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Economic Brief -  Fairer Mining Concessions in Africa: How can this be Achieved?
24/05/2012 08:45
Economic Brief - Fairer Mining Concessions in Africa: How can this be Achieved?
Working Paper 147 - Gold Mining in Africa-Maximizing Economic Returns for Countries
03/04/2012 10:47
Working Paper 147 - Gold Mining in Africa-Maximizing Economic Returns for Countries
How to ensure that mineral resource wealth contributes to sustainable economic development has been a perennial topic concerning many African countries. It is an especially pressing issue in countries that are rich in resources, but perform poorly on a host of development indicators. Too many countries export resources, often through multinational firms, while the citizens enjoy little of the resource endowment. This occurs mainly due to unfair concession agreements and/or the mismanagement of the resources revenues.   This paper focuses on the gold mining sector, and how to ensure that the sector better contributes to development. Development Finance Institutions (DFIs), including the African Development Bank (AfDB), have important roles to play in reducing the 'resource curse' phenomenon in Africa. Specifically, as multilateral institutions that engage governments as development partners and serve as financiers to some private sector projects, the AfDB and other DFIs are in a unique position to ensure both that concession agreements in the mining sector are fair to governments and that the revenues received from those concessions are allocated to proper expenditures. Our paper analyses the gold mining sector in Africa with an emphasis on policy reforms that enable regional countries to better benefit from the sector. We provide some background on why the sector’s contribution to development has been limited. A key factor is the prevalence of unfair concession agreements, which severely limit the share of resource rent that remains within countries. We pay particular attention to royalty rates, which bring in one of the largest shares of government revenues from the taxation of the gold mining sector in African countries. We also perform some analysis of data from gold mines to examine whether the current royalties increase the cost of production to the extent of affecting mine profitability or decreasing the likelihood of investment in the sector in Africa. Our analysis shows that royalties, as a share of production cost, are small in Africa. Other factors such as mine grade have a much more significant effect on cost and profitability. In fact, the level of royalty rates that would significantly reduce profit per ounce of gold produced is far above the prevailing rates in most gold-producing African countries. The result of our analysis actually suggests that there is a case for increasing royalties, above the current modal rate of 3%, to enable countries to gain a higher share of the mineral revenues.   Ensuring that governments receive a larger share of the mineral rent is a necessary but not sufficient condition for the gold mining sector to contribute positively to development in the region. Without good governance, the resource revenues are unlikely to be spent appropriately even if a higher share of the rent somehow manages to accrue to governments. This paper therefore discusses a selected number of policy reforms to ensure that countries not only receive a fair share of the resource rents generated from the gold mining sector through greater transparency, but to increase the likelihood that they would be properly allocated to development-enhancing expenditures.Read more
Working Paper 128 - China’s Manufacturing and Industrialization in Africa
23/06/2011 00:00
Working Paper 128 - China’s Manufacturing and Industrialization in Africa
The objective of this paper is to examine the state of industrialization in Africa and to discuss the interactions between China’s growth and African development. African nations are linked to China through that country’s importance in determining the prices of raw materials, China’s demand for Africa’s raw materials exports, substantial investments in Africa, and exports of low-cost investment and consumer goods. China and other Asian economies have achieved spectacular growth rates through opening up markets to facilitate sensible price signals, and operating trade and exchange rate policies that favour exports over imports in at least the initial stages. They have sought sound incentives framework for investment, and developing large-scale physical infrastructure. These policies have fostered dynamic gains from increased production and export of manufactures. In Africa, by contrast, the acceleration of growth from 2001 until the global recession was based on higher primary commodity prices, while diversification into manufactures production has been limited. Why has Africa failed to emulate the rapid growth of Asian economies, supported by spectacular increases in manufactured exports?  One problem is that Africa’s economic policies, governance, and institutions have been far weaker than in many of the successful Asian economies.  Moreover, Africa’s abundance of natural resources has starved manufacturing sectors of resources, while resource-rich economies (not only in Africa) have generally failed to achieve rapid growth, in part because of weak linkages between the natural resource sector and abundant unskilled labour, and in part because government control of natural resources has encouraged rent-seeking activities rather than productive investment.  Africa’s limited diversification poses grave threats to development, owing to the volatility of primary commodity prices and the failure to reap the potential gains from economies of scale and productivity advances available in manufactures. Africa needs to strengthen ‘the policy umbrella’ through more stable macroeconomic policies, more dependable provision of government services, and expanded infrastructure investments, including support for regional trade (e.g. improved roads and border post management).  Regional and multilateral negotiations should address ‘tariff escalation’, whereby imports of processed goods incur higher tariffs than imports of primary commodities, and should improve the value of tariff preferences by eliminating onerous and unworkable rules of origin.  Dedicated geographic zones with less restrictive rules facing investment could support manufactured exports, although the extent to which such zones will further African development is uncertain. Finally, linkages need to be established between tariff and trade policies on the one side, and industrial policies on the other.  In some cases (South Africa is the outstanding example), a combination of earlier unilateral liberalization and bilateral, regional and multilateral agreements have limited the policy space to nurture industrial development.Read more
Oil and Gas in Africa
02/02/2010 00:00
Oil and Gas in Africa
Africa - Governance of the Extractive Industries in Africa: Survey of donor-funded assistance
09/02/2009 10:47
Africa - Governance of the Extractive Industries in Africa: Survey of donor-funded assistance
The objective of the survey is to establish a baseline for categorization of governance related EI support, and to provide an overview of this type of support for African countries during the period 2004-2006, with the aim of helping improve the basis for future decisions regarding such support. The survey is managed by the Norwegian Oil for Development Initiative in coordination with the African Development Bank and the World Bank.Read more
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