The secret to transforming mining into sustainable development? Governance

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29-Jul-21

What if we knew the answer to how to unlock social progress for millions of people around the world? We do – it’s good governance, writes ICMM CEO Ro Dhawan and EITI Executive Director Mark Robinson.

Over the last twenty-five years, the number of mining-dependent countries (MDCs) has increased – these 34 countries are now home to 30% of the global population, including 450 million people that live on under US$1.90 per day. MDCs will be key producers of the metals and minerals needed for a low-carbon future. Getting the right governance structures in place will be critical to deliver on mining’s potential to improve people’s lives. With a rapidly increasing global demand for strategic minerals and the transformational potential of the sector to generate socio-economic benefits for MDCs, now is the time to act. Government, industry, and civil society all have a role to play to seize this opportunity to accelerate progress on the Sustainable Development Goals (SDGs).

Time to revisit the ‘resource curse’?

There is a prevailing assumption that countries rich in natural resources suffer from lower economic growth, weaker institutions, and worse development outcomes than those with fewer natural resources. This ‘resource curse’ is seen to prevent resource-rich countries from enjoying the full benefit of their natural resource wealth, due in part to corruption, conflict, and poor governance.

The EITI and ICMM share a mission to strengthen the governance of natural resource development around the world, this being a key ingredient for MDCs to develop their resource endowment sustainably.  We believe that effective natural resource governance can make the difference between millions living longer, healthier and wealthier lives, and individuals facing increasing conflict and inequality.

Recent research by ICMM provides clear evidence in support of our joint mission. The research analysed 41 social metrics, grouped under 12 relevant United Nations SDGs for MDCs. The findings show that, in the last 23 years, significant progress had been made by 75 per cent of these countries and they are now closing the gap with non-resource-dependent countries. Crucially, the report found that the higher the quality of natural resource governance, the stronger the socio-economic progress that was made.

The work of generations

While some lessons from the research might appear unremarkable, they are powerful in helping direct our efforts on improving natural resource governance. First, mining regulations and frameworks on the statute books is not enough to ensure positive socio-economic outcomes – effective implementation is needed to ensure that the full range of potential benefits from mining are captured for MDCs. Second, a stable governance environment has the strongest positive relationship with good socio-economic outcomes. Countries that are more peaceful, have lower levels of corruption, and have a vocal and active civil society with sufficient civic space are better able to translate natural resources into durable social progress. Among this group are countries like Chile and Botswana where mining resource endowments have translated into sustained socio-economic progress.

It is notable that most of the countries in the report found to be ‘catching up’ and most rapidly closing the social and economic development gap with non-MDCs are EITI member countries. This may reflect the contribution that improved transparency in the management of natural resources can make to development outcomes. The EITI can help countries tackle problems of corruption and mismanagement by shedding light on resource use, revenue flows and expenditures that improve socio-economic indicators. EITI member countries like Ghana, Indonesia and Peru are among the MDCs that have made greatest progress in the past 25 years.

A new chapter in resource-driven development

The importance of minerals in the post-Covid recovery and the energy transition present an opportunity for MDCs to translate their resource endowment into progress on the SDGs.

How can this goal be achieved? By working together to ensure the right factors are in place. Governments have a clear role in developing and implementing supportive policy frameworks and creating an enabling environment for development. Global standards and initiatives like the EITI provide the platform that is needed to align the objectives and actions of government, companies and civil society. The EITI Standard can provide a means of assessing how countries are doing in strengthening governance, which is fundamental to overcoming the constraints of the resource curse. 

For companies, actively supporting initiatives like EITI – by participating in processes to enhance disclosure of company payments to governments and encouraging host governments to join the EITI – can yield significant returns in the long run. As can strengthening their own internal governance approaches to combat corruption, increase engagement with civil society, and enhance their disclosure of tax and revenue payments.

For this approach to succeed, it is imperative that threats to civic space are addressed and the free participation of citizens in public debate is actively promoted. The vital role civil society plays in strengthening and maintaining good governance hasn’t always been recognised, but it lies at the heart of EITI’s multi-stakeholder approach. The rising incidence of intimidation and violence against people speaking out against backsliding on transparency or protesting against resource development is a major cause for concern. We see the economic hardship caused and exacerbated by the pandemic, and the increased potential for conflict.

A call to action

Despite these headwinds, the time is ripe to improve governance if we are to see the potential win-win from the predicted low-carbon economy resource boom. The ICMM is committed to continuously raising the bar on responsible mining, including through the application of its Mining Principles across the more than 650 assets its company members operate, in over 50 countries. For the EITI, we see a need for greater adherence to the reporting regime set out in the EITI Standard. Countries rich in mineral resources are invited to join us in the effort to strengthen governance, so the energy transition can accelerate opportunity for making sustained progress on the SDGs in MDCs around the world.