co-ordination between African governments and private industry in achieving development.”

To emphasise the importance of the Africa Mining Vision I would like to remind the Symposium about what The International Study Group Report on Africa’s Mineral Regimes said in its 2011 Report entitled “Minerals and Africa’s Development”, that:

“The development of mineral resources can have very different implications, and consequences, for communities, governments, the mine developers themselves and even countries and regions in which mining activities taking place. A comparative perspective reveals not only the large divergence in the interests of various stakeholders, but the wide range of conditions under which mineral exploitation takes place, especially in Africa.

“The many competing interests, and outcomes, suggest the importance of a shared vision to deliberately, and proactively, create the policy space which secures the interests of stakeholders at all levels. In Africa, for far too long, it has been taken as given that there are always losers and winners in mineral extraction processes. Certainly the broader interests of some stakeholders, notably communities and perhaps even states, have been far from secure. Africa’s high levels of poverty, its severe infrastructural deficits, and its continuing weak voice in negotiating mineral development contracts are ample evidence of this.

“The Africa Mining Vision…seeks to change all this. It advocates for “Transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”. At the centre of the Vision is a developmental state that integrates the mining sector into broader social and economic developmental processes. This is an attempt not only to address the sector’s isolation from mainstream social and economic activities, but to create win-win outcomes for all stakeholders…

“The realisation of the Vision hinges on strong political will and a commitment to developing strong capable mineral management systems and institutions; an astute understanding of Africa’s relative advantages in the global mineral value chain; maximizing the benefits of regional integration; and building robust partnerships.”

Again as all of us know, exactly ‘to underpin broad-based sustainable growth and socio-economic development’, the Mining Vision visualises:

  • the use of resource rents to develop physical and social infrastructure;
  • the collateral use of the high-rent resource infrastructure to open up other resource potential such as in agriculture;
  • downstream value addition, i.e. beneficiation of the raw materials both for export and domestic manufacture;
  • upstream value-addition by supplying domestically produced capital goods and services to the mining industry; and,
  • technology and product development as mining develops technologies to adapt to local conditions, which process, because it is knowledge-intensive, requires investment in human resource development as well as Research and Development, thus also to create the possibility for the new skills acquired to be used to venture into economic areas outside the resource sector.

It is obvious that this is an ambitious set of objectives. In this context the international Study Group whose observations I have quoted makes the very correct point that bold steps are required to break the colonial legacy of Africa serving as an exporter of raw materials to the industrialised world as well as end “the enclave nature of mining industries”.

In this context I must also mention the important matter of addressing illicit financial flows deriving from the mining sector.

The Report of the High Level Panel on Illicit Financial Flows from Africa which was adopted by the AU Assembly in January 2015 states that the commercial sector is the highest among all the sources of Illicit Financial Flows that leave the continent – and the size of the illicit leakages is highest in the extractive sector in Africa. The outflows occur all along the entire mining value chain, from exploration, contract negotiation, exploitation, transportation and marketing.

African governments, like those of other developing regions, depend two times more on corporate tax income as a percentage of their overall revenues than developed countries. As such they are hit hardest by the range of practices which include trade mis-invoicing and transfer pricing, as well as the use of shell companies and tax havens. In fact, the High Level Panel estimates that almost 52 per cent of illicit financial flows are from oil, precious metals and minerals and ores.

Surely, part of the new way of engagement by the mining industry must include deliberate and systematic efforts by the industry to end this practice which seriously undermines Africa’s development efforts.

The achievement of the objectives detailed in the Africa Mining Vision and the Compact impose serious obligations on the African Governments, including helping to ensure the visualised benefit which all stakeholders would derive from cooperation in the effort to achieve win-win outcomes.

In this context we must strongly encourage the AU Commission and the African Minerals Development Centre to succeed in their efforts to get the African countries to domesticate the Africa Mining Vision.

To conclude, I would like to return to a matter I mentioned earlier – the need for the mining companies to position themselves truly as corporate citizens in the countries in which they do business.

The King III Report on corporate governance says:

“Responsible corporate citizenship implies an ethical relationship between the company and the society in which it operates.”

In this regard the Accounting Firm, PricewaterhouseCoopers advises companies as follows:

“Corporate citizenship is an ethical concept, which finds expression in sustainable development across the economic, social and environmental aspects of the business.

“1. Corporate citizenship, sustainability and stakeholder inclusivity requires judgement, balance and compromise. Does the board have the right composition, skills and reliable data to make these types of judgement calls?

“2. Have we assessed the moral and economic imperatives of corporate citizenship? Have we taken this into account when reviewing our corporate strategy?

“3. Citizenship and sustainability risks may be obscure or indirect. How do we identify and manage these risks as well as opportunities?

“4. Do we have policies in place that will guide every level of the business in terms of expected behaviours and practices and with reference to our interaction with all material stakeholders?

“5. Do we measure the impact or lack thereof, of our corporate citizenship initiatives?”

I believe that the definition of corporate citizenship as it appears in the King III Report and the questions posed by PwC are indeed very relevant to the important matter of the conscious and active involvement of the mining companies in pursuit of the objectives of the Africa Mining Vision.

This goes far beyond such so-called corporate social responsibility initiatives as building a school here and a clinic there, important as these might be to the local communities concerned.

The new way of engagement by the mining industry must bring together government, the corporations, the workers and local communities, thus to act in cooperation to pursue the development goals spelt out in the Africa Mining Vision.

Thus will it be possible for the African mining corporate citizens to work shoulder-to-shoulder with all-Africa as partners in the sustained effort to achieve the Sustainable Development Goals, with the mining sector, in the words of the Africa Mining Vision being “a key component of a diversified, vibrant and globally competitive industrialising African economy.”

I thank you for your attention.

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