Let's make waves: Indaba-dabble-DO!
Published by MAC on 2018-03-15Source: UK DIT
London Calling says a UK department is "all at sea"
"Why build a railway and not benefit off the back of that?"
The question was posed by Craig Sillars of the UK Department of International Trade (DTI) before those who attended the South African Mining Indaba in February this year .
One obvious response: "Don't lay down such a massive serpent ofwinding metal if it's going to uproot people, plough through their settlements, and cost them their traditional livelihoods".
But, let's probe this conundrum a little further.
The Indaba is a yearly event attracting many investors, companies, and government representatives from across the world. This time around it proudly featured some highly controversial key speakers - among them Vedanta chair, Anil Agarwal; former Vedanta/Rio Tinto CEO, Tom Albanese; and the legendary Robert Friedland (all of whose past shabby records have been dilgently traced on this website).
For its part, the UK Department of International Trade (DIT) used the event to launch a "master plan" linking African mining - which accounts for over half British investment in the continent - to a major increase in infrastructure construction.
It's something aimed at fulfilling virtually every material objective known to modern humankind, from enhancing agriculture and building fresh homes, to increased "digitilisation" via a so-called "Extractives Hub".
Who could possibly object to that?
The Nick of time
Dilgent researcher Nick Hildyard of Britain's The Corner House - for one.
In June 2016, Manchester University published his latest book which takes strident issue with such concepts, now being proposed and deployed on a global scale.
Entitled Licenced Larceny, the work took a well-considered measure of the toll in land appropriation, social deprivation, and economic impoverishment, threatened by this type of hubristic scheming. And it's highly recommended to our readers.
Meanwhile, we'd like to cite a comparable example, drawing on MAC's own archives. And which ended in dismal failure for the whiz kids peddling it.
An embarassing lesson
Four years ago, MAC published an exclusive report on a Brazilian project, encompassing road, rail and port linkages between a prospective iron ore mine in Bahia state and the country's eastern coast.
This venture was showcased among 150 prospective partners at a fair, organised by the British Ministry of Trade (forerunner of the DIT) in 2012. The target company - ENRC - was already under investigation for criminal activities in Africa, struggling to stay on top of a mountain of growing debt, and vigorously opposed by community groups in Brazil and mining campaigners elsewhere.
Shortly afterwards, ENRC was effectively forced off the London Stock Exchange back to its home state of Kazakhstan - and the Ministry of Trade was (metaphorically) left with egg on its face, shorn of any viable project (See: Pedra de Ferro - the iron stone).
Of course, it's somewhat risky to rely on such past experiences to adequately prefigure future prospects.
Nonetheless, remember a few bons mots by the fiery Irish dramatist, George Bernard Shaw, and his predecessor German philosopher Georg Wilhelm Hegel, both of a single mind in warning that history teaches us "we never learn from history".
The apparatchiks at the UK DIT don't appear to have digested the sobering lessons of its recent past.
More than mining—here’s how UK infrastructure master planning can help improve Ghana’s cellular service
Department for International Trade (UK)
6 March 2018
Surveying the Pit
A Zambian surveyor sees an open-pit copper mine, and a world of possibility. Ah yes, possibility.
Against a backdrop of 2018’s Investing in African Mining Indaba in Cape Town, a roundtable of UK experts proposed holistic solutions around Sub-Saharan infrastructure projects that can provide wide-reaching, long-term economic opportunities for African communities.
Their idea is impactful: Say you’re interested in building railways to transport minerals from mines to ports. In a standard arrangement, you’d contract a company to build railways, move your minerals cheaply, and enjoy revenue on your exports. Done. Easy.
But what happens, after 10 to 30 years of operation, when your mines finish their production cycles and close? And how do you ensure your efforts will drive local economies and provide ongoing venture?
As Nigel Casey, UK High Commissioner to South Africa, explained in his roundtable remarks: “A mining project is much more than just mining.” The way forward, the roundtable seemed to agree, is a partnership model driven by UK infrastructure expertise, African community collaboration, and
multi-sector financing.
Mastering The Master Plan
In Ghana, for example, UK companies were recently enlisted to develop such a railway. But what began as a railway has become a far-reaching economic opportunity for the country. The railway will require installation of telecom and power transmission. The addition of telecom gives locals
greater connectivity and draws in small businesses. The addition of power allows for refrigeration—so you can build agricultural facilities for livestock and produce — and in-country beneficiation (in Ghana’s case: an aluminum refinery). That refinery will require supplemental power, driving demand for a clean coal power plant. And each emerging business will require skilled labor, driving demand for a local college.
Suddenly, this expression of interest for a railway has engendered an entire economic corridor that will long outlast any single mining project.
In Ghana, the UK Department for International Trade (DIT) is acting as a facilitator—convening UK financiers, professional services, and construction companies as partners for every component where beneficial.
“A mine itself is a critical enabler of infrastructure, but if you just think about building a railway, you’re missing quite an opportunity to develop other pieces of the economy,” said Craig Sillars, DIT’s featured panelist and an African infrastructure specialist.
Sillars spoke further about Angola, where a British company is planning to invest up to £800 million to resurrect an iron ore mine and develop a smelter. The project requires extending existing railways, expanding a port, and about 600 megawatts of power, which will come in part from
reconstituting about 25,000 hectares of agricultural land to create biomass.
These peripheral ventures can and often do emerge organically, but planning them beforehand allows for smart allocation of resources and
collaborative investment opportunities.
“A country I work with has been very successful at exporting a particular commodity,” Sillars continued. “However, with no resource and infrastructure master plan, each mine has raised their own capital, built their own railway, built their own port. The government has to wait for the capital payback of all of that infrastructure, and they’ve probably lost one, two, three billion dollars’ worth of financing and an opportunity to enable really vibrant regional development.”
In contrast, a UK company has just finished a 30-year plan for Rwanda’s ongoing expansion. The plan, in consideration of Rwanda’s projected
population boom, comprehensively identifies opportunities for economic hubs, infrastructure, and housing, among other things, according to
Sillars.
Financing Partnerships, Not Just Projects
The crux of any such large-scale infrastructure plan is competitive financing, and this is where London is particularly inviting. Though over half of UK investment in Africa is held in mining and quarrying, financial services generate the largest amount of earnings (£1.7 billion). UK FDI in Africa grew from £19.2 billion to £39.5 billion between 2005 and 2014, representing significant opportunities for African countries and companies looking to do business.
The roundtable presented DIT’s Africa Infrastructure Board (AIB), which will drive partnership financing by working with UK companies, African project developers, UK Export Finance (the UK’s export credit agency), and UK financial institutions to present funding models for consideration for key projects. The idea of the AIB is, in part, that for something like Ghana’s railway, investors can also identify and fund related opportunities that the railway enables (e.g., agriculture, education).
“Why build a railway and not benefit off the back of that?” Sillars said.
Educating African Leaders At Home And In The UK
The UK is bolstering their African collaborators as well. The Extractives Hub, for example, is a UK-sponsored digital resource center whose website
freely provides extractive data and information along with tailored technical consulting to governments in Africa.
“There’s a sea of information on extractives, and it’s very difficult to steer through… The Hub provides digestible sector research. It’s a place for industry, civil society, policy makers, and businesses to find information on things like beneficiation, regulation, existing contracts, revenues, commodity prices, and engineering standards.
The Hub is a one stop shop,” explained Gokce Mete, a Research Fellow for the Hub in attendance at Mining Indaba.
The Hub was established by a consortia of UK institutions, including the Centre for Energy, Petroleum and Mineral Law and Policy at the University
of Dundee, which has long been a premier institution for educating extractive sector lawyers and leaders from Africa.
Looking Beyond London
Finally, Maurice Kenton, a partner with UK firm Clyde & Co. in attendance at Mining Indaba, reaffirmed English law’s role as a backbone for African
infrastructure projects, especially as most contracts are generally governed by London, regardless of whether UK companies are involved elsewhere.
Clyde and Co. has secondary offices across Africa, a shift reflective of their dedication to the region and Britain’s general desire to establish expansive, lasting partnerships in Africa.
The UK’s impending departure from EU exchange agreements will streamline Britain’s relationship-building processes in Africa, making these efforts easier and more meaningful.
This article was produced on behalf of the UK Department of International Trade