1.0 Introduction

The core issue of natural resource and environmental governance involves the way societies deal with environmental problems to enable uninterrupted supply as well as the distribution of risks and rewards in an equitable manner. The exercise of involvement and the distribution of risks and rewards concern interactions among and between formal and informal institutions and actors within society that influence how environmental problems are identified and framed, the mechanisms for their resolution, which makes the decisions and how such decisions are executed effectively and efficiently.

 

Societies deploy many array of systems and mechanisms by which they gain access and protect their environmental and natural resources. People and nations protect the environment for a variety of reasons. These reasons can be summarized under four main headings namely: supply depot, repository of waste, provide identity and social relations, and for aesthetic value.

 

Since the late 1960s and early 1970s, Ghana has witnessed renewed interest in and concern over environmental issues. Increasing state enthusiasm towards meeting environmental challenges in Ghana has been reflected and reinforced following the United Nations conference on the environment in 1972 and also implementation of structural adjustment programme (SAP) in the early 1980s. The severe impacts of SAP on the environment and poor people cannot be neglected as key external factor that catalyzed rapid reforms and development of various environmental management instruments. 

   

External aid plays a critical role in the development of state policies and institutions for natural resources and environmental governance.  International institutions such as the United Nations, the World Bank and some bilateral governments have taken an interest in the environmental and natural resource sectors of the country. Over the years, successive governments have conducted environmental programmes financially supported by these agencies. The natural resource and environmental governance (NREG) is one of such donor support natural resource and environment sector programmes.

     

This paper explores some of the policy gaps and outlines key advocacy opportunities in order to provide civil society organisations (CSOs) with policy advocacy agenda in the environment sub-sector of NREG. The paper begins by providing an overview of the circumstances leading to NREG and proceeds to briefly examine NREG as another donor support. Based on the brief examination, the paper identifies and proposes key policy issues for CSOs advocacy agenda for the environment sub-sector.   

I.    Introduction

The International Study Group to Review Africa’s Mineral Regimes (ISG) was established by the UN Economic Commission for Africa (UNECA) in September 2007, pursuant to the recommendations of a meeting (“the Big Table”) held in February 2007 under the auspices of UNECA and the African Development Bank (AfDB). The theme of the Big Table was “Managing Africa’s Natural Resources for Growth and Poverty Reduction”. It was attended, inter alia, by Ministers and senior officials from eleven mineral-rich African countries and representatives of the African Union Commission. Its recommendation as regards the establishment of the ISG was one of twenty-two proposed to help address challenges it identified to the mineral and other natural resources sectors of the continent. A list of members of the ISG and of the principal persons who provided research inputs is attached as Appendix A.

“[S]ound governance systems, capacity to administer and monitor the sector, and better linkages …[with other] sectors of the local economy”  were acknowledged as prerequisites for resource exploitation to contribute to growth and development. The pressures arising, particularly in the 1990s, from efforts to attract Foreign Direct Investment (FDI) into the sector, their consequences for the regimes which were put in place as well as changing global conditions and norms were noted as significant parts of the context which call for a fresh set of actions. A summary report on the Big Table is attached as Appendix B.

At its Inception Meeting held in Addis Ababa from 4 to 6 October 2007, the ISG agreed the Terms of Reference attached as Appendix C. The ISG met on four occasions altogether: (i) the Inception Meeting; then (ii) from 19 to 21 May 2008; (iii) on 4 and 5 September (in conjunction with a UNCTAD-sponsored workshop on Foreign Direct Investment in mining); and (iv) from 10 to 12 March 2009.  On each occasion, it received and discussed presentations from members or other invited persons.  In many instances, the presentations were subsequently elaborated in written papers submitted to the ISG.

At its second meeting held in May 2008, it became clear to the ISG that the most productive and realistic way to proceed was to separate the formulation of a framework report setting out fundamental perspectives from the development of detailed tools dealing with particular aspects of mineral regimes. The third meeting produced an annotated outline to guide the preparation of the framework report.  At the fourth meeting, a sub-committee was appointed to draft the report.  The sub-committee met at Langano in Ethiopia from 11 to 16 May, 2009 to consider various inputs which were available at the time and identified areas which required more material. This draft seeks primarily to distill ideas (and in several sections reproduces text) from various inputs submitted to the ISG since its inception and from work done within the UNECA in the past decade.

It is almost thirty years since the OAU, the precursor to the AU, adopted the Lagos Plan of Action for the economic development of Africa. The Plan (extracts from which are attached as Appendix D) presented a strategic review of Africa’s development challenges and potential paths. Its identification of “[t]he major problems confronting Africa in the field of natural resource development” (paragraph 76) rings familiar today:

“ lack of information on natural resource endowment of large and unexplored areas …; lack of adequate capacity (capital, skills and technology) for the development of these resources; a considerable dependence on foreign transnational corporations for the development of a narrow range of African natural resources selected by these corporations to supply raw material needs of the developed countries; the inadequate share in the value added generated by the exploitation of natural resources of Member States …; non-integration of the raw materials exporting industries into the national economies of the Member States thus impeding backward and forward linkages; extremely low level of development and utilisation of those natural resources of no interest to foreign transnational corporations; and disappointingly low general contribution of natural resources endowment to socio-economic development.”

At the AU meeting held in Addis in February 2009, the Heads of State welcomed the formulation of the African Mining Vision prepared under the auspices of the AUC and the UNECA and presented to the First African Union Conference of Ministers Responsible for Mineral Resources held in Addis Ababa on 16 and 17 October 2008. The Vision statement is reproduced in Box III.1

This report seeks to contribute to the elaboration of an updated strategic policy framework for the development of Africa’s minerals as demanded by the Big Table and proposed in summary by the Vision statement.

Chapter II sets out the global context in which this review is being conducted as well as the history which still defines, to a significant degree, key features of Africa’s mineral policy profile.  Chapter III questions the implicit premise of the conventional approach which limits mineral policy to the extraction of minerals and the sharing of revenue from it. The fundamental objective of harnessing Africa’s mineral resources to promote its development calls for a broader framework. Chapter IV considers the impact of the sustainability paradigm on the traditional topics of mining law (ownership, licensing, revenue-sharing and investment protection) and also how that paradigm has expanded the scope of that law.

The ISG hopes that this draft provides a basis for discussions towards an agreed framework report. Its expectation is that the report, when finalised, and the Vision will (as envisaged by the Heads of State Decision in February 2009) guide a subsequent phase in which the AUC, the AfDB, UNECA and other bodies co-operate to sponsor the development of toolkits, templates, guidelines, briefing notes and other instruments with regard to specific matters of significance and concern in the formulation or revision of mineral regimes in Africa.

 

 

II.            Mining: An Evolving Sector

A. Overview

This chapter sets out the global context in which this evaluation of Africa’s mining regimes is being conducted. It identifies (a) global market trends; (b) activity and thinking in significant mineral producing and consuming regions; and (c) international perspectives which have a bearing on policy development in Africa. The history which has defined the features of Africa’s mineral profile is presented; as are the evolution of policy and the state of attempts at harmonisation, regarded as a critical tool for addressing constraints and transforming the role of minerals in the African economy.

B. Global metal and mineral demand/supply trends

(i) Demand

 

Demand for mineral commodities has increased dramatically since the turn of the century. While use of most metals increased by 1 or 2 per cent per year in the 1980s and 1990s, growth rates after the year 2000 were much higher. For instance, world crude steel production increased by exactly one per cent per year from 1990 to 2000, but by 6.8 per cent per year between 2000 and 2007. Most of this rapid growth was due to industrial expansion in China, where raw materials demand increased dramatically as it supplied an ever growing share of the world’s output of manufactured products. Table 1 shows how, as a result, China accounted for an increasing proportion of world metals use.

The book, borne out of years of detailed studies commissioned by Third World Network Africa (TWN Africa) on the environmental impact of gold mining in Obuasi in the Adansi West District of the Ashanti Region, is replete with issues that indict individual, corporate and governmental actions and inaction that destroy the very environment that sustains lives. Obuasi lies wholly within the concession of the Ashanti Goldfields Limited (now AngloGold Ashanti), and for more than 100 years, mining has been dominant.

 The Glittering Facade is a follow up to a previous publication, “Boom and Dislocation”, that significantly contributed to changing public perception on the impact of the country’s gold mining industry on the people living in communities affected by mining.

December 2008 saw a ‘perfect storm’ hit international metals prices, bringing the five-year international metal price boom to an abrupt end. The combined collapse in demand for metals and sharp drop in the demand of institutional investors for commodity-based assets have slashed copper prices by up to two thirds, and gold prices by up to a third from their peaks in July 2008.

The metals price bust has dealt a blow to the mining tax reforms undertaken in a few mineral-rich African countries in the past two years. Emboldened by the metals price boom, governments in Zambia, Tanzania, South Africa and the Democratic Republic of Congo have amended their mining tax legislation or contracts with mining companies to increase

the revenue they collect from mining rents. They did so partly under public pressure – African citizens have been all too aware that while the ‘good times were rolling’ for the global mining industry, they saw no increase in mining tax revenue to governments or spending on their basic development needs.

 

The poor balance sheet of mining tax revenue in times of record high metals and minerals prices has motivated African and international non-governmental organisations to collaborate in commissioning a study on mining taxation and transparency in seven African countries. The countries are Ghana, Tanzania, Sierra Leone, Zambia, Malawi, South Africa, and the Democratic Republic of Congo (DRC). Each country study examined past and present mining tax laws, tax rates, and the forces driving tax changes, and compared the tax terms of mining contracts with national tax laws.

The central argument made by the report is that African governments have not been able to optimize the mining tax revenue due to them before the 2003 to 2008 price boom; neither have they been able to capture the anticipated windfalls during the price boom. This argument is grounded on two main reasons: (i) Mining companies operating in Africa are granted too many tax subsidies and concessions (ii) There is high incidence of tax avoidance by mining companies conditioned by such measures as secret mining contracts, corporate mergers and acquisitions, and various ‘creative’
accounting mechanisms.

These two factors coupled with inadequate institutional capacity to ensure tax compliance contribute in a large measure to diminish the tax revenue due to African governments. In turn, they diminish the contribution of mineral resource rents to national development. This explains the high preponderance of income poverty indicators in mineral endowed African countries and communities in mining areas. To reverse this trend and ensure the maximization of mining tax revenue for national development the report recommends reforms of policies, laws, and institutions that govern the financial payments made by mining corporations to national governments.

Mining companies claim that they need to be compensated for the unique risks they face, such as price booms and busts, through special tax exemptions and concessions. But these tax subsidies, together with tax avoidance and alleged tax evasion practices by mining companies, have robbed African treasuries of millions of dollars of foregone tax revenue from the mining industry.

Fuelling these losses has been a lack of transparency and oversight of the financial remittances from mining companies to government institutions, coupled with the inability of government institutions to audit the complicated accounts of multinational mining companies.