21st Annual Investing in African Mining Indaba
Responsible Mining Can Drive African Development

In his keynote address at the African Mining Indaba, African economy scholar, Sir Paul Collier, strongly advised sector businesses to consider how mining can contribute to sustainably developing emerging economies, while still ensuring returns on investment.

Written By:
Caro Malherbe

Sir Paul Collier, director at the Centre for the Study of African Economies at The University of Oxford, opened a keynote discussion on mining and sustainable development at the African Mining Indaba saying, "As of the millennium, Africa entered the decade of exploration and the decade of discovery; what will come now is the decade of extraction."

In this regard, he focused on how mining businesses could help contribute to social cohesion and development and still provide a return on investment to keep shareholders satisfied.

"Mining companies are businesses and businesses need to fundamentally make money, but there has to be some larger sense of purpose. Good management in all companies lies in investing in a good sense of purpose and mission."

He added, "Banks and mining companies are not distinctive. They are both custodians of people’s assets. Banks just learnt the hard way that if you’re the custodian of someone’s money you are at higher scrutiny than the custodians of someone’s assets."

Relationships become assets

He quoted a survey conducted by Oxford students, which found that companies that performed higher in a variety of sectors had "effective relational contracts".

These "contracts" are theoretically understood by all relative parties as relationships and are not legally enforced, but proved to be remarkably persistent, seeming to produce higher performing companies.

"Relationships become assets," said Collier. "The sensible mission for mining companies is to convey the same message to its various clients. When one gives different messages to different audiences, for example: when the public sector is told the company is charitable and shareholders are told they are 'money hungry', there is a risk of completely messing up the relationship. Businesses have to give the same message to both parties."

Mining companies are complex, and that the fundamental relationship is that with government, which has to be a good one, he said, adding, "If they go wrong you have unsustainable business."

Mining companies in Africa have a good message to sell; that investors and financers are the fundamental drivers of development, he believes. "Without the client, there is no development in major poor countries and that is a great role for shareholders to be in".

He noted that the only way a company can remain sustainable is to also have decent returns. "Although there is no exact or right number, a business can promise to operate in a manner that makes it a feasible investment for its shareholders."

Infrastructure and job creation were all part of creating a sustainable mining process, Collier added, advising delegates to "think beyond single mines and locality", and to rather to look at what can be done to improve a sector or region.