intergovernmental forum on mining, minerals,...
TRANSCRIPT
Intergovernmental Forum on Mining,
Minerals, Metals and Sustainable
Development
DOMESTIC PARTICIPATION IN
EXTRACTIVE INDUSTRIES IN
AFRICA
Claudine Sigam
Special Unit on Commodities
16-19 October 2012
The main argument
The background
Expected and actual linkages
Determinants to linkages
The Way Forward
The Role of UNCTAD
Conclusion
Domestic inputs and Natural Resources extraction in Africa Development
AN OUTLINE
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In Africa, a close look at the mining and oil & gas
sectors reveals that the degree of linkages (backward
and forward) along the production of value chain
continues to be very low due to various reasons,
including limited domestic capacities
Domestic inputs and Natural Resources extraction in Africa Development
THE MAIN ARGUMENT
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Domestic inputs and Natural Resources extraction in Africa Development
THE BACKGROUND
Commodity
Reserve
World
Share %
Oil 10
Gas 8
Diamond 88
Platinum 73
Gold 40
Uranium 15
Vanadium Phosphates
95 53
Year
Primary
Commodities/GDP
GDP/Unit of energy used -
SSA
Extractive
industries /
Total Exports
2010 21%
(6% less fuels)
3.2% Compared 6.1% Belgium
85% Mineral ores and metals
16%, Fuels 69%
FDI INFLOW IN THE NATURAL
RESOURCE
In 2011, total FDI to Africa was USD 43bn
and FDI stocks totaled USD 570bn
It is estimated that 90% of those amount
went into extractive industries
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EXPECTED AND ACTUAL LINKAGES
Domestic inputs and Natural Resources extraction in Africa Development
SHIFT IN POLICY APPROACH
Host countries: Explore ways in which mines can become more closely
integrated with local economies
Mining companies: Intensifying competition has meant growing trend for non-
core activities to be outsourced to low cost suppliers and for firms and economies
to specialize in capabilities rather than wholly manufacturing products.
Developmental oriented capitain of industries
Civil society organisations and local communities social licence to operate
ENVIRONMENTAL CONSIDERATION
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EXPECTED AND ACTUAL LINKAGES
Domestic inputs and Natural Resources extraction in Africa Development
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NEGATIVE OR LOW POSITIVE
Resource abundance measured as ratio of primary commodities to GDP
ratio negatively correlated with GDP growth
Increased the volume of trade
Exchange rate appreciation (the Dutch Disease) More stable balance of payment
through increased export earnings
Resource exploitation favoured non-tradeables and this undermined
production in the tradeable sectors, including manufacturing
Income in the forms of wages and
other payments for host-country
inputs and most importantly
government revenues
Due to capital intensity in resource extraction, few jobs are created and
weak linkages to local suppliers
Upscale of the technological
capacities of some host low-income
economies
Enclave oriented infrastructure development
Environmental externalities (flare to market ratio of natural gas in
Africa70-80% compare to 1% in the US)
Little technology transfer
Unbalanced regulatory environment for local participation in extractive
industries
The level of linkage to the domestic economy in general remained very low or
negative
DETERMINANTS OF LINKAGES
Domestic inputs and Natural Resources extraction in Africa Development
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INTRINSIC CONTEXTUAL
The imperative of highly efficient manufacturing
processes: logistics, flexibility and costs
Ownership (origin, place of incorporation,
nationality of foreign ownership and firm
specific attributes)
The specificity of resource deposits –
characteristic of every mining is location specific,
thus the technology, knowledge and skill inputs
need to be applied locally
Infrastructure both physical and social
The technological intensity of extraction and
processing
Domestic capabilities and systems of
innovation (skills and technological
knowledge impact the depth and breath of
linkage )
Policy environment – both resource sector
specific policies and wider set of sector with
important implications for the resource sector
Mineral endowment are by nature finite, suffer long-term real price decline and are susceptible to
cyclical fluctuations. Their extraction and processing generally require many skills and much
capital.
Low linkages/domestic participation mean that natural resources extraction has had very low net
positive effect on Africa development .
Addressing the capacity gaps (corporate, household, regulatory, financial, etc) and other
gaps that hinder the development of linkages
Developing and implementing national policy with regard to linkages
Align and are mutually reinforcing
Balance government short term imperatives with longer term and wider
objectives of sustainable development
Align vision and capabilities between the state, the private sector and the civil
society
Coupling mineral sectoral policy with industrial policy, investment, trade and market access
agendas as recommended by the African Mining Vision
THE WAY FORWARD
Domestic inputs and Natural Resources extraction in Africa Development
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UN Mandate on Commodities, including Agricultural, minerals, metals and energy
“ensure that commodity‐dependent developing countries (CDDCs) are able to derive increased benefits from the global integration of markets and to meet the Millennium Development Goals”
Objectives: Strengthen the policy making and institutional capacity of CDDCs to:
– formulate strategies and policies to respond to the opportunities and challenges of minerals markets. …
Work in Africa guided by the African Mining Vision
Actions:
Platform for high level policy dialogue on topical issues related to the extractive industries contribution to inclusive development
the 16th OILGASMINE Conference , Niger, 20 to 23 November 2013 on the theme "Natural Resources Development: Governance in the Extractive Industries, Trade and Marketing Structures".
The Global commodity forum 4 to 6 February 2013
Publications
The Natural Resource Information Exchange - NRIE
Proposal to IGF: immediate actions in implementing the MPF on building linkages and information on the mineral value chain
THE ROLE OF UNCTAD
Domestic inputs and Natural Resources extraction in Africa Development
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CONCLUSION
Domestic inputs and Natural Resources extraction in Africa Development
Three main dimensions
1- Foreign inputs into the extractive activities that team up with domestic participation
by contributing to training of the technical professional and skills and technology
transfer
2- Domestic level
a. Communities
b. Corporates
c. National policies (more efforts to correct the skills mismatch between the
commodity they produce and their active/unemployed labour force. STEM
programme, training and retraining, income distribution, policy coherence, etc)
3- Regional and International level
Global initiatives and multilateral frameworks such as international trade and investment
agreements
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