Extractive Sector Regulations in : Old Practices and New Models for Change NORTH-SOUTH INSTITUTE FORUM: Governing Natural Resources for s Development Ottawa, 9-10 May 2013 Chris W. J. Roberts, PhD Candidate, Political Science, University of Alberta & President, n Access Consulting
Mandate 1) Historical evolution of Extractive Industry (EI) regulatory environment across 2) Where are we today in terms of new models vs old practices? 3) Are dynamic policy/institutional/jurisdictional frameworks capable of supporting the reawakened idea that extractives should lead to economic transformation and socioeconomic upliftment? 2
Extractives Observations 1) Extractives are a hard test of institutions (both within and outside the EI) 2) There is a EI Governance Paradox across today Too much governance? Significant domestic, regional, transnational initiatives have evolved into complex/comprehensive EI governance and regulatory environment Too little governance? Many n jurisdictions still suffer capacity (human, infrastructure, etc.) gaps, policy misalignment, and institutional weakness 3) No silver bullet policy choices: implications for every governance/regulatory decision or orientation 3
s Modest but Growing EI Relevance 99: Investment ($bn) 15: Global share (%) Source: The Report (1 February 2013): http://www.theafricareport.com/north-africa/africa-versusglobal-mining-activities.html, derived from data from Raw Materials Group, Stockholm, Sweden. 4
Governance & Regulatory Levels of Analysis GOVERNANCE ORIENTATION PRIVATE SECTOR ENABLER MIXED ECONOMY (SELECTIVE INTERVENTIONS) STATE-LED DEVELOPMENT MAINTENANCE OF POWER KLEPTOCRACY GOVERNANCE COMPETANCIES or PILLARS TECHNICAL & INFRASTRUCTURE CAPACITY LEGAL CAPACITY (RULE OF LAW) ACCOUNTABILITY MECHANISMS TRANSPARENCY MECHANISMS PARTICIPATORY MECHANISMS EXTRACTIVES REGULATORY OBJECTIVES VALUE MAXIMIZATION MITIGATION ECONOMIC CATALYST FOR INDUSTRIAL- IZATION EXTRACTIVES REGULATORY APPROACHES COMMAND & CONTROL SELF- REGULATION RESPONSIVE/ HYBRID REGULATION COMPLEX MIX OF ABOVE PLUS TRANSNATIONAL INTERVENTIONS 5
Conflicting Objectives of Extractive Industry Regulations VALUE Maximization Resource Rent Streams Contradiction 1: EI Scale & Efficiency vs. Breadth & Depth Contradiction 2: EI Expansion vs. Effects MITIGATION of negative effects Contradiction 4: Governance Capacity vs. Growth Contradiction 3: Effects vs. Economic Diversification CATALYST for economic structural transformation 6
Extractives Value Pyramid High Value Low Volume Small to Large Scale Medium Value Medium Volume Medium to Large Scale Low Value High Volume Large Scale Gold Coltan 1 Diamonds Gemstones Crude Oil, PGM, Cobalt, Tin, Titanium, Tungsten, Chromites, h Silver, Uranium, Rare Earth Elements Natural Gas, Coal, Copper, Nickel, Iron Ore, Lead, Zinc, Bauxite UNIT VALUE UP; INFRASTRUCTURE REQUIREMENTS DOWN; LESS SCOPE FOR LOCAL LINKAGES Industrial Minerals (e.g., Phosphate, Potash, Fluorspar, Salt, Gypsum, Clays) Construction Minerals (e.g., Limestone/Cement, Sand & Gravel, Dimension Stone) 7
1986-2001 Period 2: Liberalization & Early Sustainable Development Period 3: Crisis, Consolidation & Transition 8
1997 - present Period 4: Extractives Super-Cycle Period 5: Assertive 9
Context: Extractives Super Cycle - GOLD 10
Context: Extractives Super Cycle COPPER 11
Canadian Mining FDI Follows the Trend Cumulative Canadian-Listed Assets in n Mining 2011 Nearly $31 Billion 12
1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 Extractives Context: Extractives Super Cycle IRON ORE IRON ORE - USD per Metric Ton (March 1988 - March 2013) 180 160 140 March Price 120 100 80 60 40 20 0 13
USD Extractives Context: Extractives Super Cycle - OIL US Domestic Crude Oil Prices $120.00 $100.00 Nominal Inflation Adjusted $80.00 $60.00 $40.00 $20.00 $0.00 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Year 14
USD Extractives China,, & the Super Cycle US Domestic Crude Oil Prices $120.00 $100.00 Nominal Inflation Adjusted FOCAC 2006 $80.00 $60.00 China becomes net importer of crude CNPC First Investment in $40.00 $20.00 $0.00 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Year 15
Governance & Regulatory Levels of Analysis GOVERNANCE ORIENTATION PRIVATE SECTOR ENABLER MIXED ECONOMY (SELECTIVE INTERVENTIONS) STATE-LED DEVELOPMENT MAINTENANCE OF POWER KLEPTOCRACY GOVERNANCE COMPETANCIES or PILLARS TECHNICAL & INFRASTRUCTURE CAPACITY LEGAL CAPACITY (RULE OF LAW) ACCOUNTABILITY MECHANISMS TRANSPARENCY MECHANISMS PARTICIPATORY MECHANISMS EXTRACTIVES REGULATORY OBJECTIVES VALUE MAXIMIZATION MITIGATION ECONOMIC CATALYST FOR INDUSTRIAL- IZATION EXTRACTIVES REGULATORY APPROACHES COMMAND & CONTROL SELF- REGULATION RESPONSIVE/ HYBRID REGULATION COMPLEX MIX OF ABOVE PLUS TRANSNATIONAL INTERVENTIONS 16
Conflicting Objectives of Extractive Industry Regulations VALUE Maximization Resource Rent Streams Contradiction 1: EI Scale & Efficiency vs. Breadth & Depth Contradiction 2: EI Expansion vs. Effects MITIGATION of negative effects Contradiction 4: Governance Capacity vs. Growth Contradiction 3: Effects vs. Economic Diversification CATALYST for economic structural transformation 17
Extractives Value Pyramid High Value Low Volume Small to Large Scale Medium Value Medium Volume Medium to Large Scale Low Value High Volume Large Scale Gold Coltan 1 Diamonds Gemstones Crude Oil, PGM, Cobalt, Tin, Titanium, Tungsten, Chromites, h Silver, Uranium, Rare Earth Elements Natural Gas, Coal, Copper, Nickel, Iron Ore, Lead, Zinc, Bauxite UNIT VALUE UP; INFRASTRUCTURE REQUIREMENTS DOWN; LESS SCOPE FOR LOCAL LINKAGES Industrial Minerals (e.g., Phosphate, Potash, Fluorspar, Salt, Gypsum, Clays) Construction Minerals (e.g., Limestone/Cement, Sand & Gravel, Dimension Stone) 18
Converting Enclave Extractives into Value Added AFRICA MINING VISION (2009) Making the Most of Commodities Project (UK/SA) 19
Upstream, Sidestream, Downstream Linkages 20
EITI Status & Regulatory Change (2010-2012) EITI Status (Feb 2013) Country Mining O&G Regulatory Changes 2010-2012 Political Crisis 2010-2012 Angola 1 2 X Benin 1 1 Botswana 2 1 X Compliant Burkina Faso 2 X X Burundi 1 X X Candidate Cameroon 1 2 X X Compliant Central n Republic 1 2013 Post-Conflict X Candidate Chad 1 2 Candidate Congo-Brazzaville 1 2 Candidate DR Congo 2 1 X X Candidate Côte d Ivoire 1 2 X X Equatorial Guinea 2 Eritrea 2 1 X Expected Ethiopia 2 1 X Lost status Gabon 1 2 X Compliant Ghana 2 2 X Candidate Guinea 2 X X Guinea-Bissau X Kenya 1 1 X Compliant Liberia 2 1 Suspended Madagascar 2 1 X Malawi 1 1 X Compliant Mali 2 1 X X Compliant Mauritania 2 1 X X Compliant Mozambique 2 2 X X Namibia 2 1 X Compliant Niger 2 1 X Compliant Nigeria 1 2 X X Rwanda 2 1 Senegal 1 1 X Suspended Sierra Leone 2 1 South 2 1 X X South Sudan 2 X Sudan 1 2 X Compliant Tanzania 2 1 X Candidate Togo 1 Uganda 2 2 X Compliant Zambia 2 1 Zimbabwe 2 1 X X 21
EAC: REGIONAL INTEGRATION VS RESOURCE NATIONALISM Iron and Coal Developments: Uganda has first iron ore smelter in region; Kenya planning steel strategy; Tanzania/Kenya promoting coal (power) and iron ore exploitation We are not responsible for greenhouse emissions Tanzania Minister of Mines & Energy (Edmonton, October 2012) Oil & Gas Developments: Oil (Uganda, Kenya); Natural Gas (Tanzania, Rwanda); Pipelines; Refineries (Kenya vs Uganda); LNG/ Petrochemicals (Tanzania vs Mozambique) 3Ts (Tin, Tungsten, Tantalum): Great Lakes region-certification hurdles (Dodd-Frank 1502) Nuclear Developments? Tanzania just approved its first uranium mine; both Uganda and Kenya are contemplating the nuclear power option 22
Thank You. Email: cwrobert@ualberta.ca or cwjroberts@africanaccess.com 23
Canadian projects: More Job Creation CANADA CHINA 24
TSX/TSX-V (43-101) Importance 25
Post-Cold War Peacekeeping Deployments 26