As Forex Crisis Deepens Poverty: Sierra Leone Not Benefitting from its Mineral Resources

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Amin Kef

By Amin Kef Sesay – 6th August 2019

We can surmise that whilst they mined and exported, African Minerals and London Mining combined took away some billions dollars’ worth of iron ore out of this country.

At the same time, we can surmise that Sierra Rutile, Sieromco and Vimetco have also cumulatively, since the 1970s, taken away billions of dollars’ worth of ore out of this country. We can say the same thing about Koidu Holdings which mines kimberlite diamonds in Koidu.

Of course, diamonds and gold have been intensively mined and exported out of this country since the 1950s. Yet what is very dismaying is that minus the rest of the country having never visibly benefited from the proceeds of these minerals (as all our development activities to date have been financed by either borrowing or aid), when you go to the parts of the country where these minerals were extracted from, all you see are signs of exploitation, environmental degradation and socioeconomic decadence – no electricity, no water, no good schools, no good health facilities, no good roads, no industries – nothing to show for decades of economic extraction by foreign owned mining companies.

It is not very hard to find out why. Africa’s political economy is deeply ingrained with its history of the exploitation and mismanagement of its mineral and natural resources.

With minor exceptions, Africa does not consume or add significant value to the minerals that it has in abundance.  Rather, we are net exporters of raw materials that fuel prosperity and development in other regions. Africa is largely seen as a price taker rather than a price-maker, with a marginal role in international trade.

The question that arises therefore is why the continent continues to struggle with limited economic transformation, low or no resource rents and scarce employment. Africa’s share of windfall earnings from mining has been miniscule, compared to what mining companies have realized.

Indeed, most African countries got very little from mining revenues due to generous tax holidays given to mining companies. The conclusion from this situation is that the current resource-for-development model is not working to bring about equity or boost development in minerals rich African countries like Sierra Leone.

As such, the African Mining Vision, jointly developed by the AU, ECA, ADB and other UN agencies was adopted by the African Union Heads of States in 2009. The Vision advocates for “transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”.

At the core of the African Mining Vision is the realization that Africa’s mineral resources can be better utilized to address the continents social and economic needs; the focus on environmental and social sustainability, the advantages of regional and international integration with attendance hard and soft infrastructure challenges, the emphasis of building of backward, forward and sideward linkages from the core mining sector and equitable principles of fairness in benefit sharing and use of resource revenues.

To achieve the high aspirations of this vision, Africa needs to get back to the fundamentals and rectify some of the initial problems that have continued to plague the management of the continent’s natural resources.

At the fore of this endeavor is the capacity of governments to get the best deals for their countries during contract negotiations. Capacity deficits have also been identified in critical areas of auditing, monitoring, regulation and improving resource exploitation regimes. In DRC, a government committee reviewed 61 mining deals over a decade up to 2006 and found none acceptable. It recommended renegotiating 39 and canceling 22.

International processes such as the Kimberly Process for diamonds and the Extractive Industries Transparency Initiatives (EITI) for other minerals, though with their own weaknesses, have contributed to improving transparency and accountability in contract negotiation processes from the production side whilst the Dodd-Frank Wall Street Reform and Consumer Protection Act and other similar acts have also created avenues for fair play within the international circles.

 

 

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