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World Bank Mining Activities in World Bank Mining Activities in Africa Africa

Policy Framework and Country ExperiencePolicy Framework and Country Experience

AfDB-WBG Experience-Sharing MeetingTunisFebruary 12-13, 2007

Gotthard WalserOil, Gas and Mining Policy DivisionThe World Bank Group

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World Bank Mining Activities in World Bank Mining Activities in Africa Africa

Policy Framework and Country ExperiencePolicy Framework and Country Experience

1. Mining in a changing world2. Mining policy: guiding principles

and criteria 3. Country experiences4. Issues and challenges

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1. Mining in a Changing 1. Mining in a Changing WorldWorld

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Macro/Sector reformLiberalizationSome privatization of SOEs

Owner/operator of mining assets

By-stander in emerging economies

Awakening, acceptance

Benign neglect

Dominance of MarketsShrinking StateDecentralization

Regulator/administrator

Leading force in investmentNew responsibilitiesRole of NGOs

Fully integrated

Awakening, acceptance

Macro-Economic

Government’sRole in Mining

Private sector inEmerging Econs

Environment

Social Focus

1.1 Mining in a Changing World

Decade of the 1980sLate 1990s — present

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1.2 What does this Mean for

Governments? Country

Competitiveness

Investmentenvironment

Infrastructure

Sound and stable:Macro-economic managementLegal and regulatory frameworkFiscal conditionsInstitutional/admin- istrative capacity

Availability of:Physical infra- structureServices

Mining SectorSustainability

“Leaving somethingof value behind”

Sound and Responsive: Environmental management systemCommunity relationsEquity in rent sharingStakeholder participationCode of conduct/ethics

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1.3 Continuing Push for Sustainable Mining Development:

• Local communities continue to assert more strongly their views on extractive industries developments that impact them

• Industry bodies, business based organizations and civil society groups are continuing to actively promote the sustainability agenda

• The importance of sustainability in extractive industries has been reaffirmed on the international political stage

• National and local governments remain key players in fostering an enabling environment for sustainable development at the national and community level

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1.4 Current and Emerging Issues

High prices• Continuing commodity price boom leads to even greater push for

sustainability & increases its scope, but creates new interest groups, often making needed political reforms harder

New Players• China and India are important contributors to demand and are also

investing in extractive industries abroad – changing the traditional playing field

• Africa: Significant mineral (and petroleum) potential—could be leading location for new investment but weak governance and capacity make sustainable development all the more difficult

Governance• Including but beyond corruption and transparency• Long-term capacity development, dispute settlement mechanisms,

contingency contracts & renegotiations, government legitimacy

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What is Sustainable Mining Development?

• For World Bank-supported projects: “Financially viable mining development that takes place in

an environmentally and socially responsible manner with sound governance that provides lasting benefits to the communities where mineral development, production and transportation take place”.

Sustainable Mining Development is essential:

• If a mining project is to contribute to effective and lasting poverty reduction at local and regional levels

• To avoid major conflicts around mining developments• For mining to contribute to political legitimacy and national

level policies and priorities• For the sustainability of a profitable mining industry

1.5 The Importance of Sustainability

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1.6 Why Sound Governance Is Critical

Poor macro & national level governance = benefits wasted:

• Government income spent unwisely, used to promote wrong economic policies, booms mismanaged, culture of corruption

• Supports ‘sustainability’ of poorly functioning political and economic institutions, illiberal democracies

• Creates new political economy & opposition to further reforms• Can destroy the most well-conceived sectoral reform

Poor sector governance = social/environmental harm• Long-term sustainable development highly unlikely• Irreparable damage to local communities, especially

indigenous peoples• Contributes to social conflict, even civil war• Leads to demands for contract renegotiation, even

nationalization• Harms legitimacy of national government with repercussions

for national level governance

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2. 2. Mining Policy: Mining Policy: Guiding Principles and Guiding Principles and

CriteriaCriteria

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2.1 Guiding Principles for the World Bank Group in Mining

• Strengthen governance and transparency

• Ensure that extractive industry benefits reach poor people

• Mitigate environmental and social risks

• Protect the rights of people affected by extractive industry investments

Source: World Bank Management Response to Extractive Industries Review

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2.2 Criteria of a Successful Policy Framework for Mining

Development

• For these guiding principles to be attained, the policy framework must meet the criteria below; where any are missing, further reform &/or capacity building is needed

• A satisfactory macro framework is indispensable

• Government must be reasonably credible and legitimate--it is crucial to be able to avoid political economy traps in which elite groups capture a disproportionate share of benefits

• Political institutions must allow for effective participation and the ability to make transactions over time—no ‘winner-take-all’ mentality

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2.3 Criteria of a Successful Policy Framework for Mining

Development

• Benefits must be widespread at both the national and local levels

• Local capacity building for both governance and transferable occupational skills development must be a continuous and adaptive process

• Long-run capacity building for implementation, monitoring, evaluation and enforcement is institutionalized

• Stakeholders have a flexible and adaptive approach to new developments in the sector

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REGIONALGEOLOGICAL

MAPPING

MINERALRESOURCES

ASSESSMENT

REGIONALEXPLORATION

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100

1,000,000

>10,000,000

100,000

USD/km2

DETAILEDEXPLORATION

MINEDEVELOPMENT

PUBLIC FUNDING

PRIVATE FUNDING

2.4 Public vs Private Sectors Role in the Mining Development Sequence

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3. Country Experiences3. Country Experiences

Madagascar

Mauritania

Zambia

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Tanzania

Zambia

Ghana

Namibia

Botswana

Moçambique

Malawi

République Démocratique

du Congo

UgandaGabon

Niger

Nigeria

Mali

Côte d’Ivoire

Burkina FasoGuinée

Sénégal

TchadSudan

Mauritanie

Zimbabwe

South Africa

Lesotho

Swaziland

Angola

Kenya

Somalia

Ethiopia

Eritrea

Djibouti

Congo

Cameroun

Rwanda

Burundi

RépubliqueCentraafricaine

Guinea Eq.

Sierra Leone

Liberia

Benin

Togo

Madagascar

Gambia

Guinea Bissau

Algeria Libya

Egypt

TunisiaMorocco

WB MiningT.A. Projects

In Africa

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3.1 Madagascar (i)3.1 Madagascar (i)Two Projects:

– Mining Sector Reform Project: 1998-2002: USD 5 million Main policy and legal reform; initial institutional reform

(mining cadastre); ASM and environment– Mineral Resources Governance Project:

2003-2008: USD 32 million 2007-2010: additional 8 million Governance: Institutional reform (environment,

inspectorate, geological survey, gemmological institute), decentralization, formalization of ASM and trade, integration of large scale mining, community development, geological infrastructure and promotion

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3.1 Madagascar (ii)3.1 Madagascar (ii) Policy reform (1998) Legal reform:

– New Mining Code (1999, rev. 2005)– Large Scale Mining Investment Law (1999)

Institutional reform– Bureau du Cadastre Minier (2000)– Institut Gemologique de Madagascar (2004)– Cellules Environmentales Minieres (2006)– Inspection Miniere (2007)– Service Geologique de Madagascar (2007)– Restructuring the parastatal mining and petroleum agency

OMNIS into an oil agency (2008/9?)

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3.1 Madagascar (iii)3.1 Madagascar (iii) Facilitating regional integration of large scale

mining projects – 4 “new” projects:– Consultation process and regional/local

coordination committees involving mining companies, government authorities and communities

– Regional resources assessments (Dynamic Mineral Resources Management)

– Regional/Community Development Plans, based i.a. on the resources assessments

– Regional/Community Development Funds

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3.1 Madagascar (iv)3.1 Madagascar (iv) Artisanal and small-scale mining (ASM)

– Legalization of ASM (“mobile” cadastre); support to establishing associations

– Technical and management capacity building– Fiscal revenues decentralization– Management capacity of local authorities– Gemstones and gold trade formalization, fiscal

issues– Value chain: development of local cutting and

polishing, jewelry (IGM role)– Integration of ASM into local development plans

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3.1 Madagascar (v)3.1 Madagascar (v) Land use management:

– Mineral resources Geological, geophysical andgeochemical survey of about 60% of the country Set up of a multi users data bank =

core system of the Geological Survey

– Environment and social vs mining: Conflict prevention and management: “Mines-Forest committee”: large and

small scale mining Environmental base line surveys Environmental mining units

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3.2 Zambia (i)3.2 Zambia (i) Several projects:

– ERIPTA (multi-sector; closed) Policy, legal and institutional frameworks Privatization of State owned ZCCM (closed)

– Social services: water and electricity in mining towns– Copperbelt Environment Project:

2003-2008; USD 55 million Remediation of GoZ and ZCCM environmental liabilities (as part of

privatization process) Strengthening of GoZ environmental regulations enforcement capacity

– SEED (multi-sector): 2005-2010; USD 5 million Adjust policy, fiscal and regulatory frameworks to high commodity

prices and mining boom ASM (see Madagascar)

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3.2 Zambia (ii)3.2 Zambia (ii) Copperbelt Environment Project

– Legal definition of liabilities and of who should remediate them has facilitated the privatization process at a time commodity/Cu prices were low

– Plan based on private and “public” environmental management plans, approved by environmental authority (ECZ)

– Capacity building – and implementation – on site closure processes, incl consultation, resettlement and technical “best practices”

– Comprehensive environmental data bank for monitoring– Major case: lead contamination affecting a 50,000 community (Kabwe)– Communities and local authorities involvement in sites remediation and

maintenance Main issues:

– Sustainability of financial and institutional environmental management mechanisms

– But, major issue: active mining operations and private sector represent still >90% of contamination flows..

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3.2 Zambia (iii)3.2 Zambia (iii) SEED:

– Earlier agreements between GoZ/ZCCM still based partly on “negotiations”, incl. e.g. fiscal aspects

– GoZ would like to re-negotiate as it feels it does not benefit as it should under higher commodity prices.

– Improve capacity to negotiate? Or Reduce room for “discretionary” negotiation through legally pre-defined agreements? (cf Madagascar, Mauritania, Chile, Peru..)

– Zambia has data banks: data banks are important; more important is to learn how to use them and to share the information..

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3.3 Mauritania (i)3.3 Mauritania (i) Two – and a half –

projects– Projet de Renforcement

Institutionnel du Secteur Minier (PRISM I): 1999-2004; USD 15 million

– PRISM II: 2003-2008, USD 18 million + additional USD 5 million on oil

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3.3 Mauritania (ii)3.3 Mauritania (ii)Basic reform:

– Legal framework: Mining Code and Mining Agreement Law Regulations, incl. environmental

– Institutional reform: Mining cadastre – one of the most performant in Africa, 2nd only

to Madagascar Environmental mining service and Environmental Information

and Management System (SIGE) for EIA evaluation and monitoring)

Geological and Mining Information System (SIGM) for promotion and land use management

– Geological Infrastructure About 70% of country covered with geological, environmental,

geochemical and airborne geophysical data

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3.3 Mauritania (iii)3.3 Mauritania (iii)Mining and Local EconomicDevelopment:

– Socio-economic development based on the SOE SNIM iron mine within the Zouerate (mine) to Nouadhibou (port) 700 km corridor: small businesses development, economic diversification, social services, renewable energy, water resources development.

– Additional water resources would allow the development of new mines

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4. Issues and Challenges4. Issues and Challenges Regional instead of a country-by-country approach:

– Western Africa– Great Lakes: trade roads– SADC

Institutional sustainability: everybody recognize the importance of institutions. But why government and international aid agencies are reluctant to set up long term financing mechanisms?

“Newcomers”: how to react? Increased flexibility to keep “competitive”? But what about environment and social?

Convince IMF, WB – and ADB? –, and Finance Ministries economists that local management of locally generated revenues is key to EI based development

EI Funds..

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Thank you!Thank you!