Author
By Daniel Gbondo
If we are to learn anything about the extractive industries from the last few years, it should be to expect the unexpected. In 2011, it seemed that we were on the edge of a mining boom that promised transformational development. Investment poured into new iron ore projects and we registered some of the highest rates of economic growth in the world, hitting 15 percent in 2012 and 20 percent in 2013. Fast forward to 2015, and things don’t look so optimistic, particularly for our iron ore mines.
There is no doubt that the ongoing Ebola crisis has taken a toll on our economy, but we should not forget about the other big story in the world right now – the global downturn in commodity prices. Falling natural resource prices are impacting resource rich countries around the world, particularly those dependent on the commodities that have fared the worst - oil, copper and iron ore. Venezuela, Malaysia, Guinea, Mongolia and Zambia all have their stories to tell. ]
In Sierra Leone, our story includes the bankruptcy of London Mining, the operator of our second largest iron ore mine at Marampa; and the ongoing concerns surrounding the future of African Minerals, the operator of the country’s largest iron ore mine in Tonkolili. National benefits that once seemed so certain just a few years ago now seem so far away. Of course, there is not much we can do to stop a downturn, but there is a lot that we can do to protect ourselves from the damaging effects of a downturn. Well prepared resource rich economies, such as Norway and Chile or even Timor-Leste, show that getting the framework for revenue management right – essentially using money saved in the good times to help get you through the bad times – can ensure that resources revenues can be harnessed for good even when prices are not favorable. Other countries show that channeling resource revenues into transformation and development can work if done well.
In Botswana, for example, revenues primarily generated from the diamond industry have been used to ensure high spending rates on education since the mid-1970s. The result today is universal primary education and a secondary gross enrolment ratio of 82%, double the average for the rest of Africa. These people now contribute to the Botswanan economy in many ways other than mining meaning that when mining stops the economy continues to go on. As a result people in Botswana today are 15 times richer than us in Sierra Leone. Ideas like these are not new to us in Sierra Leone. They have already been discussed at length in the Transformation and Development Conference, and many have been included in the Agenda for Prosperity, and upcoming pieces of legislation such as the Public Financial Management Bill and the Extractive Industries Revenue Bill. Nevertheless, we are still struggling to develop a clear plan on how we want to roll them out.
The main strategy document for mining in the country – the Core Mineral Policy – was written in 2003 and is now desperately out of date. In 2 some ways the lull in iron ore prices actually provides us with an opportunity to get the management regime of natural resources right. It gives us time to deliberate about the long term strategy for iron ore but also think about our other resources including rutile, bauxite, gold and diamonds for which there haven’t been the same kinds of price shocks. This is why the Government of Sierra Leone has put together a multi-stakeholder expert group drawn from government, the private sector and civil society to assess the management of the mineral and petroleum sector and to help review the core mineral policy.
Led by Hon. Abdul Ignosi Koroma, Deputy Minister of Mines (representing the government), and Kadi Jumu-Peters (representing civil society), the team has already started with a comprehensive diagnostic exercise using the Africa Mining Vision and the Natural Resource Charter tools. Using this research, they will help a government led team comprising civil society and private sector actors and with support from the World Bank, draft the new mining policy before the end of the year. Our hope is that the outputs of this work can lay the foundations for a stable mining sector. One which is able to give us benefits in the long term, even when prices drop again. One which is able to attract the kinds of new investors who are able to improve our country. This work supports Pillar II of the Agenda for Prosperity by assessing the effectiveness of the legal, policy and regulatory regimes of natural resource management and provides clear recommendations that will improve the governance environment of natural resource exploitation. We will be encouraging the wider public to engage with this work throughout the year.
The author is Coordinator, Extractive Sector Benchmarking Project, Ministry of Mines and Mineral Resources
(C) Politico 24/03/15
