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Economic CommissionforAfrica
Southern Africa Office Southern African
DevelopmentCommunity
ECA-SA/TPUB!2009!3
Impact of the Global Financial Crisis and Recession on the SADC Mining Sector
An Issues Paper
CONTENTS
P AGE
Abbreviations and Acronyms 1
Summary 2
I. Introduction 5
II. TheMining Sector in SADC States 7
III. TheGlobal Financial and Economic Crisis 10
IV. Impact onSADCCou ntries 13
A. Commodity Prices 13
B. MineOperation s 14
C. Prof itability and Emp loyment 15
D. Growth Rates 16
E. Explorat ion and Prospecting 17
F. Tax Revenues 17
G. ExchangeRates 17
H. Foreign Direct Investment 18
V. Policy Response 20
A. Monetary and Fiscal Policie s 20
B. Mining-Specific Policies 21
C. Economic Diversification 23
VI. Recomm endations 25
VII. Conclusions 27
References 28
ABBREVIATIONS AND ACRONYMS
AfDS AIG BCL BHP COO CDS
CIA ECA FOI GOP GFMS IFls MDGs NDP aDA OECD SADC
African Development Bank American International Group BamangwatoConcessionsLimited Broken HillProprietary
CollateralizedDebt Obligation Credit DefaultSwap
CentralIntelligenceAgency Economic Commission for Africa Foreign Direct Investment
Gross DomesticProduct GFMS Metals Consulting
Internationalfinancialinstitutions Millennium Development Goals National Development Plan otucar Development Assistance
Organizationfor Economic Cooperation and Development Southern African DevelopmentCommunity
2.
SUMMARY
Africa n ministers responsib le for mineral resources developmen t have expressed concern about the prevale nce of poverty on the continent, despite the abundance of mineral wealth in their respective countries.With the assista nce of the Eco nomic Commiss ion for Africa (ECA),they have formulated the African Mining Vision2050,which aims to create conditions for transparent,equitable and optimal exploitation of mineral resour ces on the continent, Southern Africa n Developmen t Commu nity (SADC) ministers in charge of mineral resources are involved inthisinitiative,
The minerals sector plays a crit ical role in the growth and development of the economies of most SADC Member States, In fact, the minerals sector accounts for 60 per cent of the subregion's foreign exchanqe earnings . and contributes an average of 10 per cent to the subregional GDP Historically. the minerals sector has been the major contributorto infrastructure development in the subregion.
While dependency on mining is ongoing in most SADCcountries, circ umstances have sign ifica ntly changed since July 2008. The global financi al downturn and the subsequent economic crisis have resulted in reduced demand for the SUbregion's mineral output. This decline in demand for most of the commodities has also translated into low prices for minera l commod ities produced in the subregion, This has led to a contraction in linance and the suspension or cancellation of several mineral development projects, due to difficulties in raising capita l.
Mines that are stilloperational arelacing serious liquidity problems, The contraction in global demand for metals and minerals has also dramatically reduced revenues and affected the capacity of Governments to meet their economic and socia l obligations. Furthermore. Closure of mines or their placement on care and maintenance has led to rapi dly rising redundancies in the mineral industry and heightened unempl oyment. Overall, about 346,681 jobs have been lost in the subregion with many mines placed under care and maintenance Major job losses have been experienced in the Democratic Republic of the Congo,South Africa and Zambia
There are other impact s also. Due to the decline in mine ral prices, the foreign exchange earnings 01 most SADC countries have dropped considerab ly, leading to deterioration in exchange rates, Low mineralprices have alsoaffec ted theprofitability ofmining companies,
Currently, the subregion's mining industr y is a high-cost producer wtlichhas notbeenoverlycostconscious,riding,asithas,on the back ofthecommodityboom,But. input costshaverisensharplyin the recent past. With threats of closure, the need for restructuring the indu str y in line with current realities has arisen. Governments as wellas loc al entrepreneurs and other loc al institutional investors are being called on to increase their participation in the industry.
Economic cwerstncanon is another strategy bemq proposed with increased value adortion to stave off some of the effects a! the
economcrecessroo.
Inview ofthe above-mentioned issues, this paper recommends anumberof actions thatshouldbeundertaken to addressthe negative imp act of the current globa l financial crisis and recession on the SAOC mining sector, The recommended actions, as summarized below . were reviewed at a meeting of experts, senior SAOC Governmentofficialsand the privatesector. inMay2009.
a. Central banks should implementprudent monetary policy to avoid ,heco/lapse of rheir financialsystems;
b. Retrenchmentshould be a lasrresort,preferably in the form of vo/untary separa,ion andIn a context 0/ dialogue and goodwill between Government. labour unions and employers: flexible wage strucfuresshould alsobeexploredin view ofa Iong-'erm soJulion:
Govemments should adopfa flexible tax system that relieves mining companies 0/ heavy tax burdens during periods of financial stress:
d. Increasedlocal and State participation in theminingindustryis needed, Government shares could be increased thro ug h deferredroyalty payments,and citizens should beempoweredto participate in theindustry;
e. Need lor economic diverslfica,ion and development of the manufac'uring sector: diversillcation could be intra-sectoral, aimed at producing additional minerals,and inter-sectoral,
t.e.
into other sectors of the economy, suchas agricul'ureand the manufacture0/value-added mineralproducts:
3.
f. Transactioncostscan be reduced throughareview of regulatory frameworksand otherobstacles to business start-ups soasto enhance local content In the mining industry: Infrastructure support shouldalsobereviewed, e.g. witha view to upgrading generation and transmission cepacities:
g, Governments should eICplore ways of providing incentives, especially to young eICplorers, to enable the continuation of explorationactivitiesso as10ensure that~countries are ina position tobenefit from the neIC; upswing in mineralcommodity prices.
, I. INTRODUCTION
1. African ministers responsible for
rranerar-resource
development met in Addis Ababa. Ethiopia, in October 2008. The meeting brought together mining ministers and experts in order to discuss key issues relatirlQ to mrrerel resources,and to proposea strategicvisionand action plan lor Africa. with a view to promot ing economic growth. reducing poverty and achieving sustainabledevelopment.The meetingnoted the sharp contrast in Africa's abundant mineral we alt h and the high prevalence of poverty on the continent.A vision was needed to address this situation. Consequently. the Economic Commission for Africa (EGA) set about formulating the African Mining Vision 2050,The Vision aims to create conditions for transparent, equitable and optimal exploitation of mineral resources on the continent. and to provide a commonAfricanvoice on how to use thecontinent's mineral resources for growth and development building onthe experiencethatcommodity booms provide awindow of opportunity2. The Visiondocumentis fairlydetailed.It ldentites thereasons why the majorityofAfrican States have notbeen ableto takeadvantageof their resourceendowment opportunitiesto createcritical linkages to underpin economic diversification . growth and development. One reason is the failureto captureand channelresourcerents into reinvestment. thefocus being rather on snort-term consumption.and otten clandestine foreign exchenqecotncws. This stems from weak governance.dueparficularly to the lack of effectiveinstitutions African Stateswith weakgovernance generally fail to impose resource tax regimes fhat ensure an equitable share of mineralrents.in particular windfall taxes.due eitherto lack of State capacity or subversionof that capacity to produce overly investor- friendlyoutcomes(African Union, 20(9),Thesecond reason concernsthe collateraleffect of aresource boom,Whichnegativelyaffectsothersectors ofthe economy,such as agriculture The tendency has been to overvalue currencies, which impacts negativel y on agricultural exports (Dutch disease), compounded by failure to invest in. maintain and support infrastructurein other economic sectors
3. Thethird reason is the failureto createorinduce downstreamvalue addition for crude resources and to impo se minimum levels of tereucian co of extractedminerals, This hasledtoindirectjobexportation, as the finalprocessing and manufacturing offinished goods must take placeetsewnsre. The fourthreason concerns upstream valueadditiondue to the lack of local business capacities to take advantage of fhe opportunities created by the resource extraction sector in terms of supplyingvariousservices. Instead.resourceextractioncompaniesresort to centralizedpurchasing practices whichlead to further capitaloutflows.
6.
4. The recentcommodityprice boom,whict1 lastedlrom2004to 2008, provided the impetus for the Vision. However, formulation 01the Vision was completedata time when commodity prices had started collapsing, Nonetheless. the Vision providesa framework withinwhich mineral-rich Alrican countries can operate.While it acknowledges that most African countries have failed to integrate their mineral sectors into their local economies since obtain i ng ind epen den ce , it is nonet hel e ss optimistic and lorwardlo oking. Thispaper argues that most of Africa's problems, and in particularthose 01 the SouthernAfrican Development Community (SADC) countries. reside in weak governance. Individual Member States are unable to take on corporations, especially in an environment where there is very little or no coordination of policies across countries in the subregion. This paper therefore supports the conceptof a common voice withregard to the use 01 mineral resources and the harmonizat ion of mining policies to tester growth and development inthesubregion.
5. Itis organizedas follows:Section IIcctares theimportance of the mineral sector in the SADCregion. Indeed, themineral sector playsa critical role in the economies 01 SADCMemberStates.contributing to foreign exchangeearnings,Government revenues andemployment. The global linancial and economic crisis resulted in a downturn in mineral commodity prices following a five-year price bubble, Section III gives reasons lortheburstingofthe pricebubbleandthe enects ofthe financial and economiccrisisonthe economies01the region.SectionIV dealswith theimpact ofthe crisison the mining sector of the SADCcountries,while SectionVprovides possiblepolicy responses and recommendationsto deal with the impacts of the crtsts. Section VI concludes the paper,
II. THE MINING SECTOR IN SADC STATES
6. The mining sector plays a critical role in the growth and development of theeconomies of SADC MemberStates.Inaggregate, the mining sector accountsfor 60 per cent of the subregion's foreign exchangeearnings,and contributes an averageot 10 per cent to the subregional GOP Italso directlyemploysabout 5 per cent of thetotal wage earners, Historically. the mining sector has been the major contributor to intrastructure development in the subregion. Zambia, torexample. has a copperbeltcomplexof towns and cities.a result of the development ot its mining sector, since the late 1920s.
Botswana. on the other hand, was severely underdeveloped and dependent onagriculture,until mineral exploitationtook
ott.
7. Over the past 40 years, Botswana hashad one of the fastest- growing economiesin Africa.Fromone of the poorest countriesinthe world atindependence, Botswana has managedto transform itselfinto upper middle-income country through sound macroeconomic policies, good governance and prudent developmentof its diamondresources.
Growth orthe country's economy is expected to remain buoyant at over 5 percent in 2008·2009 (AfDS/OECD,2008),As at 2008,mining contributed over onethird ot GOP and about 70·80 per cent ot export earnings (CIA World Factbock, 2008). The exchange rate has been deteriorating,albeitslowly,from an average P4 9499to US$l in 2003 to P6.203S in 2007 (CIA World Factbook. 2008). Botswana's main exports are diamonds, copper and nickel.The collapseof the prices orthose commodities atthe internationallevel has negativelyaffected theeconomy It shouldbe noted that the diamond minesin Botswana are owned by both the Government and De Beers: in the case of Debswana it is a SO/50 partnership. The Government also has a substantial stake in Bamangwato Concess ions ltd. (BCL), which operatesthe SelebiPikwecopper-nickelmine,
8. South A!ricahas abundant mineral resources,and unlikeother African countries, the State owns a substantialproportionofinvestment inmining.Thecountry possessesnearly 90 per cent ofglobalplatinum deposits, 80 per cent of manganese, 73 percent of chrome, 45 per cent of vanadium and 41 per cent of gold, South Africa is currently theleading producer Of platinumworldwide, inaddition to producing enormous quantities ot gold, diamonds,terroctuome and coal for the world market, It supplies 80 per cent o! the world's platinum, is the world's fourth-largest producer of diamonds.and the secono-raroest producer of gold anerChina In 2007. London-based GFMS Metals Consulting(GFMS) estimated that Chinaproduced 276metrictons
of gold, while South Africa produced 254 metric tons (Chamber of Mines of South Alrica,2007}. Although mining contributed about 14 per cent to GOP in the 1970s and the 1980s, that rate dropped significantly to 5,8 per cent in 2007.Nonetheless,themining industry is still crucial to the South African economy, Precious metals contribute close to 65 per cent of mineral export earnings and 21 % of thecountry'Stotal exports The mining industry is also the largest employer, with close to 450,000 direct employees and another 400,000 employed in companiesprovidingservices to the industry.
9 One of the most important aspects ofSouthAfrican mining is the fact that the country has a high level 01 mining expert ise as well as comprehensive research and development facilities.The country has world-standard secondary processing facilities for Ierroallcys.
stainless steel and alum in ium , in addition to gold, tita nium and platinum. It is also a world leader in new technologies, such as the ground-breaking process that converts low-grade superfine iron ore into high-quality iron inputs, This kind of beneficiation of raw materials before export has the potential to be a major grow th area.
It is also noteworthy that two 01 the biggest mining companies, BHP Billiton and Anglo American Pic ,partly or wholly originat e in South Africa , Anglo American owns major subsidiaries, such as Anglo Platinum, Anglo Coal, Impala Platinum and Kumba Iron Ore. De Beers, a diamond miner, is also a South African company, though partly owned by Anglo American. South Africa has therefore benefited from the part icipation of companies with strong roots in the economy, and this has been crucial to the development of the mining sector
10. The South African economy experienced robust growt h between 2004 and 2008.During that period, South Africa reaped the benefits of macroeconomic stability and the global commodities price boom, The economy, however, began to slow down in the second half of 2008 due to the impact of the global financial crisis on commodity prices and demand (CIAWorld Factbook, April2009).
11. Angola's high growth rateof 13,2per cent in 2008 was driven by the oil sector,which enjoyed highinternational prices at the time, and this was low compared with the avera ge rate of 15% posted annually between 2004 and 2007, Oil product ion and supporting activit ies have contributed 85 per cent to GDP Angol a also produces diamonds, iron ore, phosphat es, bauxite , uranium and gold, However. crude oil and diamonds are the most import ant exportsfrom themining sector
12, Lesotho and Swaziland are not as dependent on mining as other SAOG Member States. Swaziland has mining operations, but they have declined in recent years with only coal and quarry stone mines remaining active (GIA World Factbook, 2009). Lesotho has opened up two mines. Mozambique, on the other hand, has enjoyed a relatively high GOP growth rate of over 7 per cent. The opening of the Mozal aluminium smelter, the coontrvs largest foreign investment project. has significantly increased the country's export earnings. In contrast to Mozambi que, Namibia's economy is heavily dependent on mineral extraction and processing for export. While mining accounts for 8 per cent of GOP, it provides more than 50% of toretqn exchange earnings Rich alluvial diamond deposits make Namibia a primary source of gem diamonds. Namibia is also the world 's fifth-largest producer of uranium, Other export minerals produced in Namibia include copper, gold, zinc. lead, silver and tungsten.
13 Tanzania's economy is dominated by agricultu re , which accounts for more than 40 per cent of GOP and 85 per cent of exports, and employs 80 per cent of the workforce, There has, however, been an increase in the output of mrne-a!s. led by gold.
Since the 2000s, Tanzania has become one of the leading investment destinations in non-fuel minerals in Southern Africa, altracting a toter ofover US$2 billion in mining investment (UNCTAD World Investment Report 2008j, This hasled to the opening of five gold minesinthe last decade, and an increase in gold production from less than 100,000 ounces in 1999 to more than 1 4 mil lion ounces in 2008. In 2000. mining contributed less than 1.5 per cent to GOP; this rapidlygrew to 3,5 per cent in 2007, Over the three-year period from 2006 to 2008, GOP growth averaged 69 per cent (7.1 per cent in 2008). making Tanzania one 01 the fastest growingeconomies in the SAOG region, In addition to gold,the country produces diamondsand non Zimbabwe's economyjn contrast, has not performedwell Its major mining exports are gold and terroencys (Wikipedia, 15 April 2009), However, gold production has declined from 27,114 kilograms in 1998 to 7,017 kilograms in 2008 (www.earthtimeS.o rg,27 February 2(08).
14, Whiledependency on miningis ongoingin most SAOG countries, circumstances have significantly changed since mid-2008. The global financial downturn and the subsequent economic crisis have resulted in declining demand for the region's mineral outputs, The decline has translated into low prices for mineral commodities produced in the region.
10.
III. THE GLOBAL FINANCIAL AND ECONOMIC CRISIS
15. None of the three major financial crises that the world has experienced since the 1990shas translated into a major globaleconomic crisis, In 1994, the Mexican peso crisis start ed with the Mexican Government's announcement thatthepesowould be devalued by 15%. As the peso fell , investors panicked and started selling their peso holdings, Capitalalso continuedto flowoutof Mexico, leadingto a sharp drop in the Mexican stock exchange by 47.94 per cent in one single month.The effectsof thatcrisis spread toBrazil and otherneighbouring countries (Murinde, 2009) , The major impact s of the Mexican crisis, however were expressed in terms of capitaloutflows, a drop in stock marketprices anddepreciation in the foreignexchangerate.
16, In 1997,another financialcrisis emerged, this time in East Asia.
The world experienced the effectsof the EastAsian financialcrisis, which was caused by large external deficits and propert y and stock market bubbles. Some analysts attributed this crisis to internal weaknesses in the financi al sector, such as inadequate banking regulation and super vision, New banks and financial companies were allowed to operate without supervision oradequate capitalization (Radelet et al..
1998). In that situation, Japanese banks reacted by trying to meet their own capital req uirem ents , thus red ucing credit to Thailand . There was also large-scale foreign borrowing to fund plant expansion.
This led to unsustainable debt-to-equity ratios for firms. The overau result was heav y indebtedn ess on the part of most East Asian countries, due to short-term and unhedge d loans, Such loans exceeded50% ofGOPin Thailand,Indonesiaand the Philippines
17. Foreign lnvestcre also assumed that in the event of repayment problems, they would be bailed out by the host Governments. which at the time had also liberalized their capital accounts. While this attracted for ei gn capital inflows, it also attracted substantial international "hot money: which was potentially destructive (Murinde, 2009). However, countries suchas Hong Kong and Singapore, which had strong financial and adequa te regulatory systems, escaped the contagion effects Indeed, strong financial and adequate regulato ry systems can help to mitigate the adverse contagion effects of a financial crisis (Murtnde . 2009). Almost a year after the East Asian financial crisis, the Russian financial crisis broke out This led to a depreciation in the Russian rouble and major capital outflows, which severelyreducedRussia'sforeigncurrency reserves,
18. The above-mentioned financial crises had limited contagion effectsanddid nottranslateinto economiccrises,However,thecurrent economic crisis, which origi nated in the United States sub-prime mortgage market, has had serious contamcn ef fects worldwide Goodhart (2008) says the crisis was due in pari to risk pricing, the new financial structure,poor credit rating agencies and insuffi cient liquidity Mizen (2008),on the other hand, identifiesthe global savings glut and financial innovation in mortgage-backed securities as the precursors of the crisis. In general, the crisis can be attributed to financial globalization and its contagion effects. Whichever way the problem is looked at, it is import ant 10 recognize that the current economiccrisisstarted as a financialcrisis
19. The financial crisishas deeperroots, It canbe traced back to 2000 whenthe Federal Reserve,the centralbank ofthe UnitedStatesof America, responded to the bursting of theInternet bubbleby reducing interestratesonfederalfunds.Thisisthe rate atwhichAmerican banks lend surplus liquidit yto eachother.Theratewas reduced from 6.5% to 3,5%withinafewmonths,reaching 1 per centby 2003, Thelowinterest rate causedIhe banks10 start advancingcheaploans, which led to the real estate bubble,Mort gage lenders relaxed lending conditions and invented new ways to stimulate financial activity. Investment banks on Wall Street also developed a variety01new techniquesfor passing on the rtsk 10 other investors, suchas via pension and mutuarfunds.By 2005, the monetary valueof existinghousinghad risen by 50 per cent and the consn ucuon sector had grown uncontrollably, becoming the major driver of American GOPAs the prices of houses increased, speculation also increased, which led to a rush for mortgage loans, commonly known as "ninja" loans, which were advanced to non- creditworthy customerswith no income,nojobs and no assets,Banks got rid of riskymorlgages by restructuring them into what they called
"Collateralized Debt Obligations' (COOs), that is, assets secured by
sets of assets usually consisting of bank loans, bonds and Credit DefaultSwaps(COSs).
20. According10 Mama and Nantosso (2009). "securitizationturned tnto aggravated risk orchestrated by tne transfer of ownership of mortgages of bankers who knewtheir customers to investors whO did notknow Ihem" Thisled to thedevelopment ofa CDS market "Today, the nominal value of credit default swaps in the unneo States of Americais estimated at almostUS$43,OOObillion,whilethe stockmarket capitalization in the country is US$18,500 billion and the value of treasury stocks and bonds isUS$4,5OO billion" (Mama and Nantosso.
2009).
12.
From this it is clear to see how the tmanctal economy or the paper economy has overridden and developed independently ot the realeconomy. This simplymeans that ftnanctat obligations have been createdin the economy withoutassets to back them.
21. Itis prudent toinfer that excessivespeculationis therootcause of the toxic assets produced by the unanctat crisis. and the reason behind Lehman Brothersfilingfor bankruptcy, The collapse01 Lehman Brothershad a huge euect on theAmerican InternationalGroup (AIG).
and led to the partial nationalization of AIG, The United States of America Treasury purchased 80 per cent of the shares 01 AIG, The whole process has undermined the trust needed lor the financial system to operate effe ct ively, As the banks became nsk.averse.
failing to lendtoeach other.they also startedrationingcredit to firms, This resulted in the credit crunch, Firms also responded by scaling backtheiractivitiesand numbers of workers.Thus, the problems that arose in the financial sector were now being felt in the real economy, reducing consumptionof variousgoods and also reducingsavings in theeconomy.
22. There
are
basically three ways in which the euects of the financial meltdown and economic recessionarelikely to affect SAOC economies: 1) through trade,as expressed by the fall in the demand for commodities produced in SAOC countries: 2) through loreign direct investment (FOI) flows. as exemplified by the unavailability of finance for investment; and 3) through officialdevelopment assistance (ODA). represented by Ilows of aidand grantsto SAOC countries,IV. IMPACT ON SADC COUNTRIES
23. The financial meltdown,although originating in me United States of America sub-prime mortgage market. is now impacting almost all of the world's economies, including the operat ions of many sectors of SADC economies.The severity of the impact depends on the extent of the economy's integ ration into the global economic system, and the levels of diversificationof each economy Many developing countries are primary commodity producers, depending for most of their foreign exchange earnings on one or two export commodities, In some countries, over 50% of Government revenues may be dependent on commodity exports. A substantial part of the labo ur force may be dependenf on the exportsector for jobs. In many SADC Member States, the mining sector plays a very im portant role in the development of their economies,The sector has not only provided foreign exchange and a substantial portion of Government revenue, but it has also provided resources for development, Consequently, the financial crisis and subsequent economic recession has had serious effects on many economiesin the SAOC region.
A. Commodity Prices
24. The reduction in consumer demand in the major economies of the world has affected the prices of mineral commodities, Indeed, the prices of copper, aluminium, lead, nickel, silver, tin and zinc have all plummeted. The annual average prices for these mineralshave declined considerably between 2007 and 2009, as shown in table 1 below.
Table 1:Annual Averages · Commodity Price Data. 2007 10 2009
eta'sand Minerals Marc h 2009
Aluminium US$lmt 1,372
Copper US$lmt 3,268
Lead U$<Ikg 111,7
Nickel US$/mt 10,858
Silver US¢/lroy oz 1,242
Tin U$<Ikg 1,121
Zinc U$<Ikg 115,0
SOI...-ce:Wor1d Bank CommodityPrice Data,March2009
14.
25, Thedecline in prices has varied between minerals, with copper being the hardest hit, falling close to 53 per cent between 2008 and 2009,10110wed by nickel,whose price fellby48.6per
cen t
over the same period.Aluminium and lead posted price declinesof about 46%, while tin andzinc fellby 39,4 percent
and 38,7percent,
respectively.Silver had a modest fallof 17,2 percent. The economicdownturn haseuecrec Government revenues from taxes levied on the various minerals.Economies that depend on the export 01 minerals, Such as copper, aluminium, lead,nickel, diamonds and zinc,have been affected more deeply than those that export gold, iron and steel. Furthermore, economiesthat have a substantialdomestic market lor their goods are likely to be cushioned. Oneimpact is related to the structure 01 some economies in the region which are dependent on one or two minerals lor theirexport earnings, Mono-economies are not diversified.bynature.
Consequently,when prices collapse,they are impacted more severely than economies that have diversilied mineral sectors. Therefore, the mineral production mixis importantin this respect. Depending on the production mix,countrieshave been affected differently by the declines in mineralprices,
26, It is important10 notethat Ihepricesofsome metalsand minerals rose overIhe same period.The price of gold, for example, rose from US$697 per troy ounce in 2007 to US$872 in 2008 and U$$901 in January and February 2009.Theprice 01 iron ore rose trom84,7,/; per dry memo Ion unit in 2007 to 140,6'/; in 2008,while that 01 steer rose considerablyoverthe sameperiod (World BankCommodity Price Data, March 2009). Thissuggeststhat a diversifiedmining sectorcontributesto rnaking an economy more restnent to price shocks Therefore, a diversifiedrniningsectoris good lor anycountry,
B, MineOperation s
27, At Ihe rncroeconornc level, Ihe falling prices 01metals and minerals have resulted in mine Closures, and in some cases, mines have been placed under care and maintenance,a situationwhere only the most essennetservices areroutinely onoertaken,but productionis interrupted. Essential services include mine dewalering to prevent uocom q,maintenance of production equipment and seccntv services, to prevent theft and vandalism This has been the fate of Botswana's Orepa No. 2 and Damtshaa mrnes, Zambia's Luanshya Mines Pic, (copper and cobalt),Munali (nickel) and Chambeshi Metals (smelter).
The BCLmineatSeleblPikwein Botswana was saved bythe Botswana Government's decision to acquire a majority share in the operation, therebysavingjobs and a town thatrelies heavilyon themine.
28, In Namibia, lour mines have been placed under care and maintenance:Otjihase, Tschudi,Matchless and Tsumeb, allowned by Weatherly InternationalPic throughitslocalsubsidiary WeatherfyMining Namibia InLesotho, three mines are still operating, while twoothers have been placedunder care and maintenance, South Alrica hasclosed 63 mines.mainly01 diamond and manganese Therehave been more mines placed undercareand maintenancein Ihe DemocraticRepublic 01 the Congo than in any other SADC Member Sl ate This has implications for employment levels, as mines under care and maintenance onlymaintaina skeletonstaff.
C. Profitability And Employment
29 The reduction in commodity prices has resulted in decreased profitability for mining companies. since they export nearly all their mineral production to global markets. This has been the case in Botswana. the Democratic Republic 01 the Congo and Zambia,where mining companies have experienced serious prolitability setbac ks.
Platinum and diamond mining companies in South Al rica have also felt the squeeze. Consequently . some mining companies have announced the suspension 01 new projects (Mulyash i, Luanshya Copper Mines, and MunaliNickelMine inZambia) until mineral prices rise, Some have indicated that they will have to lay olf part 01 their workforce. and others have already done so,In Katanga province 01 theDRC.more than 200,000jobs had beenlost asatDecember 2008, In xasar and other provinces , job losses exceeded 300,000 as at January 2009, These job losses have been attributed in part to the productioncost of metals like cobaltand copper,which is now greater than thepricethatthosecommodities fetch onworld markets,Itshould be noted thet more than 40 mineral-processing companies had Shut down asatNovember2008, mainly in southern Katanga province,
30 Zambian mining companies,which have already laid oil over 10,000miners,haveindicatedthattheywill lay off additional numbers of employees. These numbers do not include those employed by companies that supply services to the mining companies Botswana has also lost more than 1,000 jobs. There have been smaller job losses in other SADCMember States' Tanzania estimates that 1.287 jobs have been lost. while Lesotho estimates that 275 jobs have been lost as a result of the global downturn in mineral commodity prices . Namibia estimates a loss of 620 jobs, while 187 jobs have been lost so lar in Swaziiand. In South Alrica, 32,681 jobswere lost during the latter part of 2008and in early 2009, The diamond sector lost more jobs than anyothersub-sector,withthe closure0162mines,
16.
This has been precipitated by a 50% fall in diamond prices. It is estimatedthat over 346,681 jobs have beenlostin the SAOC mining
sector. This.however, is a partialestimatesinceinformationfrom other SAOC Member States was nol availableat the timethat this paperwas being prepared, Therefore. in general, the economic downlurn has resulted in substantial job losses. Since the mining sector is a major employer in some countries. the decline in employment is posing serious social challenges to theregion,
D .
Growth Rat es31, Nearly all the SADC Member Stales have opened up their economies and have instituted some of the most open trade regimes, Tradeaccounts for over 50 per cent of the GOP of most of the couomes in the region.In Angola,for example,oilproduction and its supporling activities provide about 85% of GOP. In Botswana. about 36% of the exportscome from the mining industry,whileinNamibia the figureis as high as 50%, Consequently, declines in mineral commodity priceshave an effect on the GOP growth Of the countriesin the region, Thefinancial crisis has also affected globe l economic growth and resulted in a decline in thedemand for commodities, such as aluminium.copper, cobalt,nickel,lead and zinc.Commodity prices have dropped to their lowestlevel since2004 The price of copper,a commodityproduced by Botswana.the Democratic Republic of Congo. Zambia and Namibia, has fallen sharply since July 2008. Copper prices have fallen from US$8,930 per metric Ion in July 2008 to an average of US$3,900per metric ton between January and March 2009 Diamond prices have also behaved in a similarway.affecting Botswana, Namibiaand South Africa.
32, Since most SAOC countries depend on the export of primary mineralcommoditiesused in the productionof consumergoods forthe Europ ean and American markets, the low demand worldwide has had a negative impact on them Most have had to revise their growth rates forecasttor 2009 South Alrica has revised its growth rate from 31% to 02% for 2009. Lesotho. from 5.1% to 4.6% and Zambia.to slightly above 4% It should be noted. however. that the revision of growth ratesis a worldwidephenomenon.
E, Exploration And Pro s pectin g
33 The futureof mining depends very heavilyon prospecting and espicceton.Onceprospectingand explorationcease,no newmines willbe opened.With the financial crisis and the economic recession, and the resulting decline in mineralcommodity prices, many young exploration companies areunabletofinance theiroperations,andsome have ceased to existaltogether, Witha decreasednet presentvalueof mineral deposits.
investors are not willing to risk their resources. rheretore,even if new deposits werediscovered, theywould not attractmining finance dueto depressedmineral commodifyp-ees.Asa result.thismining sub-sector has beennegativelyaffectedbythe crisisandGoverorrentsmust findways to support it inorderto maintainthe organicgrowth 01the SADC mineral industry,
F. Tax Revenues
34, Ta x revenues have also decreased. In Zambia, for example . revenues from mining company taxes fell from US$44million (K154 6 billion) in the second quarter 012008 to US$41.6 million (K146 billion) and US$7.5 (K24 billion) in the fhird and fou rth quart er 012008. respectively Revenues from mineral royalty taxes lell from US$24.4 million (K85,7 billion) in the second quarter of2008 to US$16,9 million (K59,3 billion) in the four th quarter.A similar pattern was observed for revenues from windfa ll taxes,which fell from US$33.7 million (K1 18.3 billion) inthethirdquarterof2008 to US$2,2million (K7.7 billion) in the fourth quarter, This loss 01potentialrevenue Irom themining sector,as a result of the crisis,reduces the Govemmeot's fiscalspace anditscecectv
to finance social sector expenditure programmes, such as education, health and infrastructure forpoverty reduction.Ifthis recession continues fora much longer period.it willaffect the abilityof SADCMember States to attain their developme nt objectives and me et the Millennium DevelopmentGoals{MOOs},
G. ExchangeRate s
35, Some countries have experienced rapid cecuoes in foreign excnanqe earning capacities,distortion of exchange rates,and rapidly rising inflation levels, In the period immediately following July 2008.
many currencies were depreciating against theUnited Slates dOllar This has been thecase for SouthAfrica. Botswana.Swaziland,Lesotho and Zamb ia In contrast. Mozambique. Ango la and Tanzania saw their currencies appreciateduring the same period, The affected currencies had allthe signsof developing Dutch disease.withappreciating foreign exchange rates affecting otherexports.Table2 shows the extentof the depreciationof some SADCcurrencies,
Table 2;Ave ' a ge exc nange rates10 1ne USSIn some SAOC co"nlties.2006·2008
....
Tanzania Shilling Botswana Pula South African Rand Lesotho Maloti
Swaziland Emalangeni Mozam biq ue Meticais Angola Kwanza Zamb ia Kwacha
125 1.9 5.8447 6.7649 6.85 6.85 25.400 80.04 3601.5
1255 6.2035 7.05 7.25 7.25 26.264 B8 3990.2
1178.1
7.9579 7.75 7.75 24.125 83.541 3512.9
1017.72 6.75 8.21 10.21 10.21 23.134 40.71
496 7
18 .
Source: CIA WotiO Faclttook 2001I; excMng.eFlale com (9 July 20091
H. Foreign Direct Investment
36. Foreign direct investment (FOI) has beena very importantresource inflow for many SADCcountries,There is conside rable evcerce that FOI boosts growthby compemennrq and facilitating domestic investment. FOI contributesto creating newjob opportunitiesand facilitatesgrowth through plant and equipment renewals, and generally contributes to improving existing technology. especially in old operations The regi on therefore requiressubstantialFOI inflows. The experience of SADCMember States in attracting ronq-term capital flows has been mixed InUnited States-do llar terms, the amountof FDIreceived by SAOCis a smallfractionof totalflows to low- and middle-income economies. Between 1995 and 1999, the approximate SAOC share of tot al FDI to developing countries varied between 2%and 3%
37. However, for some countriesin theregion.annual inflows expressed as a perce ntage of GOPhave, at limes, significantly exceeded flows to other develo ping econom ies, e.g ., Angola (1998·1999); Lesotho and Seychelles (1995-1999); and Mozamb iq ue (1999). This can often be explainedby alimited numberof large transactions,includi flQ investmentin natural-reso urce explo itation and infra struc ture development, and privatizationtransactions Privatization hasbeen animportant sourceof FOI tOf some SAOC countries, such as Mozambiq ue. Tanzania and Zambia.
South Afrk:a dominatestoreign investment inthe SADC region:it receives a substant ialfraction at new FDIflowsinto theregion, and hosts the largest numbe rof foreign subsidiariesacross a broad range ofeconomicsectors.
South Africa's capacit y toact as amagnet forFDIin theregion, partic ularly in the co ntext of growing regionaleconomic integration. is an important featureofinvestment flows(Jenkins andThomas.2002).
38. However,FDI is also dependent on creditavailabilityin developed countries.The creditcrunch has reduced the amount of financeavailable for overseas lending and for markets that are traditionally considered risky,Asbanksin the developed world tighten their lending,and as stock markets tumble,the sources of creditfor investmentin emerging markets areaffected, Furthermore, most foreign investors are dieirwestinq and buying foreign currency,thereby causing localcurrencies to depreciate, Thisis causing instabilityin the economiesof most SADCMember States.
The depreciation in most of the currencies in the regionhas the effect of raising the prices ofimported goods Since most SADC Member States import manufactured goods, prices for these will keep rising, fuelling inflation and reducing citizens' standard of living.If left unchecked,this process will negate the development gains of the past five years,and willseriouslyhinderthe attainment of theMOOs
20 .
V . POLICY RESPONSE
A. Monetary and Fiscal Policies
39 Although the financialand economic crisisoriginated in the United States of America. the globalattention has been focussed on the policy response of Governmentsworldwide,andtoomajorectcesintheotemeuoner tinancialsystem.Thisincludes developing countries,which now contribute a large share to the globa l economy and trade flows, and international financialinstitutions (IFls), which help oil the system and promote widely shareddevelopment (Lin,20(8),
40 Thefirstpriority for most SADCMember States shouldbeto prevent the financial contagion from crip pling domestic banking and non-banking financial sectors. Given the high level of inter-li nkage s amo ng the world's financialfirms and sectors,those effects startedappearing in most countries, even before the impact was fell by the real economy. The Johannesburg , Lusaka and Botswana stock exchanges tumbled, Some currencies also depreciated substantially, as mention ed earlier, and sovereign interest-rate spreads ro se with the 'flight to safety' of foreign portfolio investment inworld markets, Market capitalization ofmoststock exchanges fell substantially, At the micro level, som e exporters in developing countr ies are already finding it hard to obtain the trade credits that are their lifeblood, which could cripple export sectors hit
bythe fallinfOfeign demand{Lin, 2OO8},
41 Itistherefore important that SADC countriestake quick.decisiveand systematic measures to ensure that credi t crunches and bank collapses are avoided locally, More generally, SADC Member States have
two
main macroeconomic toolsforresponding toshocks:monetary andfiscalpolicy, One great risk is that if the credit crisis is not effectively resolved, the global economy could entera period of deflation. In such anenvironment.standard monetary policy will not be ettective.Hcwever, credit-financed industrial upgrading is a possibility in nearly all SADC Member States,and that wouldprovide more room for monetary policyto wOfk.Notallcountries, though,willbe able to etfectively use expansionary monetary policy, Some may find themselvesforced to tighten monetarypolicyandincrease mterest rates to preventexcessivecurrencydepreciationor capitaloutflows.Some Governments may be able to provide some monetary sumulus by lowering interest rates and encouraging investment in sectors where industrial upgradingis most likely to have payoffs(Lin,20(8),
42. , Onthefiscalpolicyside,Governments ofdevelopingcountrieshave a vanety of to ols that theycould useto cushion the shock,Governments with available fiscal space can respond by injecting well-designed fiscal smnuiusesinto theireconomies, so asto generate domestic demand that can offset the expected decline in foreign demand, Developing countries have pressing ne ed sthat can bemet through public investment,such as the building of infrastructure,especiallyafter a period whenprivate-sector growth has sometimes outstripped the ability of the pub lic sector to providetheinfrastructureneededtosustain that growth.
43 A second area for investment is social protection and human development so as to ensure that a temporary shock is not convertedinto severe permanent declines in the welfareof poorer households, Many programmes have been evaluated and seem to be worth investing in , Governments should prioritizeprotection and expansionofprogrammes that can most effectively buffer the impact of crises on the poorest households (Ravallion.2008), Types of programmes to considerinclude conditionalcash-transferprogrammes to keep disadvantagedchildren in school, and public-worksemployment (orworkfare) programmes,Such programmes would be appropriate responses for countrieswith healthy reserves. current-account surpluses or small deficits and solid fiscal policies.tn countries with less fiscal room for manoeuvre, programmes like these shouldbe a priorityfor donee support.
B. Mining-specificPolicies
44, SAOC countries need to formulatebothshort-and long-termpolicy responses to the global economic downturn. Even though the crisis is not of the subregion's making, the subregion is par t of the world community of States Indeed.the dO'Mlturn has affectedglobal economic growth. and the demand for commodities . in general Since mineral exportseflectively linkthe regionto the world economy,the effects of the globalrecession are being felt through the mining sector first.Asstated earlier, the selling priceof some mineralsis well below their production cost. Thus,the first step would be for the mining sectorto try to reduce productioncosts
45, One way to reduce costs would be to introduce flexible wage structures,wI1erebyminingcompaniespay lower wages during hardtimes, and higher wages in boom times.Thiswould helpreduce costsuntilsuch timeas mineralcommodity prices pickup.The problem withthis proposal is that the mines would have diflerent wage structures,implying that there is no industry standard, However, this is an issue for unions and mining companiesto discuss. It is a controversialproposition,but thereshould be open dialogue between minemanagementand labourunions, Mining companiesalsoneed to reconsider the salariesand wages of expatriate staff. Currently, the wage differentialbetween expatriate and local staff having the same or similar qualifications is too wide. This leads labour unionsto oerrerch~herwages for their members
46, Governments could also consider modifying the ta x regimes applicableto the mining sector to takeinto accocnt the importance of the sectorin termsofitscootributionto GOP,export earnings arcemployment, Them shouldbe some lIexibilityin the way miningcompanies aretaxed.
22.
Govern ments could consider reducing corporation taxes and rai sing capital allowances duringperiods of recession,and doing the opposite, raising corporation ta xes and reducing capitalallowances during boom periods.
47. With regard to windfall taxes,it is impor tant that such taxes be levied even tho ugh their administration remains controve rsia l. One advantage 01the wil'ldlalltaxisthatitis self-adjusting,Onernajxproblem, however, isthat the laxisnormallyleviedon revenue,As such,it is argued that it does nottake into consideration productioncosts and thedifferent cost structures 01 different mines, and some cla im that it impacts negativelyon theoperations of margiMI and hig h-costmines. Therefore, thelevelat whichthistax isimposed is subjectto negotiation,The windfall taxsituationdillers from country to country,dependingontheownership struc tures of the mini ng com panies. However, Governments could collect royalties,as suchtax is appliedto the extractionof non-renewa~e
rerorer resources.In cases where Governmentisasubstantialshareholder in the mining industr y orcompany . this measuremay not be necessary.
48. It isimportantthat Governments considerthe ownershipstructuresof mining companies and introd uce a level 01participation lor loca l or indigenous entrepreneurship.Localentrepreneurship mustbe strengthened if Ihe countries in Ihe subregionwish 10 retain a substanfia l share ofthe benefits Irom investment intheir mining sectors. In instances wherelocal entrepreneursarenot readilyavailable,Governments need 10 find ways to ensureamore meaningfulparticipation in theminingeectoc SADC Member Stales should drawlessonsfrom globalexperience: inthe UnitedStates aro the United Kir'lQdom,lor example, Government acquired equity inspecific companiesinorderto
save
jobs.Thecurrentstate of aff airs in theSADC mining sector isa clear indicator of Member States' vulnerability, sinc e they are heavily dependent on forei gn investment with little or no participation by either their own Governmentor local communities.It is therefore advisable to encourage lo cal inve stment in the mining ind ustr y, Pens io n and insurance fundscanbeusedtofUlfil thisrole, wtlilepubliclistings on stock excnanqes constitute anotheravenue.
49 , Another cost centreto consider is that of eiectricity to themining compan ies. In some cases, in partic ular at smelters, electricity can represent asmuc h as 70 per cent 01the productioncost. Electricity rates are mainly composed of Government duties levied at the various stages ofgeneration,transmission,distribution andconsumption.
Governments could consider reducingelectricity rates to theindustry, so as to help reduce the productioncosts formineralsthat areof strategic valueto the economy,
50 Mining companiescould considerways to reduce supplychain costs. Usually, resource extraction companies practise centreuzec purchasing,W'hich is costlyin thelong run. Localcompaniescouldsupply the same goods fO( cheaper, and thatwouldalso reduce capitaloutflows.
Governments shouldtherefore specifyalocalcontentminimum in resource contracts or licences However, in some cases where local content minimumsarespecified in thelicencesand contracts.the SAOC country concerned does not have the manufactur ing base to exploit the legislative oroveion.rheretc re. local manufacturing bases need to be developed in many SADC countries. South Africa. which has a fairly larg e manufacturing base,could contributeto developing this capacity in other SADC countries. The companies established must, however, haveboth localequityaoo entrepreneurialparticipation.
C. Economic Diversification
51, Strategies for diversifyingthe economies of SAOC Member States have been in the works since the early days of theirindependence,Many SADC Member States inherited industrial structures that are highly dependent on the extractionof one ortwo minerals Nationaldevelopment plans in most SADC Member States acknowledge that they need to dfversitv in orderto
ettect
structuralchangesin theireconomies.Botswana.forexample.considers economicdiversificationfrom diamond miningas an urgent imperative(NalionalDevelopment Plan9).just as Zambiadoes withregardto coppermining(First NationalDevelopment Pian.1966).The nationaldevelopment plans provide fortwo main types of diversification:
diversification Within the mining sector, to include mining of dilferent mineral varieties so as to spread risk, and
cnversaceuon
away frommining into manufacturing and agricultural production for the domestic and export markets, Such diversification would add value to the economiesccoceroec.
52, Failure to createor induce downstream valueaddition to crude resources (copper, iron, steel,aluminium) is onereason why many SAOC Member Statesareexposedto thevagariesof economicrecessions.Once againitis up to Governmentsto impose a minimum level 01 beneficiation on mineral extractton. Failure to establish downstream value-addition industries lead s to an indirect export ofjobs, since the final processing and manufacturingof finishedgoodstakeplaceelsewhere.
24 .
53 Upstreamvalue addition should also be enhanced In general, there is a lack of local business capacity to take advantage of opportunitiescreatedbyresource extractioncompanies, in terms of supply of input goods and services With the exception ofSouthAfrica,many SADC countries have failed to create this capacity among the local business communities.SADC countries should take advantage of South Africa's capacities in mining and industry to boost their economies. Indeed, this is an attractive regional tnteoretlon issue fhat the SADC Secretariat shouldexplorefurther,
54, Diversified economies are better able to absorb shocks. Diversification is therefore a sound and rational strategy as it enables economicrisktobe spread, For manydecades,ooicvmakers inthe region have called for an export diversification policy towards non-traditional products, albeitwith limited success.Export diversificationwouldenlarge therange of products exportedand reduce the severityofexternalshocks.
It shouldbe noted, however, that although diversificationis necessary, itis not a panacea for resoMng economiccrises,since in arecession,demand for nearlyall products falls Diversification helps to reduce and spread economicrisk,
VI . RECOMMENDATIONS
55 Based on theoscusecos.thispaperrecommends thatthe tollowing actions be taken to addres s the negative impact of the global financial crisis and recession on the SADC mining sector, The recommendations were reviewedby ameeting of experts. seniorSADCGovernmentofficials and theprivatesectorinMay 2009,
a, In order to protect the economies of the subregio n from financial contagion effects, central banks need to implement prude nt monetarypoliciesto avoid the collapseof theirfinancialsystems, b. Retrenchment should be the last resort alter all alternatives have
been exhausted, anditwould bepreferablethat this isdone through voluntary separation. Volunta ry separation is a reasonable cost- containmentstrategy.Where retrenchment is unavoidable, dialog ue between Government. labo ur unions and employers will build goodwilland trust. and precludeconflict. In the longerterm,there is need to explore flexible wage structures that can meet the challenges facedbytheindustry,
In order to save jobs and maintain the viability of so me mines, Governments should adopt a flexibletaxsystemthat relieves mining companiesof heavy taxburdensduring periodsOf financialstress, Suspensionof front-loaded taxes, such as royalties, could be an option.The negotiationoftaxmatters also requires healthydialogue and trustbetweenminingcompaniesandGovernments
o. Miningis a strategicindustryfor the SAOC subregion andits citizens cannotcontinue tobemarginalized,The currentcrisiscould beused as an opportunity to increasetheparticipation of both the State and citizens in miningassets,Thismust, however, bedone 011reconeieo commercial terms , Deferred royalty payments could be used to inc rease Government shares, while nationals will nee d to be empoweredto thateffe ct,Namibia and Botswanaaregood models ofState participation,
e The crisis presents opportunities to encourage manufacturing and diversification. Diversification could take two forms ' intra-sector diversifica tion aimed at producing additional minerals: and inter- sector diversification aimed at developing other sector s of the economy,such asagricultureand the manufacture of value-added mineralproducts,
26 .
f. The crisisis also an opportunity to reduce transactioncosts by reviewing regulatory frameworks and otherobstaclesto business start-ups so as to provideforlocal content intheindustry. The crisis should also be used as an opportunity to upgrade infrastructure support for the industr y, Forexample, reduced electricity consumptionrelievespressureon availablecapacity;
Governments could invest in upgrading generation and transmissioncapacities,
g. During thecurrent recession, one sub-sector that has been negativelyaffected is exploration. Little exploration is currently taking place. Consequently.SADC countriesmay not be in a positionto benefit fromthe nextupswing in mineralcommodity prices.Governments should explorethe possibility of providing incentives. especiallyto young explorers.to enableexploration work to continue
VII. CONCLUSIONS
56. This paper discussed the current gtobal financial cnse and recession and how~ hasimpacted the SADC miningsector,in particular, and $ADC economies, in general. Economic growfh declines in a recession.jeopardizing Governments' abilityto meet many basic needs and provide jobs. This papersought to provide possible solutionsto help SADCMember States cope withthe ecorcmc crisis Thefirstprior~ywould be for centralbanks to effecHvelymanagethefinancial systemsso as to avoidfinancialconfagion effects.Secondly.SAOCMember States needto
clear~identify theirinvestment needs, It isimperative to definethetypes of investments and investors needed to promote fhe development of the economies in the subregion,andto participatein long-termdiversification programmes for the SADC
sooecon.
TheMining Vision and Action Plan adopted by the African Union should be used as a guide for buildinga development-oriented minerals sector in the SADC subregion, which promotes growth, reduces poverty and achieves the sustainable developmentobjectives,57. Linkages must be created in order to underpin economic diversification, growth and development Adequate ta x structuresneed to be developed to ensure that resource rents arecaptured during boom times,and the mining sector is supported during periods of recession.
Flexibility is needed in changing circumstances. It is important to understand that in a pure market economy. Governments can buy sharesin private companies,as the Governments of the UnitedKingdom and the UnitedStatesof America have ocoe in the case ofNorthern Rockand AIG, Government intervention in those companies was circumstantial, and deemed necessaryto preserve jobs and arresteconomicdecline, SADC Governments can emulate this so long as they are able to reduce their shareduring boomtimes,
58 This paper focused on discussing development issues during a recession and how the recession has affected the mining sector in the SADC SUbregion.The questionis how can Governments react. in the face oftherecession,to protecttheircitizensfrom declines in theirstandard of living?The paper has made some recommendations, However,while there are common approaches, such as diversification and the harmonization of codes and standards to regulate the mining sector, which can be implementedcollectively,it is up to each State to adopt the strategy or strategies that best suit its particular circumstances,
28 .
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