In a Critical Resource interview, Mark Bristow enthuses about opportunities in African resources – and advocates listening hard to stakeholders.
Randgold Resources is a FTSE-100 gold mining company focused on exploration and production in Africa. The company has assets in the Democratic Republic of Congo (DRC), Mali, Cote d’Ivoire and Senegal.
Investment in sub-Saharan Africa can unlock huge potential
“All of sub-Saharan Africa – from Dakar to Dar es Salaam – is full of promising opportunities for resource investment, be that in hydrocarbons or mining. The potential returns on gold, for instance, are much higher in Africa than in mature markets like Nevada, Western Australia or Canada.
People always tell me that Randgold works in dangerous places. But in many ways geopolitical risk is more manageable in Africa than in other emerging markets. In Africa, people don’t want to preserve the status quo. They want investment, growth and opportunity. Young Africans work hard and expect delivery – that’s a huge asset, and by 2025 the continent will have more young people than the rest of the world put together. As a result, Africa has all the ingredients to deliver ‘super-growth’ to the global economy.
The availability of infrastructure is a key constraint. But this also presents an opportunity for investors and a means of driving the continent’s growth. Investment in Africa’s infrastructure and education has the potential to unlock an enormous economic engine.”
DRC promises major rewards for those committed for the long haul
“The DRC exemplifies the opportunities and challenges of working in Africa. The potential rewards for those willing to get involved for the long haul are enormous. However, whether in gold or copper, there are no easy pickings. Infrastructure is poor and geological information scant. Companies need to invest in exploration to find the most promising deposits.
Historically, the country has been unfairly exploited – whether by dictators or investors – and has under-delivered on its resource potential. In the 1980s and 1990s, some made windfall-style returns by ‘raiding the larder’. This has instilled mistrust and a fear that the nation’s assets are being plundered. Since 2002 we have seen more enlightened structures for the management of the resource sector put in place. Even so, some healing still needs to be done.
The current mining code was introduced with support from the World Bank and is a robust piece of legislation. Randgold has engaged proactively with the government around plans to amend the code. We demonstrated how existing legislation has created huge value for the country. In the latest round of negotiations we have begun to see a change in government attitude. Politicians are finally paying attention to Randgold’s message, which is that the country cannot draw in investment if the legal regime is unattractive. At last, a shared long-term vision for the development of the country’s mining sector seems to be emerging.”
West Africa is full of potential…but South Africa has failed to step up
“Cote d’Ivoire is a hugely exciting destination right now. The country has lifted itself out of a ten-year civil conflict and today benefits from political stability and some of the continent’s best infrastructure. The government recently reviewed its mining code with the express purpose of attracting more foreign investment.
Senegal also has a lot of potential. It is a beautiful and sophisticated country, though one that is at times dragged down by an obsession with bureaucracy. Liberia, which is re-emerging from the Ebola crisis, is also promising.
By contrast, South Africa has failed to step up and lever its competitive advantage. The country continues to blame its past for the present, refuses to take responsibility for the future and fails to recognise that if you want to attract world-class investment you need to create the right conditions. Similarly, many other countries across the continent fall victim to the temptation of ‘over-harvesting’ the mining sector’s rewards and drive away investment.”
A strong ‘license to operate’ is the driver of Randgold’s success
“Compared to other gold mining companies, Randgold has weathered the storm extremely well. Our management of ‘license to operate’ issues is the principal driver of our success – even in the current low price environment. The social license works both ways – down into the sites and up to our shareholders. If you don’t treat shareholders as owners they will behave like traders and only look for short-term gains. The same is true of governments and communities – you need to make them feel a part of the project.
On both fronts communication is key. Spending time with stakeholders is an important metric in my role as CEO. Executives should not only engage with elected officials but also local tribal leaders. I have dinner every six months with the traditional chiefs at each of our projects to hear grievances. This is not about mistrusting our local teams but an opportunity to listen to concerns with a different set of ears. We also provide quarterly updates to the press corps in our countries of operation, which creates a vital public forum for the lodging of grievances.
The biggest challenge is to have a clear strategic objective and set of principles to guide stakeholder engagement rather than simply buying-off those who make the most noise. At any project you have to expect conflict. There will always be high expectations that need to be managed through upturns and downturns. Companies should go to the source of those challenges rather than shying away from them.”
Randgold steers clear of compliance-driven industry clubs
“Randgold does not like to be a member of clubs. Instead, we set our own principles. The International Cyanide Management Code for example is primarily a compliance-driven process – a governance box to be ticked. Being a member may have some benefits, but not all members abide by the Code’s principles. Instead of becoming a signatory, we have incorporated the Code’s principles into our internal systems.
We also have a strong policy around not paying bribes and facilitation payments. This principle is maintained by making sure no one at Randgold ever meets with a government official on their own. When it comes to social investments, any support we provide is subject to collective debate within the executive committee and tested against the company’s values to ensure it is not used to buy favour with individuals.”
Responsible miners deliver sustainable economic activity not gratuitous charity
“Mining companies often see community investment as gratuitous charity. Instead it should be about converting national assets into some form of sustainable economic activity. One of the biggest risks miners face is destroying local subsistence farming and becoming the only job provider in town. This inevitably leads to impossibly high expectations.
As a result, it makes sense to invest in economic activity around your mine. Particularly in conflict areas, investing in people is key. One of the best ways to have a lasting impact is to reduce the number of expats in your workforce and train up locals. Typically, the top 15% of salaries in a mining company make up 50% of expenditure on people. If you maximise the number of nationals in senior management that money stays in the country.
There are other ways to broaden economic activity – and de-risk a project at the same time. Investing in agriculture, providing access to credit and banking facilities and housing workers in the local community rather than on-site all boost a mine’s economic impact. Another example is that Randgold does not bus workers to site but provides loans to help employees buy motorbikes. This allows staff to come to work at their own free will and reduces the risk of busloads of workers being stopped from entering a mine in case of industrial action.”