Tuesday, December 3, 2013

Committee Calls for Continued Debate Around EU Ban on Local Citrus Products

Parliament of South Africa: 29 November 2013 

The export ban of South Africa`s citrus products from the European Union markets is a major concern and poses a threat to socio-economic development in the country, according to the Portfolio Committee on Agriculture, Forestry and Fisheries.
This follows the alleged reports about the citrus black spot that was found in several citrus fruit cargos from South Africa to European markets this year which led to sudden decision by the European authorities to put immediate restrictions on the country’s citrus exports from certain identified regions. This has since been described as a serious threat to European producers and compromises their citrus industry.
The Committee is calling for urgent closer cooperation between the South African government and their European counterparts to further discuss the issue on scientific evidence and reconsider the decision while working in collaboration with the affected citrus producers in the industry to take proper control measures to ensure disease-free in the identified regions.
According to the Committee Chairperson, Mr Lulu Johnson, this untimely decision has the potential to impact negatively on the industry in terms of both the income and job losses.   “As much as we believe that each party has the obligation to act in the best for its economy, as the Committee we strongly believe that it is through the continuous negotiations that an amicable solution favourable to both countries, especially their producers and consumers, can be found before this causes more unexpected harm,” said Mr Johnson.
The Committee encourages the department, together with the Perishable Products Export Control Board (PPECB), to find a way of eliminating the possible development of the citrus black spot, and equally appeal to the EU to open doors for negotiations.

Monday, November 25, 2013


South Africa National Treasury: 10 September 2013

The Republic of South Africa has priced a US$2 billion 12-year global bond in the
international capital markets. The bond was priced at a coupon (interest) rate of 5.875 per
cent, 315 basis points above the 10- year US Treasury’s benchmark bond.

 The transaction attracted bids to the value of US$7.4 billion, more than 3.5 times
oversubscribed. The demand was mainly from investors out of Europe and the United
States. This deal is printed against a difficult global backdrop characterised by rising yields
and widening spreads.

Thursday, November 21, 2013

Investment Opportunities in Ethiopia

Privatisation Programme
The Ethiopian Government launched a programme for the privatisation of state owned enterprises in early 1995. Accordingly, the Ethiopian Privatization Agency (EPA) was established to implement the privatisation programme in the same year. The Government has laid the ground to privatise most of the state owned enterprises to the private sector. Accordingly, EPA has received a stock of 113 state owned enterprises from the government for privatisation in the years ahead. As indicated in EPA's work schedule, out of these enterprises, a total of 43 state owned enterprises are in the pipeline for privatisation in the near future. Most of these enterprises fall under manufacturing, construction, agriculture and agro-industry, hotels, transport, trade, and mining sectors. There is a strong commitment from the Government side to fully privatise state enterprises in the coming in few years. Detailed information on the process of privatisation can be obtained from the Ethiopian Privatization Agency. 
Agriculture is the main stay of Ethiopia's economy providing employment to 85 per cent of the population. The sector contributes about 45 per cent of the GDP and 62 per cent of total exports with coffee alone accounting 39. 4 per cent of total exports in 2001/2002. Furthermore, agriculture plays a crucial role in providing raw material inputs for the local industry. Endowed with wide ranging agro-ecological zones and diversified resources, Ethiopia grows all types of cereals, fiber crops, oil seeds, coffee, tea, flowers, fruits and vegetables. The potentially irrigable land is estimated at 10 million hectares. Ethiopia has the largest livestock population in Africa. Fishery and forestry resources are also significant. Considerable opportunities exist for new private investment in the production and processing of the above agricultural crops and resources. The following areas in particular, have been identified to offer plenty of opportunities to private investors. 
Food Crops
The food crops grown include teff, wheat, maize, beans, peas, lentils, soyabeans, chickpeas etc. In 1992/2000, Ethiopia produced 11.4 million tons of these food crops on about 8.9 million hectares of land. This is far short of the country's demand for these crops. Great opportunities, therefore, exist for commercial production and processing of these food crops. Some pulses can also be produced or processed for the export market. Oil crops such as rapeseed, linseed, groundnuts, sunflower, ginger seed and cottonseed serve as raw material inputs for the edible oil industry. Some oilseeds, including sesame, are important export crops. Favorable agro- climatic conditions also exist in the south-western parts of the country for introducing coconut for the production and processing of palm oil and ghee. Besides, Ethiopia has a huge potential for producing and processing of maize. It is widely grown in various agro-ecological zones. The total annual average production is 250 thousand metric tones in an area of about 1.4 million hectares. As part of the government's initiative to efficiently tap the available potential, detailed project profiles have already been prepared for the processing of coffee and corn. 
Beverage Crops
Coffee is Ethiopia's gift to the world. The country is Africa's leading producer of Coffee Arabica. Coffee remains the single most important cash crop. The volume of coffee export was just over 110 thousand tons in 2001/2002. The potential for private production and processing of coffee is significant. Tea is also another potential for production, processing and export. Ethiopia's tea is of an excellent quality. The total tea export for the year 2001/02 was 153 tons. The favourable agro-climatic conditions in the country offer excellent opportunities for production and processing of tea for both export and domestic consumption.
Cotton provides significant opportunities for export. A portion of existing textile industry demand of lint cotton is met from domestic production, the remaining being met through imports. In addition, there are good prospects for exporting lint. Opportunities for production and processing of cotton in Ethiopia are significant. 
Ethiopia's diversified agro-climatic conditions makes it suitable for the production of a broad range of fruits, vegetables and flowers, including citrus, banana, mango, papaya, avocado, guava, grapes, pineapple, passion fruit, apples, potatoes, cabbages cauliflower, okra, egg plant, tomato, celery, cucumber, pepper, onion, asparagus, water melon, sweet melon, carrots, green beans and cut flowers. Ethiopia is believed to be center of diversity and center of origin for various flowering plants. Cut flower and vegetable production are fast growing export businesses; in 2001/02-production year over 29,000 tons of fruits and vegetables and 10 tons of flowers were exported. The agro-processing of fruits and vegetables can be vertically integrated with production. There are already some integrated agro-industrial processing plants run by a state enterprise. The horticulture sub-sector in general holds great potential for private investment.  
Ethiopia is one of the top ranking countries in Africa and among the first ten in the world in terms of livestock resource. The livestock resources of the country include 35 million cattle, 11.4 million sheep and 9.6 million goats. Traditional methods of animal husbandry render current output per unit of domestic breed of livestock too low. Therefore, investment opportunities are potentially attractive for modern commercial livestock breeding, production and processing of meat, milk and eggs. Investment opportunities of significance potential are also available in ostrich, civet cat and crocodile farming. 
Opportunities exist for fresh water fish production and processing using artificial ponds. In addition, the country's fresh water bodies have an estimated annual fish production capacity of 30,000-40,000 tons, of which less than ten per cent is presently being exploited.  
Forestry and Apiculture
An estimated 2.5 million hectares of natural forest presently remains in 58 designated National Forest Priority Areas (NFPA). Of these, 13 are managed under integrated forest management systems, with about 80,000 hectares of industrial forest having been established for limited sustainable exploitation. Investors are welcome to invest in integrated commercial production of structural timber, pulp-wood, match wood or even fuel wood. Production of rubber and natural gum also offers exciting opportunities for private investment. With some 3.3 million beehives, Ethiopia is the leading honey and bees wax producing and exporting nation in Africa. This offers excellent prospects for private investment in apiculture. 
Agricultural Services
Investment in the provision of agricultural support services such as pest and disease control, technical consultancy, agricultural machinery, cold storage, transport and marketing services offer considerable scope. 
Manufacturing is now at an early stage of development, and currently accounts for about 7 per cent of GDP and 5.3% of employment. It covers about 145 state owned and 643 private manufacturing industries of all sizes. These industries are mainly engaged in the production of food products and beverages, tobacco products, textiles, wearing apparel, tanning and dressing of leather, footwear, luggage and handbags, manufacturing of wood and its products, manufacturing of rubber and plastic products, manufacturing of chemicals and chemical products, manufacturing of other non-metallic mineral products, manufacturing of basic iron and steel, manufacturing of fabricated metal products, assembling of motor vehicles, trailers and semi trailers . As part of the government effort to re invigorates and revitalize the manufacturing sector, a new Industrialization Development Strategy has recently been adopted. The Strategy clearly identifies the priority areas of the manufacturing sub-sectors and put in place strategies that insure the development of vibrant industries in the country. Major manufacturing opportunities offering attractive potential benefits to prospective investors exist in the textile and garment, food and beverage, leather and electronic, building materials and non-metallic mineral and metallic industrial sub-sectors. These investment opportunities include: 
  • Food and Beverages: processing and preserving of meat products; integrated production, processing and preserving of fish and fish products; processing and preserving of fruits and vegetables; integrated production and processing of dairy products; manufacture of sugar; brewery, winery, soft drinks, processing and bottling of mineral water, etc.
  • Tannery, Leather Goods and Articles: tanning up to finishing; manufacture of luggage items, handbags, saddlery and harness items, foot-wear, garment and integrated tanning and leather goods.
  • Textile: spinning, weaving and finishing of textile fabrics and production of garments.
  • Glass and Ceramics: tableware and sanitary ware, sheet glass and manufacturing of containers.
  • Chemicals and Chemical Products: manufacture of basic chemicals based on local raw materials, including PVC granules from ethyl alcohol, formal-dehyde from methanol, manufacture of caustic soda and chlorine-based chemicals, carbon black; activated carbon; precipitated calcium carbonate and ball-point ink.
  • Drugs and Pharmaceuticals: manufacturing of pharmaceutical, medicinal, chemical and botanical products in the form of tablets, capsules, syrups and injectables.
  • Paper and Paper Products: pulp from indigenous raw materials, paper and paper products.
  • Building Materials: manufacture of cement, lime, gypsum, marble, granite, limestone, ceramics, roofing tiles, corrugated sheets, tubes, pipes and fittings.
  • Electrical and Electronic products: manufacture of office, accounting and computing machinery; manufacture of electric motors, generators, transformers, capacitors, resistors, switch gears , electrical fittings and integrated circuit boards; manufacture of radio, television, VCRs, printers, floppy disc drives, communication and other equipment and apparatus for the domestic and export market.
  • Metallurgy: manufacture of basic iron and steel, operation of blast furnaces, steel converters, rolling and finishing mills. Recycling of metal waste and scrap. Manufacture of basic precious and non-ferrous metal; mechanical working, heat treatment, pleating of ferrous and non-ferrous metals.
  • Structural Products: manufacture of structural metal products, reservoirs and steam generators.
  • Machinery and Equipment: assembly and manufacture of agricultural machinery and equipment, industrial, transport and mining machinery and parts, construction machinery, machine tools and accessories, miscellaneous light engineering products, components and parts.
Ethiopia offers excellent opportunities for mineral prospecting and development. According to the Ministry of Mines and Energy, "Ethiopia's green stone belts offer one of the finest areas for gold mineralization any where in the world," and already more than 500 metric tons of gold deposits have been identified by Government exploration efforts. Additional gold reserves are expected to be identified in at least seven regions of the country. 
In addition to gold, Ethiopia is blessed with good deposits of tantalum, platinum, nickel, potash and soda ash. Included in the construction and industrial minerals are marble, granite, limestone, clay, gypsum, gemstone, iron ore, coal, copper, silica, diatomite, bentonite, etc. With regard to fossil energy resources, there are significant opportunities for oil and natural gas in the four major sedimentary basins, namely the Ogaden, the Gambella, the Blue Nile and the Southern Rift Valley. Details of the mineral resources have been published by the Ministry of Mines in two volume prospectus.
Tourists and writers who have been to Ethiopia wonder why Ethiopia's tourism potential is still so little known. According to December 12,2002 edition of Our World, "Those who have discovered Ethiopia would probably like to keep the secret to themselves." In any case, the message is starting to filter through. Tourism in Ethiopia is growing slowly but surely. 
The country has a lot to offer to tourists. Visitors will find landscapes comparable to its neighbouring countries, Kenya or Tanzania, and awe-inspiring historical sites and monuments similar to its other neighbour, Egypt. 
The highlands of Ethiopia have an attractive landscape, scenery and wildlife. In the African Rift Valley system, a wide variety of wildlife and numerous bird species, both endemic and common, are found and a substantial volume of traffic is directed to this area. The magnificent Tis Issat Falls on the Blue Nile (Abay) river the endemic wildlife in Semien Mountains, the Sof Omar Cave in the south east are some of the interesting sites. The rock-hewn churches at Lalibela, the ancient buildings of Yeha and the obelisks at Axum, the medieval palaces at Gondar and the monasteries of Lake Tana, Debre Damo aand Debre Libanos are the main tourist attractions. 
Given its unique cultural heritage, magnificent scenery, pleasant climate, rich flora and fauna, important archaeological sites, friendly and hospitable people and the recent growth in the inflow of tourists, Ethiopia's potential puts it among the leading tourist destinations in Africa. Tourism infrastructure, which is still inadequate, should be developed in order to cope with the growing traffic. There are, therefore, great opportunities for private investment in hotels, lodges and international restaurants.

(Source: www.ethioembassy.org.uk)


14 Novermber 2013: National Treasury

The Primary Dealers in fixed rate government bonds of the Republic of South Africa are
required to constantly improve liquidity in the secondary market by quoting a two-way
price on the bonds that have an outstanding amount of R10 billion and more.

The outstanding amount on the R2037 (8.50%: 2037) bond has reached the R10 billion
mark and consequently, Primary Dealers are obliged to quote a two-way price on this
bond as stipulated in the rules of the Primary Dealers in fixed rate government bonds of
the Republic of South Africa.

The R2037 (8.50%: 2037) bond should be quoted at a maximum bid-offer spread of
10 basis points and a minimum amount of R10 million between Primary Dealers and
other market participants.

Thursday, November 14, 2013


Following his 2013 Budget announcement, the Minister of Finance publicised the members
of a tax review committee on 17 July 2013. The committee, now known as the Davis Tax
Committee (DTC), will examine the role of South Africa’s tax system to promote growth, job
creation, sustainable development and fiscal self-reliance. It will take the long term
objectives of the National Development Plan into account in its work.

Using its Terms of Reference as the point of departure, the DTC has adopted a work
programme that has prioritised the establishment of specialist sub-committees on small
businesses, the appropriateness of the tax base and tax mix in South Africa, and base
erosion and profit shifting (BEPS).

The DTC has also adopted an approach that is participatory and consultative. This will
provide for wide engagement with all stakeholders. Special dialogue sessions are arranged
on an ongoing basis to take into account a diversity of interests and opinions. The DTC
accordingly calls upon all interested parties to make use of the opportunity to contribute to
the mentioned priorities for now.

Top priority of the DTC at the moment is to address ways in which the tax system can be
improved to facilitate entrepreneurship and the growth of small businesses. Various tax
packages already exist to encourage small businesses. The DTC needs to review these
packages to find an optimal tax package that assists small businesses in contributing towards
economic growth and reducing the high unemployment rate. Urgent contributions in this
regard will be most welcome by 20 November 2013.

Contributions with regard to the tax burden and tax mix are invited by 30 November 2013.
The BEPS Sub-Committee is working on a longer timeframe that is aligned with the OECD
BEPS Action Plan. Contributions with regard to BEPS are welcome by 31 January 2014.

All contributions can be made via e-mail to taxcom@sars.gov.za . More details on the work
of the DTC and its Terms of Reference can be found on its website, www.taxcom.org.za

Wednesday, November 13, 2013

Investing in Women’s Employment – Good for Business

Addis Ababa, Ethiopia, 31 October 2013
 – IFC, a member of the World Bank Group, is promoting increased participation of women in Africa’s private sector, helping them overcome long-standing barriers that prevent them from starting businesses or gaining employment opportunities open to their male counterparts.
As part of this effort, IFC hosted an Africa Gender Forum in Addis Ababa that brought together more than 50 women leaders, IFC clients, members of civil society, and development partners to discuss best practices and challenges to scaling successful approaches. Discussions also focused on ways to increase access to training and finance for women entrepreneurs, who own or partially own only about one third of Africa’s smaller businesses. 

“Women's economic empowerment is essential to achieving sustainable economic growth and poverty reduction. When women entrepreneurs are supported with loans and new skills, they are able to turn their ideas into small and medium-sized businesses that generate economic benefits for their families and communities. An investment in women is an investment in the community,” said David Usher, Canadian Ambassador to Ethiopia.
“IFC recognizes the need to tap the vast potential of women as drivers of inclusive economic growth and shared prosperity, and has made gender one of its cross-cutting strategic priorities. We need to support and harness the positive effect that women’s economic empowerment and leadership can have on our economy,” said Adamou Labara, IFC Resident Representative in Ethiopia.
A recently-published IFC report, ‘Investing in Women’s Employment – Good for Business, Good for Development’, found that investing in women’s employment and improved working conditions can bring dramatic benefits to both women and businesses. IFC also runs a number of programs that promote increased participation of women in business, including Women in Business which has helped over 3,000 African women entrepreneurs gain access to $27.5 million in financing. 

During the Gender Forum, several women spoke of how they or their employers are helping women gain a foothold in the private sector. 

One female business owner, Constance Swaniker, explained how she benefited from a collateral lending system IFC helped establish in Ghana. She said that the registry allowed her to use her machinery to access finance, which helped her create 50 new jobs. 

Brenda Achieng, Legal and HR Director of Finlays Kenya, a horticulture company, highlighted Finlays strategic approach to promoting greater gender equality among its employees. Finlays achieved cultural change in the workplace by developing clear policies, training for supervisors, vocational health and safety training and support from senior management.

For more information, visit www.ifc.org 

IFC facilitates expansion into Africa

Istanbul, Turkey, November 11, 2013 — IFC, a member of the World Bank Group, is providing a $35.5 million loan to Elif Plastik, Turkey’s largest supplier of flexible plastic packaging, helping the company expand into Egypt, creating jobs, improving local know-how, and bolstering supply chains. 
The investment will help the company, which makes flexible plastic packaging for consumer goods like food, cleaning materials, and personal hygiene products, build a modern factory in Egypt. Some $15.5 million of the loan will go toward the plant, Elif Plastik’s first international expansion, while $20 million will help fund the company’s operations. The new plant will be able to produce 15,000 tons of flexible plastic packaging annually.

"We plan to expand into Egypt and other countries in the Middle East, and make the new plant a hub for Elif Plastik’s operations in the region," said Selcuk Yarangümelioğlu, Managing Director of Elif Plastik. "We look forward to developing a long-term partnership with IFC to further expand in the region and increase our company’s competitiveness."
The investment is part of a wider IFC effort to encourage economic development in Egypt by supporting the country’s private sector and to support leading regional companies as they expand into Egypt, helping to create jobs and to strengthen the country’s economic integration with Europe, and the rest of the Middle East and North Africa.
“This investment fits with our strategy of boosting confidence in Egypt's private sector, a major contributor to employment,” said Nada Shousha, IFC Country Manager for Egypt. “At the same time we are helping a Turkish company expand in the region, promoting cross-border investment between developing economies."
During fiscal year 2013, IFC committed $276 million in Egypt across five projects. That brought IFC's total commitments since 2011 close to $1 billion, including $303 million mobilized from other investors.
IFC has been investing in Turkey’s private sector for nearly 50 years. In fiscal year 2013, IFC delivered a record $985 million in 20 projects, supporting smaller businesses, renewable energy projects, energy efficiency, energy security, healthcare, education, infrastructure development, and cross-border trade.

 For more information, visit:

Investing in Moroccan poultry

Rabat, Morocco, November 12, 2013—IFC, a member of the World Bank Group, is making an equity investment in Zalagh Holding, a leading grain trading and poultry group, to help create jobs and encourage economic development in rural Morocco. 

IFC’s $24 million investment in Zalagh will support the company as it expands and creates new jobs, including those for women. The expansion will also help generate indirect employment in rural areas, where Zalagh is a key economic player.

"This agreement will support our strategy to become a major player in a rapidly expanding sector and strengthen our integrated value chain,” said Ali Berbich, Chairman of the Management Board of Zalagh Holding. “As well, IFC will bring with it its agribusiness expertise and its extensive experience in optimizing corporate governance and institutionalizing family businesses.”

This investment is part of the IFC strategy in Morocco to support the manufacturing and agribusiness sectors.

"Supporting the development of Zalagh Holding is part of our effort to spur job creation and promote sustainable growth in rural areas of Morocco,” said Guy Ellena, Director of IFC’s Manufacturing, Agribusiness and Services Department in Eastern and Southern Europe, Central Asia, the Middle-East, and North Africa. “We are excited to partner with a company with such an extensive experience and a reputation for supporting communities.”

The project will also support the growth of the poultry industry and promote the use of top-notch environmental and health standards.

Zalagh Holding is embarking on an ambitious 350 million Moroccan dirham expansion over the next three years. It is planning to ramp up production of animal feed, increase its supply of chickens and turkeys, and build poultry farms across the country. 

 For more information, visit www.ifc.org 

Thursday, October 24, 2013

African Capital Markets I

The 10th IMN South African and African Capital Markets Conference attracted over 600 delegates from across the globe in on the 22nd of November 2012. Converging at the Westin Grand in Cape Town, were the brains and pockets behind chiseling into shape, Africa’s capital markets which for decades have remained generally untapped.

Still experiencing growing pains, African capital markets akin to the continent’s economy have drawn the world’s attention as fertile hunting ground for higher returns.

“There has been strong development of local currency debt capital markets  in many countries in Africa as well as unprecedented interest by offshore investors for African credit risk as they turn away from near zero interest rates environments in the developed world and search for yields elsewhere.” Megan McDonald, Head  - Debt Primary Markets, Standard Bank

 Around this period last year, the word on issuers, bankers and investors' lips what “Eurobond”. The IMN Conference coincidentally fell just about two months after the historic Zambian sovereign Eurobond.  A USD denominated 10 year bond which raised $750million and was oversubscribed resulting in an order book value of $12billion. Excitement at the prospect of more sovereign and corporate issuances in Namibia, South Africa, Angola and Nigeria was in the air.

Fast-forward, one year later, the IMN conference goes into its 11th year. Taking a look back at the past 12 months, economic tremors of varying magnitudes have swept the globe but Africa continues to register growth. Critics would render Africa’s growth story nothing to write home about but with liquidity in the capital markets seeking crevices through which to match assets, Africa is on track to catch up with the rest of the world.
Marking the beginning of the 10th IMN conference for emerging markets in Africa questions that lingered above the meeting revolved around:
  • ·         Africa’s institutional capacity
  • ·         Underdeveloped markets with relatively undeveloped yield curves
  • ·         High interest rates – a deterrent of poverty eradication

In a week, a wider pool of delegates will converge in Cape Town to behold and review the progress made over the past twelve months and project into the future.

·         Are Africa’s capital markets developing too quick too soon?
·         Is Africa transformed institutionally to make current and future investments worthwhile for investors?
·         If Africa has seen inflows of funds in other forms and failed to realise tangible growth over the decades, will the story change now?
·         With many African countries healing from the debt burden lifted under the HIPC debt review initiative, is Africa ready to take on more debt?
·         Africa needs approximately $100billion worth of investment per annum to develop her infrastructure, are capital markets the only solution?  

These are questions I hope we can all explore as we take a close look at financing Africa’s development  at The 11th Annual South African & African Capital Markets Conference.

Thursday, October 10, 2013

DuPont says that Sustainability can be the defining feature of Africa’s growth

Continent well positioned to address the sustainable growth challenge

16 July 2013, Johannesburg:  African companies now recognise the importance of sustainability as a strategic imperative, although many still battle with implementing a comprehensive solution. This is the view of Antoinette Du Randt, Regional Director, DuPont Sustainable Solutions, the operations management consulting firm of the science company.
Du Randt says “after grappling with sustainability for many years, starting with how to define sustainability, there is now raised awareness about the need to continually think about keeping a business sustainable for the long term”. Du Randt ranks sustainability as a key challenge for corporations in the 21st century and she equates it to the modern assessment of business performance.
 “A key element of sustainability is the creation of social value,” says Du Randt, who points out that companies are under pressure to not only deliver profits for shareholders, particularly evident in mining companies, but also to deliver higher value to government through increased taxes and royalties, as well as communities where they operate, who are looking for employment opportunities and improved facilities.
Sustainability can also become the defining feature of Africa’s growth in the decades ahead, helping the continent overcome the “growth at all costs” trap that has afflicted other countries in the past, whose economic growth has sometimes been accompanied by high social and environmental costs.  
Africa has changed for the better, moving from economic stagnation to being home to seven of the ten fastest growing economies, according to The Economist. This growth has helped build a burgeoning middle class, which has spurred demand for goods and services.   
But for Africa to truly realise its potential it will need to diversify its economy, encourage movement to high value manufacturing and facilitate beneficiation of its vast minerals. Putting in place robust sustainable development strategies will help the continent achieve inclusive growth without damaging the environment or harming the long term use of fresh water resources and agricultural output.
Du Randt points out that DuPont sees sustainability as part of the evolution of the business model and is a goal that companies have to pursue in collaboration with government, labour and communities. Du Randt believes that sustainability is no longer a function of corporate responsibility or compliance, but rather a key growth opportunity that differentiates a company from its competition. “For companies to thrive, the communities they operate in must thrive,”  
Du Randt says as with any other business objective, sustainability needs to be driven from the top of the organisation with a clearly defined set of goals, a buy in from all employees and leadership from board and executive level.
Du Randt points out that companies need a change in mind set and view sustainability as “going beyond corporate social responsibility” to create sustainable shared value for all stakeholders as a strategic imperative.
Sustainability can deliver commercial benefits. Between 1990 and 2004, DuPont estimates that it reduced its greenhouse gas emissions by 72% and has generated $ 10 billion in revenue from products based on non depletable resources.
She also argues that stakeholders need to have realistic expectations from sustainability and that stakeholder education and inclusion is important.
Du Randt argues that the best way for companies to achieve sustainability is to invest in innovation that improves all aspects of business performance, whether its improvement in production while reducing water and energy consumption or by defining market facing goals which deliver product innovation that reduces the environmental footprint throughout the value chain while providing tangible consumer benefits
There is also emerging debate whether companies should be provided with incentives, including financial incentives, to pursue sustainable practices. Du Randt points out those financial incentives are likely to have a limited impact and the companies should pursue sustainability for their own long term interests.
Du Randt also argued that there are already incentives such as tax breaks in place and the ultimate incentive for any company is increased and sustained profitability, gained through an integrated strategy informed by shared value creation and capture.
Du Randt concludes by noting that as external pressures continue to mount, improved sustainability performance is no longer optional, shareholders and stakeholders expect companies to reduce their environmental foot print.

As companies search for opportunities on the African continent and exploit its resources, they should use innovation and a robust sustainable culture to drive improvement.

Friday, June 14, 2013

No small scale mining for foreign nationals in Ghana

Ghana, formerly known as the Gold Coast has been a major supplier of gold to world commodity markets.  After South Africa, Ghana is the largest supplier of gold out of Africa and political stability has made the country an attractive investment destination. The gold rush has not been without its fair share of irregularities. Recent weeks have seen Ghana’s gold industry overshadowed by the arrest of over 100 illegal Chinese gold miners among other nationalities.
According to Kofi Bentil, Vice President of local think tank, IMANI Ghana, the miners were rounded up for breaking the law not on the basis of their nationality.
“Firstly on breaking immigration laws, secondly for working in the country without relevant permits, thirdly for operating in an area specifically reserved for Ghanaians and fourthly they have done acts which have destroyed the environment in Ghana. Because of these acts they are either being processed for repatriation to China or for prosecution in Ghana”
The miners are currently out on bail and some are in the process of being repatriated to China.
Former illegal mining sites are often characterised by land that is beyond rehabilitation due to the extent of the damage. The abandoned open mine shafts have collected water and become breeding ground for parasites. The irresponsible mining operations also caused the contamination of drinking water sources in communities where access to safe water was already a challenge.
Though there has been outcry over the unfair treatment of the Chinese miners, Ghanaians who conduct mining without the necessary permits or cause environmental damage would be prosecuted in the same manner. Mr Bentil believes the small scale mining sector in Ghana will not grow in the foreseeable future if government is not at the forefront of empowering Ghanaians with the ability to defend what is rightfully theirs.
However, the Chinese miners in question acquired the land they were operating on from Ghanaians who either sold their mining concessions in full or in part. This is due to either the lack of interest in mining on the part of Ghanaians or  the need for quick returns.
 Mr Bentil says, “any individual, Ghanaian or foreign who operates outside the stipulated mining policy and breaks the law in any way, will be equally prosecuted.”
“The Ghanaian policy on small scale mining clearly states that no foreign national may conduct artisanal mining under any circumstances. Even if these Chinese regularize their stay in Ghana and gain work permits, they will not be allowed to own any small scale mining permit and licenses. The only way they can get involved in small scale mining is if they are employed by a Ghanaian small scale miner.” Mr Bentil reiterated.
“The capital intensive nature of mining is of no importance in small scale mining. All you need is a shovel and you can operate a small mine,” said Mr Bentil when asked what government and financial institutions were doing to avail capital to turn small scale mines into lucrative operations.

The impact of artisanal mining in Ghana is said to be quite significant. For every direct job in mining, about 10 others are created in side stream activities. Small scale mining contributed 9% of total gold production in 2000 and by 2010 the contribution had risen to 23%, with over a million Ghanaians directly dependent on ASM for their livelihoods.

Listen to interview here https://soundcloud.com/edeline7/kofi-intro

Tuesday, May 14, 2013

88mph opens applications in Nairobi
08.05.2013, Nairobi, Kenya

88mph, an early stage startup fund and 3 month accelerator program has opened applications for Nairobi. The program assists start-ups by giving them investment of up to a 100k, access to business networks and the know how to quickly grow their businesses. 88mph’s strategy in Africa is to fund strong teams and web-mobile ideas that have the ability to scale across English speaking Africa.

“There’s an immense opportunity to build mobile/web startups in Nairobi right now. African Mobile/web is hands down one of the fastest growing markets in the world and we want to reach out to entrepreneurs who build products and services for hundreds of million mobile/web users that are rapidly popping up on the continent,” says 88mph Program Director Nikolai Barnwell.

Barnwell continues,“Unfortunately, the natural course of a startup is to die before succeeding. But we provide the funding and the infrastructure to boost the odds of survival and we now want to look for the next batch of future successful entrepreneurs.”

That’s why, in addition to funding, the 88mph team in Nairobi has put together talent and resources, to add more value for the startups:
  • A partnership with Google has enabled the right space and internet resources to build tech companies, as well as access to Google’s experienced web professionals who can mentor the startups.
  • A host of highly experienced local Kenyans and global mentors have been added to the already top-notch 88mph mentor network.
  • Furthermore, “Entrepreneurs-in-residence” – experienced entrepreneurs, specialized in sales, programming & web design - are being brought in from across the world to work side by side with the local startups during the 3-month acceleration.
  • Finally, 88mph arranges a demo day, where the startups will get access to a group of investors and showcase what they’ve achieved so far.

Last year 88mph invested in 6 web-mobile startups in Nairobi. The 3-month program to accelerate the growth of the startups in Nairobi last year has reaped great rewards for the start-ups, with one startup with confirmed follow on funding and another two that are in final discussions. This will allow them to be able to scale their businesses across Africa successfully.

‘I've seen a wealth of talent infused in Nairobi within the past couple of years," says Carey Eaton, co-Founder, One Africa Media and CEO, Cheki Africa Media."88mph and the ecosystem brewing here are making a very significant contribution to building technology companies in the region to another level, building the next great wave of web and mobile businesses that solve African problems. I'm looking forward to following these startups closely throughout the program."

The speed at which the mobile internet has reached the markets of Africa, now at 274 million Africans on Edge or 3G, has created a huge demand for local applications and services catering to the young and growing middle classes of Africa. 88mph is here to fund start-ups wishing to grab a portion of this growing market. So far, they have invested over $750,000 into 23 early stage start-ups.

The combination of a large market, young population and opportunities within the mobile/web industry makes this accelerator attractive to any tech entrepreneurs who are looking to solve real challenges in Africa.

"Looking 2-5 years ahead, the US and Europe will be stagnating at best. I think the biggest opportunities for return on investment will be in Africa and other emerging markets. Our accelerator program is a great opportunity for international tech entrepreneurs and returning diaspora to come, take advantage of the insane growth here, and work on solving some really interesting problems," concludes Barnwell.

Additional Information:

• Application deadline is midnight July 15th, 2013

• Startups can apply now on 88mph.ac

• 88mph invests up to $100k per startup

• Equity will depend on the startup company valuations, which could range from $100k to $1mil

• Altogether 8 - 15 teams will receive an investment and get accepted into the 3-month program

• The teams will be notified if they have been accepted to the program by August 1st, 2013

• Program starts on August 26th at the 88mph Garage in Narobi, Kenya

• Startups in the program will have access to tech hubs in Cape Town, as well as to 88mph's partner tech hubs across Africa

DuPont Photovoltaic Solutions - Enabling Materials during Africa Utility Week

CAPE TOWN, South Africa, May 13, 2013 – DuPont Photovoltaic Solutions (DuPont) will be exhibiting at African Utility Week 2013, May 14 – 15 in Cape Town, South Africa, showcasing technologies designed to improve the efficiency and lifetime of solar panels and lower overall system costs.  Dr. Stephan Padlewski, marketing manager for the Europe, Middle East & Africa (EMEA) region also will be a featured speaker at the co-located Clean Power Africa Conference on Wednesday, May 15th, emphasizing the importance of materials to help ensure long term reliability, a lower levelized cost of electricity and improved investment returns for solar energy systems.  Visitors to the show can visit DuPont in Hall 1, booth S02.
            “It is not enough to know who makes the solar panels you buy, you have to know what is in them to understand if they will deliver the required power output over their expected 25 year lifespan,” said Padlewski.  “One of the key challenges for the solar industry is how to lower overall system costs to make solar energy more competitive with other power sources, without compromising performance.  This is where materials matter - they have a major impact on system performance and return on investments solar.”
DuPont will highlight key materials, including:
  • DuPont™ Solamet® photovoltaic metallization pastes, that have doubled solar cell efficiency over the last 12 years.
  • DuPont™ Tedlar® polyvinyl fluoride (PVF) films that provide 30 years of proven durability and reliability for solar panels exposed to the harshest outdoor conditions.
  • Lightweight photovoltaic system solutions that are lightweight and easy to install, designed to reduce balance of system costs.
DuPont Photovoltaic Solutions is the leading global supplier of specialty materials to the photovoltaic industry.  To learn more, please visit http://photovoltaics.dupont.com.
DuPont (NYSE: DD) has been bringing world-class science and engineering to the global marketplace in the form of innovative products, materials, and services since 1802.  The company believes that by collaborating with customers, governments, NGOs, and thought leaders we can help find solutions to such global challenges as providing enough healthy food for people everywhere, decreasing dependence on fossil fuels, and protecting life and the environment. 

Thursday, April 11, 2013

The future of mining in Senegal

The mining industry of Senegal has been dormant for the greater part of the 20th century. From the 1960s to 2000, the extraction of phosphate was the major earner of revenue in mining. In 2005, the mining sector of Senegal expanded to encompass the exploration of base metals such as iron ore. At present, Senegal boasts of the 3rd largest heavy mineral sands deposit with a major operation which commenced December 13, 2012.
Major discoveries of gold, copper and cobalt deposits have been made in recent years. Mr Ousmane Cisse, the Senegalese Director of Mines and Geology explained that gold deposits have been discovered in Kedugu, located in the eastern part of Senegal.

Senegal is home to regional headquarters to a number of multinational corporations due to its well developed infrastructure as well as political stability. “Senegal is the jewel of West Africa, it is the most stable country in the region and have many companies with their headquarters here even thought they don’t operate out of Senegal”, Mr Cisse reiterated.
“A Social Mining Programme was set up in 2008 in conjunction with the World Bank to encourage the move from social to economically viable mining for local small scale miners. This programme has empowered miners to generate revenue by equipping them with the necessary skills to mine efficiently,” said Mr Cisse
Senegalese President, Macky Sall

The future of mining in Senegal certainly looks bright and is set to contribute significantly to GDP growth as well as socio-economic development by 2017-2020.
“The iron ore deposits in Senegal are linked to large infrastructure development projects such as the development of 400km of railroad as well as the reconstruction of 350km more. There will also be a new harbor to be constructed for the transportation minerals to exports markets. Furthermore, railways from mines across the country to the existing port of Darkar are in the pipeline”, said Mr Cisse.
In order to encourage foreign and local investment into the mining sector, the government of Senegal is in the process of setting up a mining consortium to promote the issuing of exploration licenses. The arm of government will aim to minimize bureaucracy in the acquisition of information related to the mining industry in order to create a conducive environment for investors.
The government of Senegal is also promoting the value addition of minerals within the country with the aim of creating employment and generating business for small businesses offering services to the mining industry. This will also promote growth in other economic sectors such as agriculture where minerals such as phosphate are consumed.

Tuesday, March 5, 2013

Where is Africa when Africa is being discussed?

When the who ’s who of mining converge, one can expect nothing less than the finest thought provoking and somewhat mind-boggling numbers to be shared. The Investing in African Mining Indaba 2013 was no exception, attracting leaders from various facets of the mining industry from all corners of the globe. Africa, the new frontier of the 21st century, is set to become the largest supplier of precious minerals, base metals and chemical minerals in the future. If current trends continue, Africa could be supplying 50 - 75% of the world’s minerals as the developed world experiences depletion in their own mineral resources. While many perceive Africa’s embryonic stage of economic development as an obstacle, the business world sees this as an opportune time to scramble for Africa yet again. The acquisition of assets at this stage is much more cost effective for those in positions to acquire funding and finance operations across all sectors.

While foreign investment is vital for the development of the mining sector, it comes with adverse effects that may see African economies further plagued with issues of lopsided distribution of income and neo-colonialism. Mining companies which presented white papers, among them Rio Tinto, Anglo American, Lonmin and other large corporations with operations in various parts of Africa, divulged current and future plans to bring about social development. It seems mining companies are of the standpoint that enough is being done to give back to the mining communities in which they operate while a prominent executive went on to say, “ governments often ask for more than they are willing to give…”

The extent to which this statement holds water may be debatable but the vital question that remains unanswered is “To what proportion do social development projects equate to the value of mineral resources mining companies stand to gain?” Taking into account the capital intensive business that mining is, it can be understood that miners should have room to somewhat dictate the terms. However, left in the bank, would the large amounts of money yield much without assets such as the rich mines of Africa to generate profit?

The debate of sustainable development rages on, perhaps a one sided one, as there seemed to be a bias towards those who have the voices to speak at such forums as the Mining Indaba. The consensus among speakers was to engage all stakeholders in mapping the way forward for African mining, yet sadly, all stakeholders were not well represented.
It may be easy to berate tales of injustice and negate the good that mining has contributed to Africa through backward looking but if Africa is to truly benefit from the vast resources she boasts of, a number of things need to be put in place. While this is not an antidote to the problem of Africa’s poverty, it may very well be one of the many steps to making Africa at large experience more economic growth.

  • Easy access to information on opportunities available in mining
  • Educate local communities on the various facets of mining to encourage participation
  • Develop local and regional capital markets to encourage the participation of local junior miners to venture into the industry
  • Education from the grassroots level of the geography and needs of Africa in order to foster innovative thinking
  • Regional trade blocks to standardise regulations for the mining sector to eliminate double standards for multinational miners
  • Regional research and training institutions to encourage development of home-grown solutions for deficits in technology and skills shortages
  • Mainstream media to play a more active role in dissemination information and setting agendas that encourage participation 

Mamphela Ramphele Mining Indaba
Cape Town, 6/2/2013
Good morning distinguished guests, ladies and gentlemen. These are difficult times to be in the mining industry – even more so than a year ago when I first addressed you at the Mining Indaba. At that time the mining sector was already in the midst of the rising tide of resource nationalism and anti-mining sentiment. That sentiment has grown stronger world-wide. In South Africa, my beloved country, the legacy of the past has come home to haunt us in the tragedy that is Marikana and many other violent incidents that have come to characterise conflicts over scarce resources in our social relationships.
The benefits of high levels of mineral resources have in many cases across the world tended not to benefit the majority of citizens. There are exceptions. The Peruvian government ring-fences royalty payments for mining communities and spends the money there, while the way Norway manages its oil revenues is probably the closest we get to an ideal model. The Norwegian government only uses four percent of its oil revenues on expenditure, and the rest is invested in Norway’s Petroleum Savings Fund, focussing largely on investments to develop other sectors of the economy. Unfortunately these are exceptions and for the most, mining tax revenues vanish in the black hole that is the central fiscus and end up funding large rural estates for presidents.
Today I would like to take you on a journey of imagining a global mining industry that operates on a completely different model. I would like us to imagine a mining industry of the 21st century that is both a catalyst and an engine of growth in both advanced and emerging economies. I would like to borrow the words of a friend and colleague, Gunter Pauli:
“Countries with rich mineral reserves and part of broad free trade zones are particularly affected by the globalized economy, where increased demand for raw materials pushes up commodity prices, which increase export revenues that strengthen the local currency against the dollar. A strong local currency driven by ore exports and direct foreign investments turn imports cheaper. This leads to a de-industrialization, or the impossibility to ever build an industry, and adversely affects agriculture that is dependent on overseas markets. This phenomenon is known as the “Dutch Disease”. It affects large commodity exporting nations like Colombia. (I must add South Africa at the top of the list).
The only way to respond to these adverse macro-economic effects of commodity driven export strategies is to change the business model of the mining industry. Evolving mining from a core business, focused on the extraction of ores and the export thereof to a clustering of mining, agriculture and manufacturing using all available resources of the mine, from land to energy and waste like rock refuse and tailings. The design of a positive response strategy to social challenges like artisanal mining, combined with securing a cluster of businesses around mining could reverse de-industrialization. Better, this could create an economy that remains vibrant after the mining operation have exhausted their resources. At first sight, the process of clustering industries and social needs have no relation. However this proven strategy that is now subscribed to by leading global corporations adds value and jobs, while strengthening each competitive position in every core business generating growth in the country.”[1]
My presentation today is intended to start the difficult conversations that are essential to such a re-structuring process in the mining industry. We often avoid difficult conversations because we believe that the business of business, as one CEO told me a fortnight ago, is to make money regardless of the socio-political environment. The reality is that in the 21st century the inter-connected nature of economics, social and political systems, fuelled by rapid information technology knowledge and information dissemination, makes such a simplistic business approach unsustainable.
I will sketch what in my view are the key issues that the mining industry, governments and other regulators, workers representatives and unions as well as citizens in general should be discussing as a matter of urgency to set a new sustainable foundation for mining. The key issues are:
- How does one build a mine in the 21st century to ensure that the benefits and risks of exploiting the resource base are shared more equitably by all stakeholders?
- How does one deal with legacy issues of old mine operations in a manner that enables fair co-ownership of the risks and rewards in a sustainable model?
- What needs to change in the framing of the paradigm of sustainable mining within a greater focus on sustainable economies and socio-political systems?
These difficult conversations have to be held in an atmosphere of candour, mutual respect and a focus on the common good for each country. Governments need to listen very carefully to mining houses and the industry as a whole. Of course when governments are truly representative and accountable to all the people, it needs to be a two-way street, and the mining industry needs to listen to them as well. But it is not helpful to imagine that governments are the only credible representatives of public good interests. Modesty on the part of governments is essential to minimize the risks of conflating governing party interests, government’s role as a regulator and the state as the custodian of inter-generational long-term interests of the society as a whole.
The private sector must confidently voice its views within the broad rubric of its accountability to its shareholders whilst mindful of the shared long-term interests of sustaining the industry in the challenging environment of the 21st century. Silence in the face of abuse of power on the part of governments tends to come back to haunt industry players.
The workers and their representatives need to take a longer term view beyond annual wage increases. Issues of productivity, use of technology and innovative business models require openness to new opportunities. Defending existing jobs may ultimately be to the detriment of sustaining the industry with new types of jobs yet to be experimented with. Unions should be at the forefront of promoting innovation and productivity as the surest guarantors of sustainable rewarding jobs. The imperative of creating new types of jobs and livelihoods needs to be at the forefront of all the parties to conversations about sustainability. Union leadership is critical in forging partnerships that benefit society including future generations.
The extractive mining industry models that have characterized mining in most countries of the world over the last centuries are being challenged on many fronts. The idea that economic and political elites can continue to capture the benefits of mineral and natural resources is not only morally wrong but bound to lead to civil conflict which is bad for everyone including business. Extractive industry modes are by their nature unsustainable given their failure to invest in innovation and creativity to enlarge the resource base and to allow new entrants to bring renewal to the industry. Instead, mining has more often than not relied on monopolistic business models that keep new entrants out thus limiting the possibility of new ideas.
Elite pacts that have underpinned most mining licence agreements across the globe are being challenged by local communities and civil society actors. Greater transparency is being demanded about the nature of the agreements, benefit sharing arrangements, environmental impact assessments and management of the mining footprints on ecological systems.
The proverbial resource curse has continued to plague most emerging economies where political elites are seen to be the sole beneficiaries of non-transparent licensing arrangements with industry players. Extractive industry approaches are often inextricably linked to extractive political systems driven by patronage networks that take home the greatest spoils. In such circumstances higher royalties and taxes do not necessarily benefit ordinary citizens who continue to live in grinding poverty. Post-colonial Africa has more than its fair share of countries caught up in the vicious cycle of the extractive industry mode in mining and other natural resources. Nigeria, Democratic Republic of the Congo, Angola and now increasingly my own South Africa are showing signs and symptoms of the resource curse.
Inclusive economic and political systems focus on institutions that emphasise meritocracy and promote the contributions of the best talents and creativity of their citizens to increase productivity and generate a sense of shared value in resources. Unfortunately, South Africa has sustained an extractive economic system that started with mining and energy companies, but now includes monopolies in many other sectors including many serviced by large and powerful – and not necessary – very efficient parastatals.
The experience of the black economic empowerment programme demonstrates how this extractive economic system has seduced new black elites to become part of the closed patronage system. Very few BEE deals have really achieved what they set out to do – namely empower the many and not the few. If we could go back to the drawing board I would make employees the largest beneficiaries together with neighbouring communities as well as communities in labour sending areas that provide the mines with their manpower.
South Africa is also increasingly finding itself in a very difficult position that reflects all the symptoms of the Dutch Disease. The huge export revenues we enjoyed at the top of the resource super cycle pushed up our exchange rate and rendered our agriculture, textile and other industrial sectors increasingly uncompetitive. The failure of successive post-apartheid governments to invest in, and manage the creation of high quality education and training systems to enhance productivity, has led to a classical unsustainable economic base.
The shrinking economic cake alongside the rising tide of higher expectations that freedom would deliver better material conditions has raised the risk profile of the country. The tragic events in Marikana and protests by agricultural sector workers in the fruit and wine farms in De Doorns in the Western Cape are a wake-up call alerting South Africans to the many time bombs waiting to go off.
A turnaround is possible. It must start with difficult conversations between leaders of the government, mining industry, and worker representatives. The government must commit to creating an environment of: policy certainty, higher quality physical and social infrastructure, including education for the 21st century, and transparent fair regulatory systems to enable investors to commit long-term resources. The adoption of the first ever National Development Plan by the government is a promising starting point. Success will depend on the implementation of the commitments made to focus more intently on fighting poverty and creating a more positive investment climate with appropriate incentives for both domestic and international investors.
The mining houses and the government must accept primary responsibility for addressing the legacy of the extractive industry mode of mining: the triple burden of silicosis, HIV/AIDS, acid mine drainage, dusty and uranium contaminated environments. Industry led Public/Private Partnership arrangements must be struck to enable comprehensive holistic solutions to emerge. Government must provide incentives for the mining industry to invest in clean up operations which would also provide alternative livelihoods and jobs for ex-mine workers and local communities. Investors would also have to refocus their mindsets away from the short-termism that has driven the extractive industry mode. There is an urgent need to re-align the time horizons of expectations of high returns with the unavoidable longer term horizons of the build up process of projects in this capital intensive industry.
Workers representatives and unions must shift their mindset from short-termism to focus more on sustainable livelihoods and higher productivity to enhance returns for everyone. A greater emphasis on demanding higher quality education and training as well as wellness for their members should be the primary focus. Unions have dropped the ball with respect of fighting for proper housing, promoting healthier families and conducive environments for work-life balance for workers. The distance that has developed between workers and their representatives is a key factor in the recent wildcat strikes and tragedies in the mining industry in South Africa. Union leaders are perceived to have become part of the elite with a focus on consumption and status for themselves.
What this requires is that companies continue to create shared value for communities, governments and other key stakeholders in the areas they operate, building on what has already been achieved.
This means that mining houses must:
§ Build on sustainable local economic development programmes
§ Enhance programs focused on the procurement of local goods and services and promote responsible supply chain management
§ Work with government to ensure community programmes align and support government development strategies
§ Develop sustainable community infrastructure and other projects in collaboration with local communities, government and other key stakeholders
§ Respect human rights
§ Monitor and optimise stakeholder engagement
Finally and perhaps most critically we will all have to accept the fact that the traditional way of mining in South Africa with its reliance on cheap, low-skilled and plentiful labour is over. It is not sustainable. The labour-intensive nature of South African mining has deterred investment and the longer government structures its regulations around this model the longer investors will stay away.
I would like to share Gunter Pauli’s ideas informed by his work in Colombia which can be adapted to any other country:
“This possible solution operates within the free market philosophy. However, the future relies on a fundamental change of the mining business model which evolves from a core business centered around a core competence, to a clustering of activities that exploits all available local resources, generating multiple benefits for the mining companies, its industrial partners, the local communities and even the environment. This clustered approach ensures that the Dutch Disease will not smite the commodity trading countries. On the contrary, the design of a new business model for mining ensures that the whole economy regains competitiveness, including the farming and (manufacturing) industries which have already faced a downturn.
Clustering of Mining, Agriculture and Manufacturing Industry
A shift in the business model for mining provides a chance to reverse this trend of deindustrialization in commodity exporting countries. In order to accelerate its effectiveness, it is ideally combined with a shift in taxation policies. As long as mining companies remain core businesses focussed on extracting more ounces from the Earth, and ship these out of the country at lower costs paying a fixed percentage as tax to the government on each unit exported, then there is no solution.
However, if we rethink the activities of the extractive industries and how these could be redirected to respond to both global and local demand, maintaining a focus on minerals, while ensuring an effective use of all opportunities made possible by the mining boom, then there is a future for agriculture and local industries. If the government were to recognize the tremendous potential of this multiplier effect, then a smart shift in taxation can steer mining towards the clustering of productive activities. Mining and the commodity trade will then turn into a catalyst of local economic development instead of being a cause of de-industrialization and rural poverty.
Mining and Basic Needs
Let us take a gold mine as a case in point. Just about every goldmine in the world needs water to process ore. Actually, most mines require water and seldom find abundance in their area of influence. The traditional response of the mining engineers has been to pump water from aquifers, to pipe water over long distances, or to install reverse osmosis facilities if there is salt water in close proximity. These are major
infrastructural adjustments, increasing both capital and operational expenses of the mine at a cost of water per cubic meter that the local population would never be able to afford.
Time to think different. While not all regions in the world can provide lasting solutions exactly like the one described below, most mining zones can undergo a major regeneration of native vegetation, or a reforestation in order to turn the hydrological cycles from excessive water consumption by mines and perceived drought and contamination of water to abundance of water for private, agricultural and industrial consumption. Since five to eight years will span the discovery of a commodity to mine and its commercial exploitation, there is enough time to reverse the water supply in the region using all available resources.
Convert Cost into Revenue
If we were only considering the regeneration of forests for the purpose of water, then this represents a cost. This still reduces capital and operational expenses of the mine, since water production and filtration by a natural forest remains cheaper than installing water catchment areas and water treatment systems. However in the business philosophy of the Blue Economy, we are not only interested in merely reducing expenses, we are keen on increasing revenues, not just for the company concerned, but for the local economy. A mining project in the Colombian Andes offers the opportunity to regenerate part of the bamboo forest that once reigned the region. Bamboo, especially giant bamboo (Guadua angustifolia) is well known for its capacity to regenerate water cycles, purifying contaminated water, while regenerating top soil and increasing rainfall since a bamboo cover of the land decreases the surface temperature and therefore increases precipitation.
My experience of growing up in a rural area, operating as an activist in a hostile environment of the apartheid regime and being a witness to, and participating in efforts to build a post-apartheid inclusive society, has taught me that almost every challenge can be turned into an opportunity for change. I have benefitted enormously from turning the hardships of my life journey into learning opportunities. The question for the mining industry today is how we are to turn the challenges we face into opportunities for creative fresh starts?
The mining industry in South Africa has no choice but to make a fresh start. Fortunately many are already working together to develop alternative models to tackle common problems such as the TB/Silica and HIV/AIDs Industry-led effort (The Chamber of Mines with Gold Fields, Anglo Ashanti, and some platinum companies taking the lead) supported by the National Department of Health and international development partners. But much more boldness is needed to develop the “clustering model” that Gunter Pauli refers to above.
Just imagine turning Rustenburg, in North West Province, into a modern mining town with a cluster of appropriate industries that form the supply chain of the platinum mines in the area. Imagine the human and intellectual capital that can be generated through the construction of both physical and social infrastructure to create a buzzing town housing all levels of employees working on neighbouring mines and industries. Imagine turning the ugly landscape of mining shafts into green spaces that provide agri-business jobs for locals and feeds the households in the area and beyond. Imagine the government, private sector and citizens working together in a transparent way to build a sustainable future together.
But legacy issues in labour sending areas have to also be addressed. Imagine the Eastern Cape and Kwa-Zulu Natal becoming the bread baskets of the mining industry as part of its supply chain for food and other agricultural inputs. Imagine the potential of clustering agri-businesses in these provinces and enhancing the country’s food security as well as its export potential. Gold Fields and Anglo Ashanti are putting together just such an experiment with a chicken value chain in the Eastern Cape. Imagine the growing social capital of rural areas that could follow the termination of the destructive migrant labour model that has damaged rural family life. Imagine the return of these provinces to proud producers of high quality school graduates feeding into a rejuvenated higher education and training system.
All this is possible, but it will take a willingness to take risks and engage in tough conversations between the government, private sector, workers and civil society. It is possible to leverage the mineral resource wealth into a catalyst for re-industrialization of our country, continent and other parts of the world. But we must heed Einstein’s words – we cannot solve today’s problems by using the same thinking that created them in the first instance. Are you ready for change?