In a wide-ranging Q&A with Critical Resource, Dr Boubou Cissé, Mali’s Minister of Industry and Mines, gives an insider’s view on opportunities amid the downturn and calls on African leaders to take responsibility for successful resource governance.
Dr Cissé took up his current role in late 2013 after working for the World Bank for twelve years. Dr Cissé holds a PhD in development economics and has published widely on economic and human development. He sits on the board of the Nelson Mandela Foundation.
African leaders should take responsibility for translating resources into development
“People in Africa think that countries endowed with natural resources are being exploited. They just see resources being extracted and exported. The revenues generated are not changing people’s lives, especially in the communities surrounding the mines. When you add some of the reports that we read – for example, Kofi Annan’s Africa Progress Report which shows that many billions of dollars have evaporated from Africa through the extractive industries – you begin to ask yourself questions.
I am cautious about what the mining industry is bringing to my country. From an economic perspective, the contribution of mining to Mali’s economy is more than $400 million a year, not to mention job creation and other developments. But people’s quality of life is not changing. In the past, this has been the government’s fault; we were not using resources to transform peoples’ lives or to invest in infrastructure development. Instead, resources went to finance recurrent expenditures, and some was wasted. This is a major problem other African countries are also facing.
Many will think it is the responsibility of mining companies to address this problem. However when we talk about development, it is the responsibility of the country, of the government. The ‘Africa Mining Vision’ was adopted in 2012 and runs through till 2063. It sets goals such as poverty reduction, local content and issues related to the industry’s impact on the environment. These were not part of our vision for the sector before. Previously, we wanted to generate revenues but we did not ask ourselves what we wanted to do with these revenues. This was an extractive industry view; we need to move to a development industry view.”
For Mali, there are opportunities amid the global downturn in the resource industries
“The downturn is not a disaster. It will mean that companies that are not performing as well will need to adjust to new trends and reduce some of their operating costs, such as the cost of expatriates and other inputs. Many inputs are bought from abroad and companies can cut costs by procuring an increased percentage of the inputs locally. A few years ago, most of the companies were operating as enclaves – there were no forward or backward linkages with the rest of the economy or local communities. Mali is seeing this downturn as an opportunity for companies to reconsider their approach and look at how they can do better.
Mali has the reputation of having the lowest production costs in the region when it comes to gold. Until the gold price drops to $1,000 per ounce the major gold mining companies in Mali will do fine. Looking at the cost disparities between some of the major companies in Mali you start to wonder how these differences can be explained. Some companies are performing extremely well in terms of production costs. By contrast, other companies’ production costs are extremely high – they may face problems in the downturns unless they cut costs.”
Mali’s mining reforms will soften fiscal terms while pushing social performance
“Given the global downturn in mining, the Government of Mali needs to take a softer policy towards mining companies, especially when it comes to fiscal aspects. There are one or two companies that had initially forecast profits for this year but will suffer losses. This is not a good time for the government to be hard on them.
We are conducting a mining review in order to come up with new, win-win contracts for the government and companies. Over the past 20 years we have had three mining codes. We have been working with mining companies to get everyone onto the latest contract under the 2012 code. This is a very open, transparent process and we should have new contracts by December 2015.
The original 1991 mining code did not have a single reference to local development. There is nothing in the code that obligates companies to focus on local communities. We now want to change that. Similarly when it comes to mine closure the law has been totally silent about the obligations of both companies and the government. The current government of Mali is not exclusively focused on maximising fiscal revenues; we want to take care of issues such as economic development and mine closure.”
The Sahel’s security risks are under control and should not deter investors
“Recent security incidents in the south of Mali are isolated events. The situation is linked to jihadist campaigns and global terror threats. The core mines are located very far from the north [where armed conflict broke out in 2012 with Tuareg separatist groups], 7 out of 10 major mines are located in the west, more than 2000 km from the conflict. These far away threats do not deter resolute investors; the Syama mine was meant to close in the next 2-3 years but a serious investment in a new deposit at the site will take the mine’s life through to 2024.
The rebellion has not affected production but it might have affected new investors’ perception of the country and the development of green-field sites. We recently signed the Algiers Accord, which signals that we remain the stable country we have been for centuries. The government is also currently working with mining companies to come up with a security strategy for the southern and western part of the country; it is a very good partnership.”
The recent peace accord means Mali’s oil and gas sector is open for business
“Mali’s oil and gas reserves are located principally in the north. With the signature of the Algiers Accord, we will be aggressively promoting oil and gas investment. We have a new Petroleum Act that came into effect in June 2015 and internationally funded projects will build stability and infrastructure in the north.
Early oil and gas exploration was carried out by very reputable oil companies: Eni and Sonatrach were operating on 4 blocks for 4-5 years until 2012. There is no doubt, based on their results, that our country has oil. Many companies left while undertaking feasibility studies when the crisis hit in 2012. Exploration work by Eni and Sonatrach confirmed that there are huge quantities of gas available in the northern fields. Gas discovery would be very positive for Mali as it would address energy bottlenecks in developing the mining industry. Companies will have an appetite for investing in the sector if we can demonstrate that such investments are economically viable.”