MAC: Mines and Communities

Africa Update

Published by MAC on 2007-03-23

Africa update

23rd March 2007

The United Nations Environment Programme (UNEP) has criticised African governments for backing huge hydro power and fossil fuel projects, while the UN and the World Bank aim to fund the search for geothermal energy sources on the continent.

Meanwhile, the World Bank/IFC has said it expects to double the number of mining-related investments in Africa. During 2006 it approved financing for three major projects: Newmont's highly controversial Ahafo gold mine in Ghana, Rio Tinto's Simandou iron ore venture in Guinea (in which the IFC has 5% equity) and Lonmin, the London-based platinum miner.

IFC to double number of mining investments in Africa

Bloomberg News Service

14th March 2007

Rashad Kaldany, outgoing Director of the Oil, Gas, and Mining department at the World Bank Group, told Bloomberg that the International Finance Corporation (IFC) expects to double the number of its investments in Africa's mining sector. He added that the World Bank's private lending arm intends to diversify its mining portfolio in Africa from primarily gold production to include base metals such as copper, aluminum and iron ore, which are currently fetching high prices on international commodity markets.

During the 2006 calendar year, the IFC approved 3 mining projects worth $280 million in sub-Saharan Africa, including $125 million for the controversial Ahafo gold mine in Ghana, a $5 million equity investment in an iron ore project in Guinea, and up to $150 million for platinum miner Lonmin in South Africa. According to an article in Business Report, the $100 million loan and $50 million equity deal with Lonmin, which was signed last week, constitutes IFC's single largest investment in Africa today.

Kaldany noted that the IFC prefers to invest in countries that have subscribed to the Extractive Industries Transparency Initiative (EITI), an international campaign requiring disclosure of company payments and government revenues from oil, gas and mineral extraction in resource-rich countries. He also added that the IFC would only finance lowest cost producers, to prevent default when the prices of commodities return to their long-term levels.

The IFC's stated intention to double its mining investments in Africa is troubling, though perhaps not surprising. Last year, the volume of the IFC's extractive industries lending increased by over 50 percent.

Serious questions remain about the development impacts of extractive industry investments; all too often, the environmental and social consequences of mining projects outweigh the potential benefits for affected communities. In the case of the IFC-supported Ahafo gold mine, for example, nearly 10,000 local residents have already lost their homes and/or livelihoods as a result of the mine, and thousands more in farming-dependent communities are expected to be physically or economically displaced by the mine's second phase. Meanwhile, the project sponsor is planning to open another mine site in the country, which could threaten a forest reserve and jeopardize local water sources.

Africa Must Set Alternative Energy Agenda - UN

PlanetArk KENYA

23rd March 2007

NAIROBI - Africa must be bold and follow the examples of Brazil and Germany to plan an energy future around renewable and alternative sources, the head of the UN environment agency said on Thursday.

Many of the plans being considered by African governments, including huge hydropower dams and fossil fuel plants, were simply "more of the same", UN Environment Programme executive director Achim Steiner told a development conference in Kenya.

Many would be able to supply the huge appetite of industry and city dwellers on the world's poorest continent, he said, but would "lock in" the rural majority to decades without power.

"We should not live with the dream of a trickle-down of energy supply (to villages) in 20 to 30 years time ... Africa should not follow the technological path the rest of the world is willing to give it access to," Steiner said.

"More imagination, honesty and boldness to set an African agenda ... is what the continent is screaming for today."

Africa was rich in renewable energy resources like wind, solar and geothermal power, he said, which could be harnessed relatively cheaply to power small communities.

African governments should be encouraged by a new focus in the West on fighting climate change through promoting clean energy generation and carbon financing, he said.


And they should look to countries like Brazil and Germany, which he said took "strategic decisions" years ago to become leaders in biofuels and wind power respectively.

"Everyone laughed at Brazil at the time ... The theory was they could not afford to invest in alternative energy," he said. "They spent $25 billion on public funds for the ethanol sector, but have saved $50 billion now on avoided oil imports."

Steiner was speaking in Nairobi at the start of a major two-day meeting on sustainable development jointly organised by Japan, the United Nations and the World Bank.

Takeshi Iwaya, Japan's senior vice-minister for foreign affairs, said the focus must be on quickly improving livelihoods threatened by power shortages, poverty and pollution.

"The first step towards sustainable development for ordinary citizens is not to discuss global environmental issues, but to grasp day-to-day environment and energy needs and to remove the immediate threats to their lives," he said.

The head of the UN housing agency Habitat, Anna Tibaijuka, told delegates the rapid growth of cities and slums, especially in Africa, meant such concerns must be addressed without delay.

"Those slums mirror the huge chasm between rich and poor," she said. "This gulf is an affront, even a danger, to humanity."

Story by Daniel Wallis


UN to Insure Geothermal Explorers in East Africa

PlanetArk KENYA

23rd March 2007

NAIROBI - The United Nations and World Bank have launched a fund to help insure energy explorers hunting geothermal power sources under Africa's volcanic Great Rift Valley, officials said on Thursday.

The Rift has the potential to produce more than 400 megawatts of geothermal electricity, UN experts say, or more than half east Africa's total power generation capacity, including all its power stations and hydropower dams.

But exploration is very costly, so the African Rift Geothermal (ARGeo) fund aims to encourage investors by paying for part of the bill at sites where test drilling -- which can cost several millions dollars at a time -- comes up "dry".

"The expense of looking for geothermal is huge," Catherine Vallee, a senior UN Environment Programme (UNEP) programme officer, said in an interview. "This new facility will provide a kind of insurance scheme to mitigate against some of that risk".

Geothermal plants use steam trapped deep underground to spin turbines, creating power. The technology has attracted growing interest as rich and poor nations alike try to boost generation while reducing gases emissions blamed for climate change.

The World Bank has committed $13 million so far to the ARGeo fund, which will operate in six countries along the Rift: Kenya, Uganda, Tanzania, Ethiopia, Eritrea and Djibouti.

UNEP has contributed $4.7 million, and bilateral donors are expected to add at least another $10 million to the pot.

Kenya was the first African country to tap geothermal power, and already hosts the continent's biggest geothermal plant near Naivasha, about 140 km (85 miles) west of the capital. The ARGeo project will seek to build on that by boosting local skills and sharing experience and exploration equipment.

"Geothermal is secure, reliable and clean energy, once set up," Vallee said. "It can really change things in this region."

Katherine Sierra, the World Bank's vice president for sustainable development, said the Bank had donated some $200 million to building geothermal capacity in Kenya over the last 30 years -- about a third of its total donations to the country.

"Africa's strategy should be to look to their own resources to reduce oil imports," Sierra told Reuters at a sustainable development conference in Nairobi. "Geothermal also has the benefit that it reduces local pollution and improves health."

Story by Daniel Wallis



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