Professional Documents
Culture Documents
The Role of The Mineral Industry in The Economic Industry in The Economic Development of Africa
The Role of The Mineral Industry in The Economic Industry in The Economic Development of Africa
Telephone: 0302-513390/1
The Role of the Mineral Industry
Fax: 0302-500512 in the Economic Industry in the
Email: iasgen@ug.edu.gh Economic Development of Africa
Website: http://ias.ug.edu.gh
– Pathway to Better Model?
Mark Cutifani
Published by the Institute of African Studies, University of Ghana, P. O. Box LG73, Legon, Accra - Ghana
WELCOME ADDRESS BY
PROF. BRIGID SACKEY, AG. DIRECTOR, IAS
I wish to welcome you to the first lecture in the series of AngloGold Ashanti Ltd.
lectures to highlight the partnership between AngloGold Ashanti, a gold mining
company and the Institute of African Studies, a research institute. In contemplating
this union, the first thing that comes to mind is, 'what odd bedfellows!' However, a
brief sketch of the mandate of the Institute of African Studies should clarify, if not
bless, this union.
It is within this context that the partnership between the Institute of African Studies
and AngloGold Ashanti should be seen.
The importance of this relationship also derives from the sensitive place the mineral
industry occupies in Africa's political economy and development history. In particular,
gold mining is a key source of income for Ghana, and has been a major source of
livelihood for many Africanfamilies for centuries. As an Institute of African Studies,
we are naturally interested in these livelihoods, poverty reduction and development
issues which are also interests and concerns shared by the mining industries.
The Institute of African Studies conducts research into the manufacture of brass
works, e.g. gold weights, which were used in weighing gold as well as the use of gold
in economic and social activities. Gold for example has been used extensively in
2 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
The Institute of African Studies will be interested in looking at, and creating platforms
for, discussing the reforms and regulations that are needed to create a mining industry
in Africa that is favourable to social and economic development and environmental
protection. This lecture by AngloGold Ashanti is an example of such a platform.
The relationship between AngloGold Ashanti and the Institute of African Studies
began when the former, as part of its social responsibility and commitment to tertiary
education, graciously granted the Institute an amount of $400,000 towards the funding
of the Kwame Nkrumah Chair. It must to be acknowledged that even though the
decision to establish the Kwame Nkrumah Chair for Pan African Studies and
Documentation was taken in 1987 by Prof. Kwame Arhin, Director of the Institute at
the time, its funding came to fruition through the efforts of Prof. Takyiwaa Manuh in
2005, another former director of the Institute of African Studies. The Chair was thus
formally launched in September 2007 and I am happy to announce that the University
Council has approved the appointment of Professor Kofi Anyidoho as the first
occupant of the Kwame Nkrumah Chair for Pan African Studies and Documentation.
Distinguished ladies and gentlemen, from the foregoing, the relationship between a
mining industry and a research institute could be characterized as compatible because
research underlies the very existence of corporate institutions. Thus, the partnership
between AngloGold Ashanti Ltd. and the University of Ghana through the Institute of
African Studies should foster mutual relationships between the mining industry and
academic research to promote development.
3 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
BRIEF PROFILE
After a one year stint at Savage Resources Ltd. as General Manager, he moved to
WMC Limited where he initially worked as Manager, Operations in charge of Nickel
and then as a Group Manager with responsibility for Project Management.
Mr. Cutifani’s next career move was to Normandy Mining Ltd. located in Adelaide.
He spent two years there as Group Executive, Mining and Group Executive in charge
of Mining and Development. He then took up the position of Managing Director of
Sons of GWALIA Ltd in West Perth between 2000 and 2002.
Mr. Cutifani then left his home country Australia, for the Toronto-based Mining
Company INCO. Starting as Vice-President, Mine Operations for Canada and the UK,
he became President, Ontario Operations, and President for North America and
Europe before attaining the high office of Chief Operations Officer.
Mr. Cutifani is a 49 year-old Australian. He and his wife Luana have four young
children.
4 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
Abstract of Lecture
Continental Africa represents the world's most dynamic and exciting social and
economic development potential.
Continental Africa represents the fifth largest economy in the world and it has been
estimated that it is home to more than 40% of the world's natural resources, which is
inclusive of 30% of the world's mineral resources. If we also consider agricultural
development potential and its access to energy and water the Continent has the
opportunity to become the world's leading source of primary goods and products
within 20 to 30 years. In this context and in a world that is drastically short of all
forms of primary resources and products Africa has the opportunity to position itself
as a foundation for the world's economic growth over the next century.
Africa supports one billion people: more than 14% of the world's population. Many
modern commentators, as they point to natural resources and all the things we see in a
material world as the traditional pathways to wealth and economic emancipation,
almost always miss the very essence of Africa, itspeople. Yet today Africa and its
people endure extreme poverty, health and personal security challenges. In the last
century there have been many great leaders in Africa each looking to define a pathway
that would provide a new future for the people of a country, or to provide a role model
for development of its people towards a new state of being within its African context.
It is out of great respect for the people of Ghana and forone of Africa's great
visionaries, Kwame Nkrumah, that I humbly represent my colleagues at AngloGold
Ashanti to put forward our observations and thoughts on how we can partner in
helping Ghana realize its great potential. We respectfully acknowledge the leadership
role Ghana, its leaders, and the people have already played in creating the 'Future
Africa.' We seek to engage and understand how we can become a more positive and
constructive partner in this shared future.
The Minerals Industry has been a cornerstone in the economic development of Ghana
for more than 100 years. At the same time, and based on our personal experiences,
both the industry and the community have been left with a sense of 'promise
unfulfilled'. Mining companies have struggled to deliver sustainable returns and
communities have complained that they have not benefited in a lasting or sustainable
way particularly for those outside the immediate sphere of economic development for
a resource.
5 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
In our discussion we will seek to deal with these observations and frustrations in an
open and forthright way, while putting forward thoughts on how we can bridge the
'expectation gap' both in terms of perceptions and in terms of the reality of delivery on
expectations for all of AngloGold Ashanti's social and business partners. The vision
for 'Future Africa' lives in the hearts and minds of the people of Ghana; as a guest and
partner in the development of Ghana we commit ourselves to your vision for 'Future
Africa'
6 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
Opening Remarks
I must first acknowledge what an honour and a privilege it is to be here with you
today. AngloGold Ashanti’s Ghanaian heritage is more than just part of a company
name. The people of Ghana remain important shareholders in our company as well as
partners in social and business development within Ghana. Through your ownership in
our company we are also partners in the development of the “Future Africa”, with
additional operations and developments in South Africa, Namibia, Tanzania, Guinea,
Mali and the Democratic Republic of Congo. In addition to our African operations we
also do business in Argentina, Australia, Brazil, Colombia, China and the United
States. Together we are Continental Africa’s most significant global mining company.
It is out of great respect for the people of Ghana and for one of Africa’s great
visionaries, Kwame Nkrumah, that I humbly represent my colleagues at AngloGold
Ashanti. In putting forward our observations and thoughts on how we can partner in
helping Ghana realise its great potential we respectfully acknowledge the leadership
role Ghana, its leaders and the people have already played in creating the “Future
7 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
Africa”. We seek to engage and understand how we can become a more positive and
constructive partner in this shared future.
I am not sure I can do justice to both the memory and legacy of Kwame Nkrumah. In
my own personal way I would like to share my experiences of people in Ghana – to
help capture what I see as the essence of this legacy. I am not quite yet a regular
visitor to Ghana – but I have noticed something very strong in Ghana’s people–
something about the way you describe yourselves to other Africans. When describing
your heritage you talk to your proud past and your love of freedom – and your
willingness to put all at risk to maintain this freedom. As every Ghanaian seems to
point out to me –“we were the first African nation to throw off the yolk of European
Colonialism – we secured our independence and we remain proudly independent and
free thinking.”
It is not my intention to dwell on the past – or to deal with the residual impacts of
Western (or Eastern) Colonialism. In the world of Africa there are many more
qualified commentators that can more ably deal with such matters. My focus is to
understand where we are today, within the context of our past, and to explore what
future possibilities could look like for Ghana and its minerals industry.
In dealing with Kwame Nkrumah’s legacy I have referred to the writings of one of
Ghana’s most respected politicians and former AngloGold Ashanti Director, Mr. J H
Mensah. As Mr. Mensah observed, Nkrumah was heavily influenced by the Pan-
Africanist ideology of self-improvement and supported infrastructure development
projects such as road building, the improvement of medical services and the
implementation of the Volta River hydroelectric dam at Akosombo project. He also
allocated considerable resources to improve Ghana’s agricultural base as the
Government established the Agricultural Development Board. This policy was
focussed on improving the export performance of the sector, by regulating marketing
and export trading transactions as well as encouraging the development of new cash
crops to reduce the country’s reliance on cocoa.
the economic and social freedom he sought for the rest of Africa. He realized the
solutions to African problems lie in all African Union Governments pursuing common
policies and planning the economic development of Africa as a whole. Indeed the
independence of Ghana was very symbolic for the Pan-African world, as all Pan-
Africans saw it as the torchbearer for the realization of the decolonization of Africa. In
my own words I see Nkrumah’s vision centred on the concept of a unified Africa.
That vision appears to have been borne of an observation and belief that the
boundaries that define the nations of Africa are substantially artificial. These
boundaries are an artefact of European Colonization. In that context he could see the
limiting impact such artificial boundaries, both in terms of dividing the ideological
bringing together of the countries of Africa and in terms of the practical sharing of
infrastructure across the Continent. In these points he demonstrated a vision of future
political conflicts and the practical limitations such artificial boundaries would have
on the economic emancipation of Africa. To this day we still debate the merits of
Continental Transport Infrastructure and the need to create the conditions necessary to
promote free and safe trade through the Continent. He was a man ahead of his time.
In reflecting on Nkrumah’s dream of “Future Africa” some would argue one of the
weaknesses in his proposition at the time was the economic burden that Ghana bore in
trying to bring African nations together as part of a broader continental economic
entity. While it may have proven to be a “bridge too far”, one must continue to ask the
key question that was posed atthat time – that question must not be about if... but how
Africa can realise its economic and social transformation potential. In this context
Nkrumah’s dream should remain a torch that lights the way, with the leaders of Africa
working together to forge partnerships that give life to this vision.
Continental Africa represents the world’s most dynamic and exciting social and
economic development potential.
Continental Africa represents the fifth largest economy in the world and it has been
estimated that it is home to more than 40% of the world’s natural resources, which is
inclusive of 30% of the world’s mineral resources. If we also consider agricultural
development potential and its access to energy and water — the Continent has the
opportunity to become the world’s leading source of primary goods and products
within 20 to 30 years. In this context and in a world that is drastically short of all
forms of primary resources and products, Africa has the opportunity to position itself
9 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
as a foundation for the world’s economic growth over the next century. In addition to
establishing this potential global resource supply position, the development of this
potential provides a natural opening to the subsequent development of competitive
industrial and manufacturing sectors. That is, not only does Africa’s resource potential
provide a doorway to accelerated economic development, it also establishes a natural
advantage and foundation for developing industrial and manufacturing sectors that
have access to competitively priced raw materials.
Africa supports almost 1billion people, more than 14% of the world’s population.
Many modern commentators point to natural resources and all the things we see in a
material world — the traditional pathways to wealth and economic emancipation —
they almost always miss the very essence of Africa, its people. Yet today Africa and
its people endure extreme poverty, health and personal security challenges. In the last
century there have been many great leaders in Africa — each looking to define a
pathway that would provide a new future for the people of a country, or to provide a
role model for development of its people towards a new state of being within its
African context.
role within a more global context, more understanding of the need to engage with both
its North American contemporaries and the emerging economic powerhouses to the
East.
The challenge for any leadership within society is to identify people’s needs and to
construct collaborative pathways with key social and economic entities to satisfy those
needs. The bringing together of all elements of society to create this pathway remains
a key to political and economic sustainability. At the same time the unintended
consequences of these developments must be contained within a socially acceptable
framework. These frameworks include safety, environment, balanced economic
development of resources over different timeframes and the equitable distribution of
benefits through society. When considering the philosophy and application of
sustainable development principles to the Minerals Industry these frameworks are
critical in determining our success in delivering real value to society.
To put the case for the Minerals Industry and its potential role in creating “Future
Africa” let me make some observations regarding our industry:
- In our modern and developing world the primary or raw materials used for
providing food, shelter, transport and amusement are either grown or mined.
- If land and water are taken as the key finite resources we have to work with
in supporting societies survive and amuse themselves, we must think of
mining and agriculture in terms of these resources i.e. we must measure our
11 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
industry’s consumption of these two finite resources in creating value for our
society.
- It has been estimated that approximately 3% of the earth’s surface is
dedicated to active mining operations— activities to yield the raw materials
to make life as we know it possible.
- It has been estimated that approximately 40% of the earth’s surface is
dedicated to the production of food — activities necessary to feed and sustain
life as we know it.
- It is further estimated that the products mined have improved the net
productivity of the agriculture and farming sectors by at least 50%. Or to put
this differently— it is estimated that we would need to increase the global
footprint of the agriculture and farming sector by a further 50% to feed the
world’s population if we did not have the products of mining to support
global food production.
- It is clear mining’s consumption of land (and water) is relatively low
compared to our other fundamental life preserving activity. At the same time
the mining industry is a key to supporting the agricultural industry’s ability to
feed the world. In this context we are partners in sustaining life as we know
it.
- The mining industry, through direct and indirect contributions makes up
around 20% of global GDP— while facilitating the existence and efficiency
of all other industry sectors.
- At the same time the mining industry generates approximately 5% of all
global warming contributory gases — compared to 13.4% from the
agricultural sector (which includes loss of carbon sink capacity through
deforestation) — the mining industry has helped reduced carbon gas
emissions through its impact on improving agricultural productivities.
My simple message when talking about the mining industry — the world needs the
mining industry to support life as we know it and to ensure we develop the world in an
environmentally sensitive and sustainable way. Without mining we do not have a
sustainable world and Africa does not have a sustainable pathway to its future social
and economic development. If we are looking to blame someone for our short
comings— lets go to the mirror and take responsibility for the world as we see it. In
our world those that consume drive the need to support our society. If we each decide
to be modest in our consumption needs — whether that is expressed through our need
for food, shelter, transport and the items that amuse us, then the world will be a better
12 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
place. Until that time comes we need mining and agriculture to support everything we
do — and to support us to create a sustainable model for the 6.7 billion people that we
share on this “third rock from the sun”.
In this context it remains without doubt that the Minerals Industry represents one of
Africa’s great economic development opportunities — both within its own
development context and within the needs of supporting the world, its people and
every individual’s personal development aspirations.
In my formative years as a young mining engineer I was called upon to describe mine
planning and the business mining to my other engineering colleagues.
- To find an ore body is like finding a needle in a rather large field— much
more challenging than a needle in a haystack. Once we find a prospect the
real work begins. The ratio of successful investments starts with 1000
prospects, which convert into 100 resources, which convert into 10
developments, which convert into 1 economic project. History tells us the
odds are ugly.
- In mining we never know what we will mine. We drill holes to try to estimate
what is in the ground, we mine to what we think is the shape of the ore body
and we process the mined ore based on the samples that we drew from our
limited drilling samples.
- In the context of estimates on estimates… the only certainty in mining is —
we know the answer is always wrong.
- In mining a resource, we know that every day we are one day closer to the
end of the operation. On average — in each year we are mining between 40
and 80 meters deeperthan we did the year before. At the same time head
grade (or the quality of the ore) is probably decreasing… and so the inherent
costs are increasing in the order of 5% to 10% per year, depending on the
nature of the ore body. In addition we have to deal with increasing input and
labour costs — a natural consequence of global cost inflation.
13 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
To help create a successful mining industry we need to reduce the number of moving
parts. In this context the mining industry has its best chance to be successful— from
all stakeholder and partner perspectives— when social and community infrastructure
is stable and supportive. While not diminishing the responsibility of mining
companies to manage their affairs in a sensitive and appropriate way, it must also be
acknowledged by Governments and Communities that we each have a significant part
to play in creating successful business and social partnerships.
When I represent the Minerals Industry to those that are not familiar with the facts of
our industry I find many people are surprised, or in many cases very sceptical of the
story we present. It is unfortunate that we do not promote our industry well. There are
cases of where irresponsible operators have damaged local environments or where the
needs of local and regional communities have not been taken into proper account
through development of resource projects. The term that has been used to capture the
potential downside of resource developments has been termed “The Resource
Curse”by those that seek to simplify or narrowly define the potential unintended
consequence of resource development activities. However, as an industry we must
make sure we identify there are potential negative consequences of some project
developments and deal with them through proper community engagement and project
planning and execution.
14 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
The International Council on Mining and Metals has conducted extensive research on
the issue of “The Resource Curse”. The defining paper on the topic was put together
by Kathryn McPhail in May 2008 —“Sustainable development in the Mining and
Minerals Sector: The Case for Partnership at Local, National and Global Levels”. In
this paper McPhail references NGO studies in 2006 that raised fundamental questions
about the poverty reduction and development benefits of mining investments in certain
developing countries, which included Ghana. In these papers the point is made that
many local community members that are not employed by the mining companies are
often disadvantaged as goods and services in local areas increase in price due to
increasing demand (from those that benefit from higher wages), land access is reduced
because of mining and related activities, environmental degradation and/or loss of
utility of available land through a range of factors. In putting these observations in
context McPhail outlined a number of propositions as put forward by some academics
on the topic:
Large earnings from mineral resources can lead to the Dutch Disease (also
known as the Resource Curse) phenomenon involving exchange rate
overvaluation leading to a decline in the competitiveness of other, non-
mineral economic sectors.
Dependence on such earnings is problematic, if the prices of the minerals in
question are volatile in the short-term or subject to sustained decline in the
long term.
The presence of mineral wealth can encourage governments to adopt
misguided industrial policies that offer protectionist barriers to support
uncompetitive new activities.
An economy blessed with abundant but finite natural resources may over
consume. One reason is that incomes in the short term may fail to account
properly for the depletion (depreciation) of the nation’s capital, thereby
resulting in consumption levels that are unsustainable; the correction when it
comes is inherently damaging to livelihoods.
Some countries blessed with natural resources may be prone to poor
governance and in some cases will experience a “predatory” state
characterized by corruption, political conflict, and inequalities largely created
by state actions.
In the subsequent and associated research and analysis that has been undertaken it is
clear that to fully benefit from their resource endowment all aspects of community and
15 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
resource development should be taken into full account by both developers and
Government/Communities. Successful development strategies — as defined by the
delivery of target outcomes for all key stakeholders - need to take into proper account
all social and economic issues, both direct and indirect. In putting together the lessons
learnt from this research work McPhail outlined a toolkit approach to managing the
identified issues. This toolkit helps identify both the social and economic issues that
need to be considered while putting forward ideas and approaches that have been
successful in various jurisdictions. The toolkit approach was tested in four country
field-based case studies — in Peru, Tanzania, Chile and Ghana. The specific findings
in the research were outlined:
In all four cases, the long-term (50 year) comparison suggests that the
resurgence of mining activity in recent years has been accompanied by
smaller problems in most aspects of the resource curse thesis, than in the
years when mining was stagnant or in decline. For example, Resource Curse
problems seem to have been avoided and exchange rate policy movements
largely compensated for inflationary changes. The growth of non-mineral
tradable GDP was found to be positive in real terms in all four countries and
higher than that of their regional comparators in all but one case (Peru).
There was also some instability in revenue flows that has persisted in some
countries, but the revenue/GDP proportion has been higher, especially in
Peru and Ghana.
At the same time the study did identify a number of problems that were common
across all jurisdictions:
As we look at lessons learnt it is clear that the success of the Minerals Industry in any
jurisdiction is not simply a matter for the developing company, an industry collective
or the governments that regulate activities within their own borders. Companies need
to take into account all factors relating to technical, commercial and social
development and work with all key stakeholders through the planning and
development processes. The social aspects are multi-tiered and exceptionally complex.
In many cases the manifestation of this complexity revolves around reconciling the
multiple and sometimes competing objectives of government and community
groupings. As was observed in McPhail’s paper, the most successful mining countries
had developed strong central-level government reforms, including more effective,
efficient and transparent public expenditure management. However, in most cases
these reforms had not effectively filtered down to regional and local levels. In these
cases mining companies were left to navigate and defend development agreements
that had been negotiated centrally and without adequate reference to local community
interests.
In the eyes of an experienced miner — our most pressing and important challenge is to
support central-level government reforms to impact the broader operating structure for
the Minerals Industry. At the same time, and I like to steal a term our Head of
Ghana— Keith Faulkner, used to describe where we are trying to go in Obuasi, we
must lead the development of local engagement strategies to create a “symbiotic
relationship” with all of our stakeholders, replacing the “parasitic relationships” that
have defined so much of our industry’s history. To elaborate on this point, we believe
we should be setting context and creating the conditions with our business partners
where we can work together in mutually beneficial relationships. A relationship in
which benefits only flow one way is not healthy and it is not sustainable. Like
benefits, the accountability for developing these relationships goes both ways— and
ultimately has the potential to last beyond the life of our immediate working
relationships, to create lasting value in the local and broader community context. To
work with a local contractor is important in terms of capability building. However, if
the contractor does not build and deliver a competitive service their viability will
diminish with the inevitable closure of the mining operation. In this context we are
17 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
only certain about one thing in mining operations — when the resource is depleted the
mine will close. The lasting legacy we need to help build in our communities is a
competitive support and service industry. If we cannot do this together we will not
deliver sustainable business improvement and the opportunity we have to transform
Ghana’s long term potential into future and viable business opportunities will
potentially be diminished.
In our own way we are looking to move beyond the one-way “colonial relationships”
of our past, to create “real partnerships” for our shared future.
In setting up the conversation for our engagement within Africa it is also important to
deal with a few other myths that have developed around our industry. In quoting
statistics I have used the South African minerals industry statistics for 2008 as a
guideline — with adjustments to reflect AngloGold Ashanti’s unique asset and
operations mix in Africa. To this end I hope to demonstrate that “local really is local”.
The revenues generated by the sale of the products of mining were allocated back to
input costs in the following proportions:
In almost all cases more than 80% of expenditures relating to the extraction of mineral
resources are local. Salaries and wages relate to those salaries and wages paid to those
working at site. All other expenditures are generally sourced through local businesses
or agencies. The only significant expenditures that occur outside of a direct
expenditure into or through local economies come though payments to shareholders
and payments to governments through taxes and royalties. In this case, assuming 50%
of shareholders are South African, the actual direct offshore payments drop to a very
18 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
small number. Mining is a local business — and the primary beneficiaries are local
individuals and communities.
In dealing with Governments in Africa it is clear that each is looking to establish “the
right balance” in managing their resources responsibly, for the people and the long
term benefit of the nation. Tax and royalty regimes are constantly being reviewed as
the dynamic nature of revenue and cost streams change, reflecting our global context.
Mining companies are generally equipped to manage cost volatility, as it is a common
issue across our globally competitive universe. However, where governments add to
this volatility by changing fiscal regimes, the ability of a mining company to adapt and
be flexible is severely limited. As a coping mechanism mining companies must either
cut capital programs and/or discretionary operating costs. In both cases competitive
positions are compromised and the long term health of the business and its associated
contribution to the community will decline. Mining companies need fiscal policy
certainty to ensure they are positioned to cope with the natural volatility and
competitive pressures that prevail in the global market place.
To add a further point— the mining industry is a risk-based industry where investors
have an informed and relatively well-developed understanding of the cyclic and
speculative nature of business. They understand the long dated nature of exploration
expenditure necessary to sustain competitive production and cost profiles. Such
speculation and risk taking is not easily accommodated within a public institution —
or certainly within the narrower confines of shorter term public budget accountability.
Invariably shorter term and urgent community programs will drive out longer term
strategic investment in relatively high risk exploration expenditures. Global
investment managers can defray risk across an investment portfolio and private
mining companies can defray risk across multiple operating jurisdictions.
While it could be argued that a nationalised mining company could create a similar
globally diversified portfolio it is becoming clear that “other nations” are becoming
increasingly concerned by third party government control of resource developing
mining companies. There are a number of examples where even small holdings in
mining companies are impacting sovereign decisions with respect to resource
ownership of companies and assets in some countries. The very nature of this concern
will, in my view, be a further compelling argument for why countries will not go
down the nationalisation road.
In the history of the world and in looking at today’s reality — not one country of the
181 official countries listed as signatories to the UN has developed, and is currently
operating, a material or successful nationalised mining industry where the operational
activities, as opposed to the ownership of the resources, are carried out by the state.
The rise of the left leaning South American ideology may well see history repeat itself
20 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
in some of these Latin American states. As they say in looking at history, “ignoring
the mistakes of the past dooms one to repeat them”.
Having made these points we are not suggesting any of our current models are
working as they should. We make the argument that a robust and sustainable industry
needs multiple stakeholder engagement to help develop a model that works for each
resource and community and social circumstance. In each case we also acknowledge
sovereign ownership of resources and the rights of the people, through the state, to set
the agenda and strategy to ensure the development of resources to the benefit of the
community at large. However, we do respectfully put forward that a stable and
consistent policy framework is good for industry and good for the long term
development of the country’s natural resources. Ultimately, the people and
communities will be better serviced by success within both contexts.
The mining industry in Ghana has been a significant contributor to the development of
the country for more than 100 years. Through the Obuasi operation and the Ashanti in
AngloGold Ashanti, we have been part of most of that history. In 2008 Ghana was the
ninth largest gold producer in the world. The mining sector direct contribution to GDP
was in excess of 6%, which is consistent with the broader African statistics — with an
indirect contribution to the economy estimated to be in the 15% to 20% range. The
mining industry is the third largest tax paying sector in Ghana, with US$128M
representing 15% of total collections. Mining represents 43% of gross export revenues
— with 2008 revenues of US$2.3B.
In the 32 years from 1953 to 1985, prior to the introduction of the new Minerals Code,
Ghana had experienced volatile per capita growth rates, recording more negative
growth years than positive growth years through that period. Since 1985 the country
has reported 24 years of consistent positive per capita growth rates. This is a
remarkable achievement. AngloGold Ashanti operates two significant gold mining
operations in Ghana. Obuasi has been mining for more than 100 years and Iduapriem
has been operating since 1992. The operations employ more than 7,000 employees
and contractors. Together we produce around 550,000 ounces of gold per year.
However, in measuring the value of a business and its contribution to the community
one must look beyond the numbers;
21 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
While we remain committed to the development of our business within Ghana we are
also the first to acknowledge our mistakes and the lessons that inform the strategies
that we are putting in place to create our new future.
In the first instance we acknowledge we have not been good listeners with respect to
Ghana, its traditions and its way of doing business. We have not understood that a soft
word does not necessarily mean a soft intent— we are learning to listen and watch
carefully. Instead of trying to change community culture we are learning that real
success comes when you take the time to understand culture — and learn how to work
within a culture to achieve business results. As we have adjusted our approach success
seems to be easier to achieve.
While we have grown and managed our business through Government structures we
are also learning about traditional community leadership and influence structures that
still operate within the regional and local community context. While these structures
increase the level of complexity we see in our business, they are also providing
alternate disputes resolution avenues. In this context we must remain flexible to a
range of possibilities for shared outcomes.
The net impact is we have too many expatriates working in areas where local
Ghanaians should have the requisite skills and we are short where we see very specific
global technical skill requirements. In this context we are changing our skills mix that
will result in a much higher proportion of local workers.
At the same time we have also recognised that we have not developed an operating
structure and a management process in which we effectively involve our local
workforce and leadership teams. We have now developed a new operating model for
AngloGold Ashanti — developed with some of our Ghanaian leaders and workers —
that will be used as our local operating model. This model will also be the leadership
and management development model that will help us to grow our future business
leaders. We are not aware of any other mining company that has developed a more
comprehensive organization and operating model.
As an aside I should also make the observation that we have many Ghanaians working
within senior management positions outside of Ghana. In that context we are truly a
global company providing opportunities for Ghanaians to grow within Ghana and in
the broader global context. While we encourage many of our global Ghanaians to
continue to consider careers back home — we need your support to ensure we make
Ghana an attractive long-term home for these very talented global executives.
We recognise we are partners in the business and we are partners in our communities.
In bringing these conversations to a close I will try to summarise our learnings and our
recommendations within the broader African context.
First, if we cannot align on the relevance of industry to the world and its future
progressive development then we are all in a rather meaningless conversation. Mining
is essential to the world — it is essential for the economic development of old and
new economies and the realisation of the dreams and aspirations of 6.7 billion people.
It is essential for both economic and sustainable development — in every sense of the
word.
Africa is home to 14% of the world’s population, and 40% of the world’s natural
resources. The world needs Africa and Africa needs the world. The nature of this
equation provides Africa with an opportunity to develop its natural resources for the
benefit of the world — but more importantly for the benefit of its people. Our African
leadership must look beyond political and economic ideology and create an
environment where the world will bid competitively for its resources — but within the
context of improving Africa for and with its people.
In competing for and developing Africa’s resources those companies that seek to
develop Africa’s resource potential must deliver a model that supports the
development of its people — as the pathway to developing the Continent’s long term
and sustainable potential. It is Government’s solemn responsibility to ensure and
secure these outcomes for its people.
The Governments of Africa must provide an environment where business can invest
with confidence. Good governance expressed through constructive legislation, honest
24 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
and transparent business practices and outcomes focused partnerships must be the
starting point for true development collaborations — where partners are judged by
what outcomes they can deliver for the country and not based on narrow political or
economic ideology.
In the case of industry and governments we must come together with open minds and
an understanding that true partnerships reflect a two way commitment to understand
each others needs and a willingness to find solutions that are flexible enough to deal
with our complex world. Governments must be willing to understand the need for
certainty when making investments, in addition to understanding input costs structures
and the extraordinary pressures that face companies working low margin projects. At
the same time industry must be willing to accommodate flexible revenue models,
particularly when commodity prices exceed scope of resource revenue models and/or
when, in rare cases, margins generate extraordinary returns while limiting local upside
participation.
I commend to you the work of the ICMM and its sustainability team in applying its
Resource Endowment Toolkit. In the development of this model we have a useful tool
that has documented the experiences of our industry and seeks to provide a practical
guide to solutions that we are all looking for as we create sustainable operations.
It is out of great respect for the people of Ghana and for one of Africa’s great
visionaries, Kwame Nkrumah, that I humbly represent my colleagues at AngloGold
Ashanti. In putting forward our observations and thoughts on how we can partner in
helping Ghana realise its great potential we respectfully acknowledge the leadership
role Ghana, its leaders and the people have already played in creating the “Future
Africa”. We seek to engage and understand how we can become a more positive and
constructive partner in this shared future.
The Minerals Industry has been a cornerstone in the economic development of Ghana
for more than 100 years. At the same time and based on our personal experiences,
both the industry and the community have been left with a sense of “promise
unfulfilled”. Mining companies have struggled to deliver sustainable returns and
communities have complained that they have not benefited in a lasting or sustainable
way — particularly for those outside the immediate sphere of economic development
for a resource.
25 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
In our discussion we have dealt with these observations and frustrations in an open
and forthright way, while putting forward thoughts on how we can bridge the
“expectation gap”— both in terms of perceptions and in terms of the reality of
delivery on expectations for all of AngloGold Ashanti’s social and business partners.
The vision for “Future Africa” lives in the hearts and minds of the people of Ghana —
as a guest and partner in the development of Ghana we commit ourselves to your
vision for the future — and your vision for “Future Africa”.
26 | IAS-AngloGold Ashanti (Ghana) Lecture on Business in Africa
Mr. Mark Cutifani and Prof. Brigid Sackey, Ag. Director, I.A.S, and guest being
ushered into the lecture by a dancer of the Ghana Dance Ensemble
Prof. Benjamin Ahunu, Provost, College of Agriculture and Consumer Sciences, Chair
of the first in the series of the AngloGold Ashanti lectures on business in Africa
Prof. Takyiwaa Manuh (right), former Director, I.A.S., during whose tenure the AngloGold
Ashanti-IAS collaboration was born, with Professors Esi Sutherland-Addy (left) and Kojo Amanor