50-65% of mining companies’ revenues is accounted for by capital and operating expenditures.
Mining can play a vital role on the sustainable development of some of the world’s poorest countries, yet many countries that are most economically dependent on mining would benefit from improved governance, according to a new report published by the International Council of Mining and Minerals (ICMM).
The report ranks 183 countries according to the relative economic importance of mining. The new data shows the potential contribution mining can play in the sustainable development of many of the world’s poorest countries and also highlights the importance of governance if the economic benefits of mining are to result in broader-based economic and social progress.
The report presents a revised version of ICMM’s Mining Contribution Index (MCI) to rank countries. This index combines data on mining’s contribution to countries’ gross domestic product (GDP), export earnings and mineral rents that are paid to host governments. It indicates the importance of mining in the economic life of a country and the potential for this to translate into economic and social progress – although it does not tell whether this potential has been realised.
The report also looks at other factors that heavily influence whether this potential is realised. These include contributions to government revenues, employment and the role that governance plays in achieving long-term sustainable development. It also shows the importance of the work that leading international mining companies are doing through organisations like ICMM and Extractive Industries Transparency Initiative (EITI) to improve transparent reporting and governance.
Many countries’ dependence on mining has been increasing over the last two decades in spite of the recent decline in metal and mineral prices. The report also looks at how companies have been affected in terms of reductions in market capitalisation or exploration spend, and how this in turn might affect countries. It concludes that mining needs to be thought about more systematically as a crucial contributor to host countries’ economic and social development.
The report also includes a guest contribution from the UN Development Programme’s (UNDP) Casper Sonesson on the opportunity to re-imagine mining’s role in helping to achieve the UN’s Sustainable Development Goals.
“Mining’s role in lifting people out of poverty and furthering the sustainable development of host countries has often been overlooked. This report flags a number of countries where mining can play a major role in helping host nations meet their developmental aspirations,” says Aidan Davy, ICMM’s chief operating officer.
“Mining can play important roles in contributing to sustainable development. It makes critical economic contributions through the government revenues it generates and the linkages it creates with local economies in many countries, as shown in this report,” says Casper Sonesson, policy adviser at the UN Development Programme.
“In addition, there is great scope in other areas ranging from leveraging mining related infrastructure and water management for local development to minimising environmental impacts. Going forward, new partnerships and good governance will be essential to fully realise mining’s role in tackling the UN’s Sustainable Development Goals,” adds Sonesson.
In Africa, the mining industry accounts for 10% of the total value of exports.
“In Africa, the mining industry accounts for 10% of the total value of exports, second only to petroleum, and mining and associated industries play a crucial role in several African countries’ economies, especially in foreign direct investment, public revenue and job creation,” says Sheila Khama, director of the Africa Natural Resources Centre at the African Development Bank (AfDB).
“In recognition of mining’s contribution to regional economies and achieving the UN’s Sustainable development Goals, the African Development Bank works with regional countries to promote good governance of mineral resources through the Extractive Industries Transparency Initiative (EITI) among others.”
Patrick Heller, director of legal and economic programs for the Natural Resource Governance Institute (NRGI), says governance is a key determinant of the long-term benefits that citizens derive from their countries’ mineral endowments, and of the nature of relationships between citizens and mining companies.
“Too often the relationship between governance and mining has been overlooked in assessments of the overall impact of the sector. We are encouraged that ICMM is working to direct industry and government attention to this important link,” says Heller.
Paul Collier, Professor of Economics and Public Policy at the Blavatnik School of Government and a Professorial Fellow of St Antony’s College, Oxford, says, while there is potential for a “resource curse” to affect mineral-rich countries, ICMM’s report reinforces that mining can also be a driver of development, especially in low and middle income countries.
“As custodians of mineral assets, mining companies can help harness their potential for the benefit of nations and host communities. With good governance and responsible mining practices, mineral resources can be a major driver of development,” says Collier.
The report shows that 15-20% of revenues from a typical mine go to host governments as taxes and other payments, 10-20% is in direct employment, 15-20% are profits for shareholders (which may include governments), and 50-65% is accounted for by capital and operating expenditures.
Equipment Africa says: The 50-65% revenues for mines, which is accounted for by capital and operating expenditures, represents an often untapped opportunity to increase indirect employment. Governments are sometimes overly fixated on using the products of mining to develop domestic manufacturing, but there is a lot more opportunity in developing a home-grown supply chain for the mining industry.