Isabelle Ramdoo, ECDPM, International Conference on Mining for Sustainable Economic Development in the Great Lake Region, Bujumbura, Burundi, 22 – 23 November 2012

1. Making Extractive Sectors work
for Development
Mining as an engine of growth
International Conference on Mining for Sustainable
Economic Development in the Great Lake Region
Bujumbura, Burundi
22 – 23 November 2012
Isabelle Ramdoo
European Centre for Development Policy Management (ECDPM)

2. 1. Setting the scene
African countries are known to host 30% of world’s reserves of
minerals and metals and over 10% of oil reserves;
•Mining in Africa, 2012 Estimates of oil and gas reserves, 2012
But reserves are largely underestimated: known sub-soil assets is
only one fifth that of OECD;
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3. • Recent discoveries, both in the continent and offshore, likely to
increase the visibility of African countries on the global market
• East African countries, including a number of Great Lakes
countries are likely to become producers of hydrocarbons e.g
DRC, Kenya, Uganda, Tanzania
• Put together, the region will be the biggest producer of oil (and
potentially gas) in Africa;
• Regarding other mining products: DRC is already the largest
producer of some strategic minerals such as cobalt, Rwanda is an
important producer of tantalum, Zambia is a key copper producer
etc.
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4. 2. But are minerals Africa’s best friend?
2.1 Overall, impressive growth rates over the past 2 decades
1. Robust growth rates despite crisis 2. Among the fastest growing eco.
Source: Africa Pulse, World Bank, Oct 2012
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5. 3. Attracted significant FDI, despite credit squeeze in 2009
ECDPM Source: E&Y (2011): It’s time for Africa Page 5

6. Poverty rate decreased by
1% on av. per annum from 57.6%
in 1995 to 50.9% in 2005, and
expected to reach 35.8%
in 2015 it growth rates
are maintained at the
current level
Africa’s number of MICs on
the rise
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7. 2.2 But numerous challenges remain
1. Overdependence on extractive sectors
Value added by economic activity as a % of GDP, 2010. Export concentration, 2010
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8. 2. Income inequality remain high despite high GNI per capita
GINI Index for Mineral rich countries GINI Index for oil rich countries
Mineral rich GNI per capita, $ 2010 Oil rich GNI per capita, $ 2010
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9. 3. Making resources work
3.1 Extractive sectors as an engine of structural transformation
Conventional wisdom: resource-rich countries have poor economic
performance
Good news: Causal relationship not verified; commodity super-cycle
there to stay for a while
Economic environment has evolved: more integrated and less
protective
But first, need to have a conducive environment
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10. We observe a delink between extraction and value addition
Share of diamond prod v/s share of cuts Share of gold production v/s share of jewelry fab
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11. How can Governments address this?
1. Commodity cycle here to stay. Good news for 2 reasons:
a. Continued investment
b. Financial resources from minerals to foster broader development
agenda
1. Consistent policies and adequate policy sequencing (coupling
industrial, fiscal and trade policies in a holistic and sector-specific
cluster approach: 2 channels
a. Domestic policies to foster industries policies
b. Take advantage of fracturing global value chains
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12. Economic reforms and structural transformation: Setting the
fundamentals
1.Addressing governance issues at all levels – governments, private
sector, home countries of multinationals, donors and banking system.
1. Addressing infrastructure and energy gaps
1.Reducing cost of doing business
2.Addressing crippling effects of skills, technology, research, innovation
gaps;
1.Ensuring resource efficiency for a balance between sustainable
consumption and production processes.
1.Good market intelligence to tap national, regional and international
markets
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13. (i) Channel 1: Moving up value chain: Promoting linkages
• Purpose in NOT to turn mining companies into manufacturing
companies, but rather to set the right enabling environment to
encourage entrepreneurs in developing manufacturing clusters.
• Requires to build competitive advantage by setting fundamentals
right
• Maximising use local procurement and local content (side
linkages)
• Promoting value addition within the extractive sector – involves
activities in the mining cluster (downstream linkages such as
smelting and refining) and activities in the manufacturing cluster
(jewelry industry, metal fabrication)
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14. Stages of Value Addition: Where value added is created
Mining cluster Manufacturing cluster
High labour and capital Low labour, Low labour, Med to high
intensity high capital high capital labour and
ECDPM intensity intensity capital intensity Page 14

15. Different types of linkages
• Backward (or upstream) linkages
• Forward (or downstream) linkages
• Horizontal (or sidestream linkages), important to link extractive
sectors with other productive sectors
Important also to bear in mind the nature of different extractive
sectors – sometimes some forms of linkages make more sense
than others
But benefits will only take place where commercial opportunities
exist = CHANNEL 2
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16. (ii) Channel 2: Linking domestic industries to global value chains
• Extractive sector characterised mostly by large multinationals that
are increasingly engaged in diversified activities
• Increasingly outsource parts of their value chains towards more
competitive places
• Renders industrial policy complex but at the same time presents
opportunities for resource-rich countries to develop win-win
partnerships with such companies to conduct industrial
transformation locally
• Quantum leap in productivity is essential
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17. Thank you
Contact: Isabelle Ramdoo
ir@ecdpm.org
Website: www.ecdpm.org
www.slideshare.net/ecdpm
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