MAC: Mines and Communities

Canada: The limits of tying aid to mining companies

Published by MAC on 2014-12-29
Source: Toronto Star

Fool’s Gold: The limits of tying aid to mining companies

Barrick Gold’s massive mine in Peru has sped up community development, including schools and a hospital. So why are so many locals still jobless and poor?

Marco Chown Oved, Staff Reporter

Toronto Star

15 December 2014

QUIRUVILCA, PERU — Towering atop a pedestal in the main square, a golden statue of a miner with his headlamp and jackhammer gleams in the morning sun, a monument to the mineral wealth on which this town was built.

The Quiruvilca mine opened almost 100 years ago, and its blackened wooden structures still loom on the mountainside above the rooftops. But a century of mining copper, silver, zinc and gold brought little development to this remote settlement, nestled in a steep valley more than 4,000 metres up in the Peruvian Andes. The roads weren’t paved; many people didn’t have electricity.

Nine years ago, another mine opened, operated by Toronto-based Barrick Gold, the world’s biggest gold mining company. It has paid hundreds of millions of dollars in taxes and royalties and the new-found wealth is visible everywhere. The local government has brought power to virtually everyone in town and is now hooking up remote villages. Through an infrastructure-for-taxes program, Barrick has constructed roads, a police college, a hospital and a school. A new highway has cut travel time to the coast from eight hours to 3.5.

But physical infrastructure is the low-hanging fruit of development. While everyone benefits from the new highway, not everyone can get work at the mine; unemployment and poverty remain endemic.

“I have to recognize that economically, (Barrick is) here and they allowed us to do projects. They allowed us to bring electricity to many communities,” Mayor Walter Diaz Ramos says. “But the job opportunities, which are a direct benefit to the families, they’re insufficient.”

Making the jump from roads to jobs has proven difficult, and prompted people here to ask whether mining can bring lasting prosperity.

In an effort to prove that Canadian mining companies can bring more than just a few jobs to the countries where they dig, the Canadian government has launched a series of international development pilot projects in mining communities. In Quiruvilca, it has funded a partnership between the charity World Vision and Barrick to develop the economy, but the small-scale jobs created — micro-entrepreneurs, they’re called — fall short of the economic activity needed to sustain the town long term.

The curse of the boom town remains on everyone’s mind. As Ramos said: “Without mining, we wouldn’t exist.”

It has been four years since Cirilo Paredes worked in the shafts, but he still looks like a miner.

He spent 22 years as a tunnel builder and his deep-set eyes and creased skin testify to a life of hardships underground: long shifts in tight quarters with little light for low pay.

When he couldn’t take it anymore, he quit and passed his job to his son. There has never been much to do in mining towns other than mine. But as Paredes removes his cap to wipe sweat from his brow, he glances toward the sky filled with brilliant sunshine and says: “You know, I don’t mind physical labour at all, but it’s so much better out here in the open.”

Paredes is the proud owner of Quiruvilca’s first coal-delivery business. On a crisp and chilly day, he swung his shovel atop a giant pile of coal, mixing it with clay and forming it into balls to deliver to more than 200 households for heating and cooking. He makes more than he did as a miner and provides a service that benefits the community.

Paredes started the business after attending entrepreneurial workshops sponsored by World Vision and Barrick. His business plan won a local government competition that paid for three half-ton delivery motorbikes, which have allowed him to expand the company and hire three employees.

With $500,000 from Barrick and another $500,000 from the Canadian government, World Vision launched the business workshops as a way to wean the town off total dependence on the mines. As the project winds down its third year, it can lay claim to a dozen successful small businesses in this town of 7,500, as well as a dozen more in the small villages nestled in the surrounding mountain valleys. From cheese factories to alpaca wool co-operatives, local restaurants to ice-cream vendors and even a doll manufacturer, the project has spawned a slew of micro-businesses.

Early successes like Paredes’s are promising, but the project’s real victory is having unlocked the Peruvian government’s own money for projects that will benefit local people. When the project started in 2010, the regional government spent just over $900,000 on five community development projects, said Onome Ako, the business development manager at World Vision. By 2012, those numbers had exploded: 21 projects were funded with $4.9 million. Most tellingly, without any help from World Vision, that momentum was sustained in 2013, when 19 community projects received $4.2 million.

“By spending $1 million, we’ve unlocked $9 million in government funds,” Ako said. “We’re helping to ensure the resources are being used for the benefit of the local people. This empowers locals to hold government to account. Even if we walked away right now, we’ve already seen in the last two years that there’s been an increase in locally driven projects.”

The program is built on an innovative tax scheme that was already in place to fight corruption. Called the “Canon,” it puts half of a mine’s income tax in a fund earmarked for the region around the mine. The money is only released when the local government can present properly planned and budgeted projects. While this is an effective way to prevent local politicians from buying fancy cars or feeding inflated contracts to friends, it has had the effect of making it hard for regional governments to spend their own money.

World Vision estimates that in 2009, before the project started, the Quiruvilca government was spending less that half of the approximately $20 million it was receiving in Canon per year — the vast majority of it on infrastructure projects. In 2013, after three years of project proposal training with World Vision, the local government spent 60 per cent of its Canon, and funded four times as many economic development projects as before.

Peru, like many Latin American nations, is a place of extreme contrasts. There is the Amazon jungle in the east and tropical beaches in the west, with the snow-capped peaks of the Andes dividing the two. Across this diverse landscape, the wealthy generally occupy the coastal lowlands, while the indigenous and poor live at altitude or tucked into the jungle. But the fate of both rich and poor are linked to the mining industry.

Peru has long been Latin America’s largest gold producer and remains overwhelmingly dependent on extraction. The Extractive Industries Transparency Initiative reports that mining and petroleum make up 62 per cent of Peru’s exports and account for more than 75 per cent of foreign investment. But it hasn’t always been this way. Pulling oil and minerals out of the ground in Peru is a business that has ridden waves of nationalization and denationalization over the decades.

The floodgates for foreign investment most recently reopened in the 1990s after then-President Alberto Fujimori defeated the Maoist Shining Path guerrillas who had controlled most of the country’s mineral-rich mountains. The results of this victory have been enormous: mining concessions in the previously unsafe mountains increased more than tenfold and now cover more than half the territory of some provinces. Meanwhile, Peru’s GDP has tripled, bringing a wave of wealth and construction in the big cities. Seafront neighbourhoods of adobe houses in Lima have been levelled and modern condominium towers now take their place. Even that international indicator of moneyed classes has started to appear: the organic supermarket.

But head away from the coast and into the mountain towns where the mining takes place and the wealth is harder to find. Crumbling storefronts only receive paint when local politicians use them for campaign advertisements. Deafening three-wheeled moto-taxis imported from India carry people around for a few cents a ride. These towns have become flashpoints of conflict as indigenous people complain they aren’t benefitting from the mining happening on their doorstep.

Protests and blockades around mines have routinely turned violent. Almost 200 people were killed in clashes with police and private security forces between 2006 and 2011.

But according to the national ombudsman, the number of local conflicts in Peru has been dropping since its peak of 286 in September 2009. As of October 2014, the figure was down to 201. While more than 70 per cent of these conflicts are still sparked by disputes at mines, they have become markedly less violent. In 2013, the ombudsman found no deaths from riots and protests, though at least nine people have been killed in clashes around mines in 2014.

The mining industry helped defuse the protests by increasing spending on Corporate Social Responsibility (CSR) projects. Through a “voluntary tax,” the foreign companies built schools and hospitals, roads and power lines. While these projects won the support of those who benefitted directly from them, they also created jealousy and competition between towns.

“Social responsibility programs don’t resolve conflict, they are the source of it,” said Ximena Warnaars, a program co-ordinator with the indigenous rights organization Earthrights International in Lima. “People who are directly affected (by the mine) benefit from CSR, but people who are indirectly affected — downriver — don’t. If it were a state responsibility, everyone would have a right to a school. But mines just build schools in nearby communities.”

“In the past — I would say 10 years ago — most people in the public sector believed in CSR, believed it was a good thing,” said Gerardo Damonte Valencia, a professor of anthropology at the Pontifical Catholic University in Lima and a specialist in natural resource management. “But now, you don’t see many results, mostly because these initiatives are more about negotiations for accessing land or water than they are about development projects. If you have this conditionality, you are not doing development. It’s an exchange: land for money.

“CSR cannot replace the state … You cannot rely on CSR for development. It’s never going to work,” Damonte said. “Companies have realized they can buy some social peace, but you’d have to be a fool to think they can develop the country.”

This isn’t World Vision’s first partnership with Barrick; they have been working together for years.

Like many Canadian NGOs, World Vision wants to diversify its funding sources and the private sector is the obvious place to turn. This trend has increased markedly over the last few years, ever since the government started cutting development assistance.

Canada reduced its aid budget in 2010 and it has been going down each year since. Last year, in addition to the budget cuts, the government revealed that it had failed to spend at least $300 million that had been allocated to aid. Last spring, the OECD reported that Canada’s overseas aid fell by $600 million, proportionally greater than every other member country but Portugal. This year, the government again failed to spend its reduced budget, coming up $125.9 million short.

Canada, which under Brian Mulroney spent 0.5 per cent of GDP in overseas aid, now spends only half that: 0.27 per cent. That’s about a third of the UN’s official goal of 0.7 per cent for all developed nations, a target the U.K. reached for the first time in 2013.

The budget cuts came as the Conservative government set about restructuring Canada’s aid delivery. Long-term funding of organizations was ended and NGOs were asked for project proposals akin to private-sector bids on contracts. Then, the government released its CSR policy and declared that aid would work to “build a Canadian advantage” in the extractive sector overseas, introducing the idea of economic diplomacy. Finally, the stand-alone aid branch of government, the Canadian International Development Agency (CIDA) was folded into Foreign Affairs to create the Department of Foreign Affairs, Trade and Development (DFATD).

The McLeod Group, a think-tank of prominent Canadian development experts, has been relentless in its critique of the Conservative government reforms. In a blog posting, it reported that instead of formally cutting funding, CIDA and DFATD delay approvals of dozens of projects until they shut down from lack of funds.

“The Harper government has declared open season on the aid budget,” writes the group, which collectively authors its papers. “The challenge for CIDA in all of this is to ensure that Canada’s aid program is not lured away from areas where it has knowledge, history and a legal obligation — road, railways, schools and hospitals — into acting as a shill for companies that do a bit of this on the side as a customary part of the package the industry offers to acquire mineral rights.”

Amid the upheaval, international development charities complained they were being punished for taking positions the Harper government didn’t support. They came out under the banner Voices-Voix and started documenting the dozens of aid organizations that found their budgets slashed, their projects frozen, and subjected to what they called politically motivated tax audits. The most prominent example came in late 2009, when then-CIDA minister Bev Oda cancelled a project run by the United Church aid organization KAIROS by handwriting the word “not” on a staff recommendation to fund it. More recently, the internationally renowned think-tank the North-South Institute had its funding cut entirely and had to shut down.

At the country’s biggest development conference, held in Ottawa this spring, the hostility to the government’s changes was palpable. (In order to attend, the Star agreed to not quote any presentations or speakers.) In one session, the moderator asked those who had their CIDA funding cut to stand up. At least half the audience of several hundred stood. Then she asked how many had a CIDA-funded program that was forced to close because the funding didn’t come through in time and a quarter of the audience rose. Asked how many people had been forensically audited by CIDA, several dozen stood. When asked how many worked for organizations that no longer existed because their funding had been cut by CIDA, a handful of people rose to applause from the crowd. Among them was a representative of the Pearson Peacekeeping Centre, which was shuttered after 15 years of training police officers and government officials overseas.

Typically a mild-mannered bunch, the exercise released pent-up emotion: “We can’t expect resources from this government!” one man yelled. “They don’t give a s---!”

While the Harper government has been cutting back, Canadian corporations are ramping up. An increasing number of companies — especially in the mining sector — are adopting CSR policies and looking to spend money on philanthropic projects. When they sit down with cash-starved NGOs, the impetus to work together comes from both sides.

New types of projects are emerging from these marriages of for- and non-profit organizations. USAID, the American government overseas development organization, has wholeheartedly embraced private partnerships marrying business interests with development goals. The U.K. and Australia are doing likewise.

But, as veterans of mining partnerships point out, CSR is inherently limited to small projects and limited benefits.

“CSR isn’t bringing the private sector into aid, it’s bringing aid into the private sector,” said Jeff Geipel of Engineers Without Borders. “We aren’t interested in building a school for 100 kids. We want to do something bigger.”

CSR budgets are a tiny part of what mining companies spend and EWB is pushing them to redirect other spending to the local economy, something Geipel says would have a far greater impact.

According to a World Gold Council study, CSR spending by gold-mining companies is less than 1 per cent of the amount they spend on procurement of services and materials. Of the 15 major international gold-mining companies surveyed, the total budget for community projects was $285 million. Those same companies spent more than $35 billion on goods and services.

If mining companies bought more materials locally, the impact would be exponentially larger than any CSR project, said Scott Gilmore, a former Canadian diplomat who founded Building Markets, an NGO dedicated to incorporating businesses in developing countries into global supply chains.

“A lot of the more prominent companies — the Rio Tintos and the Iamgolds — are genuinely making an effort to have inclusive local growth,” he said. “But they actually don’t spend that much money, if you take a look at their CSR budgets versus their gross. What these mining companies should be focused on is supply chain, not CSR budget.

“You could double your CSR budget and put a few million into the local economy. Or you could increase your local spend on supply chain by 2 per cent, just by sourcing your tires here, and that will have four or five times the impact on poverty reduction and economic growth,” Gilmore said. “So spend your energy on that, not on the window dressing of the CSR projects.”

EWB and Building Markets have both been working with local businesses to bring the quality of their products up to an international standard, which has been the biggest barrier to increasing local procurement at mine sites.

Yet, DFATD remains committed to CSR, releasing last month its revised policy, called “Doing Business the Canadian Way: A Strategy to Advance CSR in Canada’s Extractive Sector Abroad,” which only mentions procurement in passing.

Over the ridge above Quiruvilca, another image of the mining community appears. It’s a shanty town on the side of the highway, hundreds of slapped-together shacks. When the stiff wind blows, the snapping of plastic tarps echoes between mountain peaks.

Pablo Juarez Robles sits astride his motorcycle and gestures to his shack. He used to be a farmer, but has turned to informal coal mining to survive. When Barrick came, Juarez’s family farm was expropriated to make way for the mine. In return, he says, Barrick paid him about $200 (U.S.) and promised to train him and give him steady work.

“Now I am without a job and I haven’t been with Barrick for a year and a half,” he said. “I am anxious to work at Barrick mine, but they only give you contracts. Six months. Eight months. Then they liquidate you.”

Last year, miners at Barrick’s Lagunas Norte mine went on strike for better wages. Unlike the prolonged and violent conflicts at other mines, this was resolved peacefully in a little more than a week. But Barrick is no stranger to trouble.

Barrick has been dogged by allegations of human rights abuses and environmental destruction at mines across the world: in Papua New Guinea, in Tanzania and in Chile. Even in Peru, where Barrick is considered one of the most responsible foreign companies, a protester was shot by a police officer at a Barrick mine in Ancash province in 2012.

Here in Quiruvilca, the negative effects of the mine are more mundane: broken promises, misunderstandings and desperate people.

As tractor-trailers rumble along the highway to the mine, Juarez gestures to the collection of shacks and explains the residents’ grandiose plans. Most of the squatters are unemployed mining engineers and they take a technical approach to their shantytown. One day, there will be a grid of streets, a town square and even a soccer pitch.

For them, there is no question, the mine acts only in its self-interest. Whatever development the mine has brought has passed them by.

“I am offended, legally offended, because of the lies,” says Juarez. “They don’t fulfil their promises. Clearly, they bring development. For example, this road is because of the mine, but it’s for their own benefit, their cargo, for themselves. You see, for the community, the people are still poor and there is no progress.”

Ghana: Canadian aid project goes off the rails

Development money went to Ghana because of a Canadian mine. Neither succeeded

Marco Chown Oved, Staff Reporter

Toronto Star

9 December 2014
AWASO, GHANA—Behind the rusting security gate at a secluded mine entrance, two flagpoles stand side by side. One flies the black star of Ghana while the other, which once carried the Canadian Maple Leaf, now displays China’s red ensign.

Yet half a million Canadian foreign aid dollars, earmarked for communities affected by Canadian mines, were sent here for three years. It was part of an experiment in overseas aid, where the Canadian government partnered with a mining company to develop the local economy. The money went to teacher training, vocational classes and small agricultural projects.

But three years on, training has ceased, half-finished buildings sit shuttered and the development plan has stalled due to a lack of new funding.
The Canadian mine was sold in early 2010 before the project even started, and while its former owner, Rio Tinto Alcan, fulfilled its commitment to fund the three-year project, the Chinese management hasn’t contributed a cent.

“We’ve had some engagement with the new owners. They were quite interested in the project that we were doing,” said Abena Adubea Acheampong, Ghana country director at World University Service Canada (WUSC), the non-profit organization that implemented the project. “But they were very honest with us to tell us, ‘We are having some technical challenges, so we will not be able to fiscally contribute toward the project.’ ”
Without a mining company partner, the Canadian government has ceased its funding as well.

Mines change hands often, and the Ghana sale underscores the risks of tying development projects to corporate interests that ride the tides of the metals market. While the private sector provides the promise of a vast new source of funding for international aid at a time when governments are cutting back, when economic conditions change, promises can be broken, projects abandoned and people living around the mines are left to fend for themselves.

In the jungles of southwestern Ghana, soaring wawa trees poke out of the canopy and vines trail down to the ground. The route to Awaso cuts through foliage that regrows so quickly it is constantly threatening to reclaim the road.

Here, bauxite — the base form of aluminum — has been mined for almost 75 years. The Ghana Bauxite Company was started by the British, before being partly nationalized in the 1970s, with a majority stake retained by Rio Tinto Alcan, an international aluminum corporation based in Montreal. But in 2010, Rio Tinto Alcan sold its stake to the Bosai Group, a Chinese mining conglomerate, saying the mine was too small for its massive international operation.

From the edge of Awaso, it’s a seven-kilometre trip up along a steep, red dirt road to the mine’s head office, perched atop Kanayeribo Mountain. The new owners have maintained much of the Ghanaian staff and management — even bringing some of the senior managers to China to visit the smelters where their bauxite is transformed into alumina, the next step toward aluminum.
Four years after the sale, the mine continues to operate at a loss, said Benjamin Addo, head accountant at Ghana Bauxite Company, and this has severely restricted its ability help to the surrounding community.

“We’re still committed to corporate social responsibility (CSR), but not on a scale that we did before,” Addo said. “(Rio Tinto Alcan) is a huge international company and we cannot match what they were doing.”

Addo, who also worked under the previous owners, estimated that under Rio Tinto Alcan, the mine had an annual budget of $200,000-$300,000 (U.S.) for community development projects.

He wasn’t permitted to reveal what the Bosai Group is spending. All he would say is that “expectations are bigger than our current CSR budget.”

Outside the office, a creaking conveyor belt cuts a swath down the side of the mountain, carrying bauxite from the open pit at the top to the washing and transport facilities below. There, men clamber atop transport trucks affixing tarps to prevent the heaped bauxite from falling off along the road to port. Despite their efforts, small piles of the rocks can be found everywhere around town.

Even after a century of mining, Ghana remains underdeveloped, with poor roads, unreliable electricity and a weak education system.

These problems are worse in the remote western regions, where many of the country’s mines are located. Awaso is only 375 kilometres from the capital Accra, but the drive takes more than eight hours because the roads, which start out as modern divided highways, quickly deteriorate into mud tracks through jungle.

Every hour around the clock, two trucks rumble past the dilapidated concrete house that Awaso’s traditional chief calls his palace. He receives visitors on a wooden throne atop a small concrete pedestal in his courtyard, where cats and children wander freely.

Nana Yaw Gyaim III starts by speaking in the local language, Twi, and allows four courtiers, perched on furry cowhide chairs, to translate for him. But he soon loses patience and switches to English.

“Over the entire history of the mine, it has not benefitted as it should,” Gyaim said.

Locals didn’t realize what they were missing until they heard that other mining companies were contributing to the community. A neighbouring town got a covered market. Another was hooked up to a mine’s private electricity grid that would kick in when the public power cut out. Gyaim asked Rio Tinto Alcan what they could offer and was impressed by their response.

“Rio Tinto did great things,” Gyaim said, describing the construction of schools and wells. “But now that they’re gone, we’re waiting to see the same effort.”

Since the Chinese takeover some of the buildings started under Rio Tinto Alcan still haven’t been completed. The brightly painted community centre in Awaso was supposed to be one of the company’s most visible legacies in the area. Instead, the building remains locked up more than two years after its scheduled opening.

Awaso’s fate is linked to the mine and when it suffers, so do these people. Nowhere is this more visible than the train station, which once bustled with women carrying baskets of fruit and live chickens, but now sits silent.

For decades, bauxite was hauled by rail. After dropping its load at Takoradi port, the train would turn around and take people, electronics, produce and seafood back north. The railway was the community’s link to the outside world, but decades without maintenance took their toll. Bauxite-filled trains started derailing with increasing frequency until one day in 2010 they stopped running altogether.

Station supervisor Sylvester Kwame still shows up to work every day because, thanks to a fortuitous bureaucratic oversight, he still gets paid.

Kwame said farmers would drop off foodstuffs to be delivered to markets in every town along the line. Now the food is put on buses, which take longer, cost more and lead to more spoilage. The public buses drive alongside the mining trucks that have made the bad road even worse. The increased traffic has caused several horrific accidents.

Officially, the closure of the railway had nothing to do with Rio Tinto Alcan’s decision to sell the mine, but the timing coincided. The following year, Ghana’s bauxite production plunged 33 per cent. Once trucking was set up under the Chinese owners, it rebounded but accountant Addo said this mode of transport is twice as expensive, costing the mine half the price of a ton of bauxite.

“If the rail line becomes operational, then our cost of operation is going to go down. Once we start making a profit and paying taxes, the businesses along the line will benefit and the ripple effect will spread out,” said Addo. “But who is going to spearhead it?”

Chief Gyaim doesn’t think this is a difficult problem. “(The mine) ruined the railroad. Now they should fix it.”

He doesn’t care who owns the mine; he wants to see them take more responsibility. Modest projects like schools and wells are great, he says, but getting the railway running would improve everyone’s life immediately.

“Mining will not be forever, but if they want to leave a mark, they will have to do more.”

In 2011, not long after the railway broke down, Canada’s then-development minister Bev Oda announced three pilot projects that would see the government partner with mining companies in Burkina Faso, Ghana and Peru. The federal government contributed $6.7 million, a tiny fraction of Canada’s approximately $4.5-billion foreign aid budget.

In Ghana, the Canadian government contributed half a million dollars alongside $300,000 from Rio Tinto Alcan to fund a corporate social responsibility project in a dozen towns and villages around its former mine.

Rio Tinto Alcan says its commitment to the project after the mine was sold shows the company didn’t do it for its own gain. It’s a sentiment echoed by Canada’s high commissioner in Ghana, Christopher Thornley.

“What we’ve demonstrated is that we’re with Ghana here. Even when the mine switched hands, we stayed there and didn’t leave,” Thornley said.
By the time the project started, Rio Tinto Alcan had left the country entirely and simply provided funding from its legacy budget, said Maysa Habelrih, a general manager with the company.

WUSC, an Ottawa-based non profit that arranges volunteering opportunities for students and professionals overseas, was given a free hand to run the project as it wished.

Instead of constructing buildings as the mine had been doing, WUSC, which has a $34-million budget and works in 20 countries, decided that job training would have a greater impact on the community, and Rio Tinto Alcan has been impressed by the results.

“It’s been successful,” Habelrih said. “They bring amazing talent. . . . They’re much more effective.”

WUSC taught the district council to deliver services, teachers to handle difficult subjects like math, and young farmers to start livestock operations.
“We focused on sustainability,” said WUSC project manager Kofi Nkansa Sarkodie. “We used the district assembly for all the trainings, so that when WUSC isn’t there anymore, they’ll be able to continue on without us.”

Unfortunately, that came sooner than anticipated. In early 2014, instead of continuing the project with the new mine owners, WUSC closed its office and left the area.

In interviews, teachers at three schools in the district all said they benefitted from the training. But now, they have no followup and the district has no money to build on these early successes. In towns where more than 300 young people were trained to raise pigs, poultry and bees, small operations are running, but the young farmers are worried about accessing credit to purchase new animals after they sell the ones they have.

“The problem is that the program started too late and we didn’t have enough time to accompany the youth for the two years to help them get established,” said Sarkodie.

Development money went to Ghana because of a Canadian mine. Here's how it has affected one school and the children who go there.
Canada’s decision to partner with mining companies raised eyebrows in the development community. While there’s a worldwide trend toward harnessing the private sector in aid projects, the mining sector is widely viewed as too controversial to participate.

The NDP’s foreign affairs critic, Paul Dewar, says extractive industries run counter to foreign aid: instead of bringing wealth to poor countries, they take it away.

“We do not go into places like Africa to help the Africans. What we’re doing now in countries in Africa is . . . taking resources out, and taking wealth out for our own benefit. Let’s at least be honest about what the relationship is,” he said at a debate hosted by the Canadian Council for International Co-operation last spring. “The new thinking should be: how do we work to help people within their own situation develop resources — that are theirs after all — for their benefit.”

International Development Minister Christian Paradis has said the projects that Canada has funded are only pilots and that lessons learned will guide future partnerships with mining companies.

But in February, before any outside assessment of the pilot projects was carried out, Paradis announced a new program called Extractives Cooperation for Enhanced Economic Development (EXCEED), which would fund more partnerships in the African extractive industry with an annual budget of $25 million.

“We know that sustainable economic growth drives poverty reduction, and the private sector drives economic growth. It is thus vital to partner with the private sector to raise people from poverty and set them on the path to prosperity,” he said in Montreal in May. “Since I became minister of international development, one of my priorities has been to create conditions that will enable these partnerships to increase significantly.”

Liberal foreign affairs critic John McKay said the Conservative government has been eager to work with the mining sector, but reluctant to hold it accountable for environmental destruction or human rights abuses.

In 2007, after a series of national round tables on corporate social responsibility and the extractive industry, a multi-party committee tabled a comprehensive report in Parliament recommending more transparency for taxes and royalties paid to foreign governments, as well as an ombudsman to handle complaints made by communities affected by Canadian mines.

While Canada has been encouraging financial transparency, there still is no ombudsman. An office was created for a “CSR councillor” to mediate conflicts, but the councillor, Marketa Evans, resigned late last year after opening six cases in four years and not resolving any — primarily because mining companies refused to participate in the process and she lacked the power to compel them to do so. A successor has yet to be appointed.

In 2010, McKay sponsored a private member’s bill that would compel the government to investigate complaints against Canadian mines and cut off a company from any government assistance if environmental or human rights abuses were found. The bill was rejected by a razor-thin margin: 140-134.

Meanwhile, Canadian mining companies continue to be accused of environmental destruction and human rights violations. In 2013, the Chilean government ordered Barrick Gold to halt construction of a mine after the company was fined $16.5 million (U.S.) for “serious violations” of environmental laws. HudBay Minerals is currently being sued by Guatemalan villagers for the killings, shootings and gang rapes security guards allegedly carried out at its mine between 2007 and 2009. Last month, three men filed a lawsuit against Nevsun Resources, claiming they were used as slave labourers at the company’s mine in Eritrea.

Perhaps in reaction to these developments, Canada’s new strategy for CSR in foreign aid, released last month, has taken a slightly stronger stance than before. It threatens to cut off mining companies that refuse to work with the CSR councillor — though the post remains vacant.
“It’s a new way to dress up the CSR councillor,” said McKay. “The old one was completely and utterly ineffective and a waste of taxpayers’ money.”

A Canadian aid project goes off the rails. Development money went to Ghana because of a Canadian mine. Neither succeeded.

On the whole, life is improving in mining towns in Ghana, though it’s “small, small,” as the locals say.

After an overhaul of legislation, Ghanaian government revenues from the sector more than doubled from $210 million (U.S.) in 2010 to $500 million (U.S.) in 2011, the last year for which figures are available, according to the Extractive Industries Transparency Initiative.

Meanwhile, offshore oil discoveries have brought in even more money, but in doing so, they’ve shifted attention away from mining, leaving Awaso’s broken road and railway forgotten in the jungle.

The highly publicized Canadian development partnership ran out of money in January of this year. Rio Tinto Alcan’s last meeting with WUSC was in May 2012. WUSC project manager Sarkodie moved back to Accra. He visits whenever he gets a chance, but the organization has no money to continue working in Awaso, leaving the local assembly to follow up with the projects as best it can.

Under a wobbling ceiling fan, district director of agriculture Francis Nkroma-Antiedu describes how much went into identifying the community’s needs: first infrastructure — wells and schools — then training for teachers and for agriculture. They have made great strides getting kids into schools and reducing sickness from dirty water, he says. But just as he starts sounding optimistic, the power cuts and we’re forced to continue our conversation in the dark.

At the main intersection in the nearby village of Soubiri, a half-dozen signs point the way to different mines on each road out of town. I ask a street vendor if the mines have built anything for the community and he points into the jungle behind town.

Back along a muddy path, partly washed out by the rains, sits a large public toilet with the name Rio Tinto Alcan painted prominently above the door. There are 24 stalls, 12 for men and 12 for women.

Because the plumbing was never finished, five years after it was built, the building remains padlocked. Garbage is strewn in the bushes that give off a stench, signalling people still come around to relieve themselves — but not in the way the company intended.

“I have no fear of the mines leaving,” said Nkroma-Antiedu. “There are so many; they come and go.

“With so many projects left incomplete, the question is how do we make sure we benefit before they leave?”

After the gold rush
Canada is tying foreign aid to overseas mining development. It’s touted as “win-win,” but in Burkina Faso there are already some losers

Marco Chown Oved, Staff Reporter

Toronto Star

2 December 2014

ESSAKANE, BURKINA FASO—Under the golden light of the setting Saharan sun, two types of workers shuffle between concrete huts on their way home, still bathed in sweat from a day in the mines.

The makeshift miners are barefoot; the mud from their hand-dug pits is splattered on their faces and ground into their clothing. In the dusty streets, they intermingle with the employees of a nearby industrial mine, wearing safety vests and hard hats. A way of life is ending for one group, while the other is being touted as the way to bring Burkina Faso out of poverty.

Essakane village was built from scratch by the Canadian mining company Iamgold in 2009 to house the 16,000 people it displaced to make way for an open pit gold mine. The frontier town sits isolated on a sepia-toned moonscape at the edge of the Sahara Desert. It is so hot — 43 degrees Celsius in the shade — when the wind blows, it’s like a convection oven.

Before the mine came, virtually everyone here was an orpailleur — French for “gold digger” — heading down narrow holes in the desert to hammer gold from the rock as deep as 70 metres underground. The haphazardly dug shafts frequently collapse, killing dozens of people every year. But the lure of gold in a barren landscape attracted thousands of people to scrape a meagre existence out of the ground.

Now, 150-tonne trucks rumble up earthen ramps leading out of the open pit mine, terraced like an Italian orchard. More than 1.5 kilometres end-to-end and 100 metres deep, it’s not only the biggest mine in West Africa, it is also Burkina Faso’s biggest private investment and largest single employer. Every day during 2013, the mine produced an average of 686 ounces of gold — worth about $880,000 on the world market.
Here at the intersection of old and new mining, an experiment in overseas aid is taking place. The Canadian government has partnered with Iamgold to fund a development project that seeks not only to benefit local people, but also to promote Canadian business abroad.
As austerity-minded governments cut foreign aid, these private-sector development partnerships are gaining popularity. The United States and United Kingdom have been working with mobile phone and soft drink companies for more than 10 years, but Canada is belatedly joining the game. When the government announced three pilot projects in 2011, it chose to partner exclusively with mining companies.
This may seem like a good place to start — Canada is home to more than 60 per cent of all mining companies in the world — but the practice of extracting minerals has been both socially and environmentally disruptive.
Canadian mining companies have been implicated in violence, human rights abuses and environmental destruction on four continents. But for the pilot projects, the government chose three mines with particularly good reputations — in Burkina Faso, Ghana and Peru. The three projects have avoided the higher-profile controversies, but the simple act of partnering with any mine to fund a development project creates a troubling conundrum.
While development seeks sustainable solutions to poverty, mines, with their limited lifespans, only offer unsustainable prosperity.
For people in Essakane, the material conditions of existence have improved dramatically. Five years ago, new concrete houses were built. They now line the main thoroughfares and people have added verandas made from branches and woven millet stalks. Children and women fill plastic jugs with clean water at public pumps. Two new schools, a medical centre and a youth centre have helped transform what used to be several scattered mining camps into a planned town.
But the orpailleurs here aren’t happy. What they have gained in infrastructure, they have lost in livelihood.
When Iamgold arrived, it kickedthe local miners off the richest gold deposits, though it allows them to dig anywhere on its 1,200-square-kilometre concession that isn’t being mined. The company hired from the local community, trained former diggers and gave them well-paid work. But it can’t employ everyone. Those who don’t have a job returned to digging — and the digging isn’t as good.
Just outside town, Mamadou Dicko, 45, emerges from a hole in the ground no wider than his shoulders. He hauls out flour bags filled with rocks, piling up his bounty. It could bring him $60 on a good day, but now, as often as not, leaves him with nothing.

“There was a lot of gold before, but since (the mine) came here, there’s nothing,” Dicko said, turning his empty palms to the sky. “We’re suffering.”

Like many diggers, Dicko applied for work at the mine, he says, but was rejected. “It’s too late for me. I want my kids to get a job at the mine. I don’t want them working in the holes — it’s too hard and too dangerous.”

Iamgold’s open pit is expected to operate until 2025. At that time, some of Dicko’s children will barely be teenagers. And with no gold left, Essakane is likely to follow in the footsteps of resource-dependent settlements around the world and become a ghost town.

Following sweeping reforms to mining regulations in 2003, Burkina opened its doors to international companies. The ensuing rush can only be described as a mining boom — and Canada has been at its centre.
Canadian companies opened the country’s first mine and, by the time Essakane opened in 2010, they owned half the gold mines countrywide. Canada is Burkina Faso’s largest source of foreign direct investment with assets soon expected to reach $2 billion.

The mining boom has been a windfall for the Burkinabé government. Taxes and royalties from mines went from $3.8 million in 2008 to $236 million (US) in 2011, the last year for which figures are available, according to the Extractive Industries Transparency Initiative, an international agreement that makes tax and royalty payments from mining companies public. Mining revenues now represent 24 per cent of Burkina’s budget, though the stability of this income was cast into doubt when street protests forced longtime president Blaise Compaoré from power in October.

Yet Burkina remains one of the poorest countries in the world. It ranks 183rd out of 187 countries on the UN’s Human Development Index, which measures health, education and standard of living. The World Bank estimates that nearly half the population is below the poverty line, living on less than $1.25 (US) per day. According to UNICEF, only 29 per cent of adults can read. All of these numbers are worse in the remote northern region that includes Essakane.
This makes it difficult for locals to benefit from the mining boom. While Iamgold reports that 93 per cent of its 2,300 employees are Burkinabé, less than half of those are from Essakane’s province, and only 16 per cent are from the nearby villages. That’s 368 jobs for more than 16,000 people.
For Iamgold, the challenge has been to take orpailleurs and turn them into safety-conscious industrial miners. Even basic jobs like driving a truck or cooking require an employee to understand French (in addition to the local Fulfulde language) and to be literate. In the dusty northern reaches of the country, this is a rare skill set; so the company brings in a dozen busloads of workers from the capital each week.
The gleaming white coaches roll up the highway and past Essakane village, a stark reminder to the unemployed locals of the money being earned by others with what used to be their gold.
When the mine opened, there was a round of hiring and training for people who lived nearby. A recent expansion brought another wave of construction contracts. But training on the fly isn’t countering the nationwide shortage in skilled labour — the bricklayers, plumbers, electricians and cement mixers needed to build and service the mines. The shortage will only get more severe as new mines open and prospecting expands.
This is the logic behind Canada and Iamgold’s development partnership: to train young people in trades, not only for mines but for the future spinoff economic activity.
“Burkina Faso is very poor, with a very low level of industrialization. A few years ago, you didn’t have specialists like mechanics or electricians,” said Iamgold West Africa vice-president Oumar Toguyeni. “That’s why (this program) is huge: because you’re providing skills to teenagers who otherwise would have ended up in the streets. They could become the next entrepreneurs and set up their own businesses.”
Two hundred kilometres from Essakane, laughter echoes from the technical college in Tougouri.
Teenagers wearing aprons, work gloves and welding goggles are watching as Abdulatif Kafando uses a disk grinder to finish a welded joint, sending sparks flying. This time last year, this government-run centre for dropouts was largely empty — offering a single class in motorcycle mechanics for 22 students — and 19-year-old Kafando was down a hole scraping for gold.
Like many here, Kafando left school early and joined the orpailleurs to help support his family. ARM, an international organization that pushes for increased regulation for artisanal miners, estimates that there are 700,000 people working in informal mines in Burkina Faso, producing 20 tonnes of gold per year — a figure comparable to the production of all the industrial mines in the country. Yves Bertrand, who oversees ARM’s programs in West Africa, says many of the orpailleurs are children who, because they never finish school, will be stuck in the industry for life.
For Kafando, a friend’s death in a mine collapse convinced him to get out.
“Yes, I made some money and that was good. But I was scared. It’s very dangerous. People die in those holes. When you’re down there, you realize that you’re all alone in the world.”
The Canadian government and Iamgold teamed with PLAN Canada, a large international development organization, to renovate 24 technical colleges, providing equipment and revamping the curriculum.
“The large-scale mines that are coming into Burkina Faso are in some ways discouraging artisanal mining, but (they’re) also taking jobs away from people, even if they are unsafe jobs,” said Nadine Grant, program director at PLAN Canada. “So it’s very important that new and different opportunities that are safe for young people become available and that’s part of the issue that our project is trying to address.”
Word of the classes spread quickly. Enrolment has shot up to 115 students in three programs: tailoring, motorcycle mechanics and welding. While some graduates may find a job in the mines, the idea is that in-demand skills could lead to work anywhere.
“When a mine sets up shop, they need plumbers,” said Grant. “There’s a shortage of plumbers in Burkina Faso and our training centres are producing qualified plumbers and these people can move around to where the need is.”
The college’s principal, Eloi Zidouemba, strides into each class, greeting the teachers and students. He repeatedly thanks PLAN and Iamgold, but what is more important, he says, is that the community supports the centre because parents see it as a way for their children to get jobs.
“The parents’ association manages the school cafeteria and feeds the students every day,” Zidouemba says. “Our community management committee is working on selling the products prepared by the students to pay for equipment repairs.”
“We’re breathing new life into these centres, which had been more or less forgotten,” said Grant. “It’s not only the locals who are taking notice, it’s the government itself, which is now looking at the (technical colleges) as an important tool for dealing with youth unemployment.
“If it goes well, the idea is to replicate the methodology across the country.”
On the ground, the youth training program is everything a good development project should be: it works with the local government to reduce youth unemployment. Yet these schools have sparked a big debate in Canada due to how they’re funded.
Iamgold and Plan designed the program in 2010 shortly after the federal government released a new international development strategy, which proposed, among other things, that some Canadian international aid dollars fund partnerships with mining companies.
Burkina Faso, Ghana and Peru were launched as pilot projects with a federal government contribution of $6.7 million (a tiny fraction of Canada’s approximately $4.5 billion foreign aid budget). In Burkina Faso, the Canadian government contributed $5.6 million to the five-year project, Iamgold contributed $1 million and Plan $900,000.

Much of the initial backlash was based on fears that the projects would do more to burnish the image of Canadian mining companies than they would to help the needy.

In 2013, the Canadian International Development Agency (CIDA) merged with the Department of Foreign Affairs to create the Department of Foreign Affairs, Trade and Development (DFATD). Critics decried this as another step toward subordinating aid to trade. The government’s message of “economic diplomacy” did little to assuage these fears.

“The government’s Advantage Canada strategy underscores the importance of government partnerships with the private sector aimed at enhancing the sector’s entrepreneurial advantage in a competitive world market,” read the 2010 initiative, called “Building the Canadian Advantage: A CSR Strategy for the International Extractive Sector.”
This strategy marks a “key shift” in Canada’s overseas aid priorities, according to a report on public-private development partnerships from the North-South Institute.
By law, Canadian overseas aid must help the poorest of the poor. The Official Development Assistance Accountability Act, passed by the Conservative government in 2008, enshrines an altruism principle — development dollars must contribute to poverty reduction and take into account the perspectives of the poor.
But the new strategy is more concerned with meeting the needs of the job market, write the report’s authors, Graeme Douglas and Shannon Kidornay.
“The danger in this policy shift is that it risks turning development projects into appendages of private sector investments,” they say.
In 2012, the OECD Development Assistance Committee cautioned Canada that “there should be no confusion between development objectives and the promotion of commercial interests.”
Yet, through three international development ministers — Julian Fantino, Bev Oda and now Christian Paradis — the government’s message has been consistent: what’s good for Canadian foreign investment can also be good for the economies of developing countries. It’s win-win.
“Canadian businesses are models of best practice,” said Paradis at the Canada Africa Business Summit in September. “They use innovative approaches, financial instruments and technologies to build local capacity and create benefits for communities. Their presence is positive for the countries in which they operate, and perhaps even more importantly, for those who live there.”
Stephen Brown, a political science professor at the University of Ottawa who specializes in overseas development, worries that the interests of locals and the interests of mining companies aren’t always parallel — and are often contradictory.
“We already have money to support Canadian business, why spend aid money on it as well?” he said. “It’s facile to call it win-win. But it is really? And who wins more?”
Brown points out that the Investment Cooperation Program, a previous federal government initiative that funded development partnerships with Canadian companies was shut down in 2012 due to financial irregularities. It was difficult to determine if the funds were really being used to pursue development objectives, he said, and these new partnerships suffer from the same ambiguity.
In Essakane Village, Iamgold is helping prepare people for life after the mine closes. One project teaches women to grow fruit and vegetables in a fenced garden. Instead of buying food grown further south, the garden allows the women to feed their families and sell the surplus harvest to the mine for profit.
But the project has met resistance. People here have never eaten tomatoes or eggplants before and have had to learn to cook with these unfamiliar ingredients. What’s more, the solar-powered irrigation system, which saves water, has to be monitored by an engineer from the mine.
In about 10 years, when Iamgold expects to close the mine, the market for these strange vegetables and the technical expertise that keeps them growing in the desert will be gone.
The garden, like many of the improvements Iamgold has brought to these people’s lives, is undeniably positive. There are concrete houses where there were mud huts, public wells instead of a dry riverbed and even concrete posts that will soon hold electrical wires.
But village council president Talatout Boukari is not satisfied with Iamgold’s efforts to help. The few jobs that exist are often temporary and, like the mine itself, fleeting.
Many of the new concrete houses are empty. Despite the mining boom, people are actually leaving town. They have given up on getting hired at the mine and the orpaillage isn’t good enough to keep them here, says Boukari.
No one has done a head count, but a quick survey turns up dozens of the new houses that are shuttered and locked. Many have “for rent” signs.
These empty houses, with their right angles and fresh paint, show the double-edged sword of mining development. While it has improved people’s living conditions, it has also taken away their ability to fend for themselves.
Or, as Boukari puts it: “You can build a house out of gold for me, but if I can’t feed my family, I’m not going to live in it.”

A new form of foreign aid

In 2011, the Conservative government announced an experiment in foreign aid. Instead of funding international development organizations directly, foreign aid dollars would support partnerships between charities and Canadian mining companies operating abroad. Three pilot projects — in Burkina Faso, Ghana and Peru — received $6.7 million in public funding.

Three years on, two of the projects have wrapped up and one continues to operate. The experiment has been deemed enough of a success that the government has earmarked up to $25 million per year to cooperation projects in the extractive sector in Africa.

Travers Fellowship

Star reporter Marco Chown Oved’s trip to Burkina Faso, Ghana and Peru was underwritten by the 2014 R. James Travers Foreign Corresponding Fellowship. The fellowship commemorates the career and ideals of Jim Travers, a former reporter, foreign correspondent, general manager for Southam News, editor of the Ottawa Citizen, executive managing editor of the Toronto Star and national columnist for the Star. The Travers Fellowship finances significant foreign reporting projects by Canadian journalists and is based on Travers’ belief that Canadians deserve first-hand, in-depth coverage of important stories outside our borders.


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