Leave The Minerals In The Ground If The Mining Sector Is Not Better Linked To The Broader Economy

At present, it is not clear where the Government of Malawi is investing the rents it receives from the extractive industries; revenue should be going to public investment projects to benefit future generations. Indeed, this is a feature of good governmental management of commodity wealth highlighted by Marcelo Giugale of the World Bank.

Furthermore, the Economic Recovery Plan launched by Joyce Banda’s government in September 2012 does not explicitly indicate how the mining sector is linked to Malawi’s other key industries addressed in the plan (commercial agriculture, tourism, energy and information and communication technologies), which would ensure the benefits of exploited natural resources are available for future generations.

South Africa has a much older and more established mining sector than Malawi. We can learn from South Africa’s experiences as it faces the same challenge of ensuring that the exploitation of natural resources benefits the nation. In fact, in a bold statement, Dr Paul Jourdan, who recently worked with a team to complied the African National Congress’ State Intervention in the Minerals Sector report, explained that the country does not need “dirt diggers”,

If you say I’m just a dirt digger and this is my core competence then fine, go to Australia. I’m not sure that we want companies that are just going to dig holes. I think that we want companies that are going to make those linkages and build our economy for the future, post mining.

In the objectives of the MPRDA [Minerals and Petroleum Resources Development Act], we need to put in the maximisation of the linkages; it is there in a fluffy sense about enhancing socio-economic development…we need to clearly say that we are not going to mine unless we make the linkages. The condition of getting a permit to mine the nation’s minerals is to make the linkages.

This is undoubtedly a far cry from the Government of Malawi’s screening of potential companies. Currently, several companies given licenses to explore in Malawi have little experience in this industry and linkages beyond the sector are minimal with companies already operational (a few jobs created, a few contracts with local food suppliers agreed and a couple of classrooms and healthcare centres renovated).

Jourdan outlined the necessary linkages between the mining sector and the broader economy at the AngloGold Ashanti and Motjoli Resources Mining for Change breakfast in Johannesburg in June 2012.

  • Fiscal linkages: the importance of capturing the fiscal benefits of South Africa’s minerals via the proposed resource rent tax
  • Spatial linkages: infrastructure and local economic development
  • Knowledge linkages: human and technology development
  • Backward linkages: supply of capital goods, consumables and services
  • Forward Linkages - beneficiation and industrialisation, strategic minerals, export tariffs, steel pricing competition

These could serve as a lens through which the Government of Malawi assesses proposed Mining Development Agreements with companies seeking to extract and export Malawi’s natural resource wealth.

For further information about necessary linkages between the mining sector and broader economy, visit Mineweb and the full State Intervention in the Minerals Sector (SIMS) is also available online.

5 responses to “Leave The Minerals In The Ground If The Mining Sector Is Not Better Linked To The Broader Economy

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