"The Challenges of Development, Mining Codes in Africa
And Corporate Responsibility"
Groupe de recherche sur les activités minières en Afrique
Faculté de science politique et de droit
Université du Québec à MontréalWith the collaboration of Thomas Akabzaa
Department of Geology, University of Ghana, Legon
And Paula Butler, Ontario Institute for Studies in Education, University of Toronto

Submitted by Dr. Bonnie Campbell toInternational and Comparative Mineral Law and Policy
Trends and Prospects
Edited by Elizabeth Bastida, Thomas Walde and Janeth Warden
Introduction
Over the 1980's and 1990's, the process of reform of regulatory and legal frameworks
favouring greater harmonisation and stability in the mining sector in Africa has indeed
contributed to creating a more favourable environment for foreign investment. These
measures have entailed however, a redefinition of the role of the state which is so
profound that it has no historical precedent. In this context, they have the potential effectof driving down norms and standards in areas of critical importance for social andeconomic development, as well as the protection of the environment in the countries
concerned. There is in fact strong evidence which suggests that the latter tendency has
been and continues to be the case in an increasing number of situations.
Consequently, present trends raise pressing questions concerning the conditions
necessary to ensure development goals and the role and responsibility of the agents andactors who contribute to the shaping of this process. If the issue of lasting and sustainableeconomic development is to be addressed, it implies taking into account not only the roleof the private sector and specific companies, but as well the role which bilateral andmultilateral financial institutions and the countries of origins of the companies present
play in shaping the investment environment and the norms which regulate it.

2This contribution analyses the process of liberalisation of the African mining sector in
the 1980's and the creation of a new regulatory frameworks for mining in Africa in the
1990's from a developmental perspective.
The case studies considered illustrate a dynamic and open-ended process of the reformwhich translates into three generations of African mining code. The first generation of the
1980's is illustrated by Ghana; the second generation of the 1990's by Guinea, and thethird and most recent by Tanzania, Mali and Madagascar.
Our hypothesis is that the process of economic reform of the African mining sector overthe last twenty years which has had as its objective creating a more favourable
environment for foreign investment, has entailed profound modifications in the role oflocal states which have not received the attention which they deserve. Moreover, themanner in which measures of deregulation and forms of re-regulation and facilitation
were introduced in the 1980's and the 1990's, may not necessarily be compatible with,and even present impediments to meeting the development challenges of the countries
concerned.
Consequently, beyond the role played by individual corporate actors, the conclusion
draws attention to the broader context which needs to be taken into account in addressingthese issues and notably to the importance of bilateral and multilateral actors. The paper
ends by pointing to several possible areas of reform and to measures which might
contribute to enhancing the role of the mining sector is responding to development
challenges.
1. The creation of new regulatory and fiscal frameworks for mining in Africa
To understand present trends, it is important to contextualise the process of liberalisationof the African mining sector which began in the 1980s. While policies of stabilisation
and adjustment went a long way in getting rid of price distortions and liberalising African
economies, this process was accompanied by a very deep redefinition of the relations
between states and markets and states and their societies, involving a redirection,

3

redefining and even withdrawal of the functions of the state as they had previously
existed. While much has been written about the economics of structural adjustment, muchless attention has been given to the manner in which the role of the state was redefined.
One notable exception in the academic literature was the work of T. Biersteker 1 who
noted that while opinion in the 1980's seemed to converge concerning the need to reduce
the state, there was little discussion on what it meant to do so and even less on thepolitical implications. Based on the recognition that the state’s multiple functions wereaffected in different ways2, his analysis led him to conclude that the manner in which therole of the state had been reduced by structural adjustment policies, might well undercut
its ability to redirect its regulatory intervention on behalf of the private sector.
Furthermore, reducing or redirecting the state's distributive intervention in the economy
could well undercut its ability to mediate effectively between conflicting factions within
civil society, especially between industry and the work force, or to build coalitions infavour of the desired reforms. And lastly, by failing to mobilise the private sector
adequately and by weakening the fiscal basis of the state, World Bank and I.M.F.
programmes, concluded Biersteker, could undermine the legitimacy of the state itself.
Biersteker’s contribution is a useful framework for understanding what is happening
presently in the African mining sector. In this respect, it is important to underline theextensiveness of the adjustment experience on the continent and the dynamic nature ofliberalisation which does not seem to have a terminal point. It is in this area of the world1

Thomas J. Biersteker, “Reducing the Role of the State in the Economy: A Conceptual Exploration of I.M.F. and World Bank
Prescriptions”, in International Studies Quarterly, Vol.34, 1990.
2
To summarise briefly, Biersteker suggests that the effect of World Bank and IMF programs has been to:•increase or at least maintain state efforts to influence the economy;•state attempts to regulate the economy tend either to be reduced or to be redirected;•

managing demand by imposing wage restraints or eliminating indexation programs entail a redirection of state mediation, not its
reduction ;•most, though not all policy reforms recommended entail a reduction of state attempts to distribute (or redistribute) the social or
private product of capital ;•policy reforms nearly always entail a reduction in the efforts to produce goods and services directly;

Finally while policy measures are not specifically directed against the planning function - as they leave more and more of the economy
to the market, they should in fact reduce state efforts to plan economic activity. (pages 486-8).

4

where the greatest number of programmes were introduced. As of 1981, 35 countries of
Sub-Saharan Africa implemented 162 structural adjustment programmes (SAPs) with theWorld Bank /and /or the IMF. 3 During the same period, 126 SAPs were introduced
throughout the rest of the world4.
Second, it is important to underline the extent to which during the 1980's, a very central
aspect of the reform process was the profound and very conscious withdrawal of stateparticipation from the mining sector. According to the United Nations Conference on
Trade and Development: "During this period, a deteriorating financial situation has
forced many countries to reconsider the role of the State. State-owned enterprises,
including in the mineral sector, have been privatized, inter alia to reduce fiscal deficit."5
A useful illustration of policies of liberalisation reforms proposed for the mining sector in
the 1980’s which may be considered as the first generation of reforms in this area, isprovided by Ghana, the continent's second most important producer of gold and bauxite6.
As detailed in a study devoted to gold mining in western Ghana,7 the mining sector
received priority attention under the country's Economic Recovery Programme (ERP),
initiated in 1983 as this sector was considered key to the country's economic recovery.
In fact, this sector has received a tremendous boost with policy changes dynamicallyinitiated since 1986. A new Mineral and Mining Law (PNDCL 153) was put in place in1986. There were two addendum : Additional Profile Tax Law (PNDCL 122) and
Minerals (Royalties) Regulations (LI 1349) in 1985 and 1987 respectively. Another law,
Small Scale Mining Law (PNDCL 218) was enacted in 1989 in a bid to give legal
credence to small-scale artisanal mining in the country. Another law established the3

Hakim Ben Hammouda, L'économie politique du post-ajustement, Karthala, Paris, 1999, p. 53.

4CNUCED, Rapport sur le commerce et le développement, 1993, Geneva, 1993.

5

United Nations Conference on Trade and Development, "State Participation and Privatization in the
Minerals Sector". Report by UNCTAD Secretariat. TD/B/CN.1/GE.2/2.30/August/1995. P.4.
6
The case study of Ghana was produced by Thomas Akabzaa, Department of Geology, University of
Accra, Legon.
7
Thomas M. Akabzaa, Boom and Dislocation. The Environmental and Social Impacts of Mining in the
Wassa West Distinct of Ghana, Third World Network, Africa, 2000, Chapter 2, pp. 17-19.

5Minerals Commission as a key institute to ensure a one stop investment centre formining.8
These laws, together with generous provision of tax incentives to foreign investors,
constitute the main legislation which wields jurisdiction over fiscal issues of the mining
sector.
For example, corporate income tax, which stood at 50-55 % in 1975 was reduced to
45 % in 1986 and further scaled down to 35 % in 1994. Initial capital allowance toenable investors to recoup their capital expenditure was increase from 20 % in the firstyear of production and 15 % for subsequent annual allowances in 1975, to 75 % in thefirst year of operation and 50 % for subsequent annual allowances in 1986. Royalty
rates, which stood at 6 % of total value of mineral won in 1975, were reduced to 3.7 % in
19879. Other duties such as the Mineral duty (5 %), import duty (5 - 35 %) and Foreign
Exchange Tax (33-75%) that prevailed and contributed significantly to government
revenue from the sector until the reforms, were abolished.
In addition, the following incentives were introduced :•Exemption from the payment of customs import duties in respect of plant andequipment and accessories imported for use in mining.

•

Personal remittance quota for expatriate personnel was freed from any tax imposed
for the transfer of external currency out of the country.

Apart from these concessions, a holder of a mining lease may be permitted by the Bankof Ghana to retain a minimum of 25 % of the operator’s foreign exchange earnings in an
external account for the purpose of acquiring equipment, spare parts, raw materials andfor dividend payment and remittance in respect of goods for expatriate personnel among

8

Ibid.,pp.17-18.
« According to the statutes the royalty payable ranges between 3 - 12 %, according to the operating
margin of the mine. But in practical terms no mine pays more than 3 % », Ibid., p. 30.
96others10. The study notes and documents that companies have in fact negotiatedindividual retention levels far above the minimum requirement.

To return to a more general level, by the end of the 1980's in the context of thedisappointing overall results of the adjustment process in Africa, the initial stringent
forms of state withdrawal which had accompanied the initial phases of structuraladjustment became the object of serious questioning and new emphasis came to be put on« building capacity », and improving « governance » through the introduction of
institutional reforms. This reflection, illustrated for example in the World Bank's 1992
and 1994 publications on governance, was to become gradually more systemised in the1997 World Development Report which focused entirely on « The State in a Changing
World ». In a parallel fashion, there also occurred a renewal of reflection on institutional
reforms with regard to the mining sector. The process of redefining the role and functionsof the state was undertaken however, above all with a view of creating a favourable
environment for investment and the free play of market forces. Developmental objectives,
notably through re-distributive measures in order to ensure greater social cohesion, or
regulatory measures to monitor the use of non-renewable resources and to ensure theprotection of the environment, were to be placed very much in a secondary position ascompared to the emphasis on policies to attract foreign investment and promote exports.
With regard to the mining sector, as the World Bank became increasingly involved in theconceptualisation and introduction of institutional reforms in the 1990’s, it did so fromthe perspective of a financial institution, privileging strategies favouring short term fiscal
redress and incentives to attract potential investors. In this regard, there is remarkable
continuity between the 1992 study Strategy for African Mining and the 1998 document
Assistance for Mineral Sector Development and Reform in Member Countries11, theformer setting out the rationale and the latter, and notably its Appendix 2, "Summary of

10
11

Minerals and Mining Law, 1986, (PNDCL), p. 153. Ibid.,p. 30.

Peter Fox, William T. Omorato et John Strongman. The World Bank Group. Assistance for Mineral
Sector Development and Reform in Member Countries, Washington D.C., The World Bank, 1998.

7

the Essential Elements of a Modern Mining Code," reading as a synthesis and as a tool
to implement the recommendations proposed in 1992.
The 1992 study was the first systematic presentation of reforms considered needed by
the Bank in response to the fact that the sector was, according to this institution, underperforming. In fact, it only attracted 5% of exploration and capital expenditures of theworld's mining industry.12 In view of the continent's considerable mining potential andthe significance of this sector in certain African national economies, this area of activity
could be considered “an important source of tax revenues and foreign exchange which areessential to Africa’s economic recovery” 13. In order to gain a better understanding of theconcerns of international companies which invest in a developing country, the WorldBank had undertaken a survey which was sent to eighty mining companies including
juniors and majors.
This survey revealed that, after mineral potential and existing infrastructure, which are
the main decision criteria, potential investors look for a stable legal and fiscal framework,
which includes a mining code, contractual stability, a guaranteed fiscal regime, profit
repatriation and access to foreign exchange. Three aspects of the Bank study areparticularly significant to our analysis. First, it noted that macro-economic data was lessimportant because the mining sector is more isolated from other sectors of national
economy, except for some features concerning earning and exportation, such as exchange
rates. Investors also look for a larger and a faster return on equity in Africa than indeveloped countries because higher risk premiums are required for projects in developing
countries. Investors also prefer to keep majority ownership. Furthermore, noted the
document, investors are concerned about corruption and political risks and suffer fromthe lack of geological information in Africa. In short, “perceived mineral endowment,
infrastructure, political stability, investment policies, and institutional framework, are all

12World Bank, Technical Paper No. 18, African Technical Department, 1992. Quoted by Patricia Feeney,"The Human Rights Implications of Zambia's Privatisation Programme"in Micheal K. Addo (ed.) Human
Rights Standards and the Responsibility of Transnational Corporations, Kluwer Law International, GreatBritain, 1999, pp.323-350.
13
Ibid., p. v

8

key determinants of exploration and investment decisions”14 Because the mineralpotential in Africa leaves no doubt, the main decision factor determining an investment is
the perceived risk, especially political risks.
What comes out clearly from the above is the extent to which consideration of what wasneeded to attract foreign investment was very much premised on a sectoral approachrather than one which sought to articulate the contribution of the mining sector into amacro economic objectives involving inter-sectoral linkages for example, with a view of
seeing to what extent the sector could contribute to broader developmental objectives. No
provisions are made to build eventual backward and forward linkages such as thepossibility of value added processing of minerals, which in a resource extraction
economy would normally be considered important development objectives.
More precisely, primary focus for the governments of African countries was seen to reston how to take into consideration a precise set of concerns aimed at attracting investment
and reducing investment risk for private mining companies. To do so, the World Bank
prescribed recommendations in four main areas: a) appropriate regulatory framework; b)
economic and fiscal policy; c) institutional reforms and infrastructure and d)environmental effects.
Second, with regard to the environmental effects of mining activity, the 1992 publicationsuggests that these are generally geographically localised, identifiable and specific, andbecause adequate technology is available to deal with them, the study concludes: "Thenecessary measures to safeguard the environment and health and safety of the populationand the workforce can be incorporated in legislation and regulations."15 The assumption
underlining both documents is that new technologies in conjunction with social pressures
will encourage international mining companies to respect environmental codes. The 1998
document stresses the importance of Environmental Impact Studies – a point to which weshall return.
Third, as a new element of the Bank policy, the issue of social impacts of mining
remained at the end of the 1990's, far less developed than other aspects of regulatory
14

World Bank, Strategy for African Mining, Mining Unit, Industry and Energy, World Bank TechnicalPaper Number 181, Africa Technical Department Series, 1992, Washington, p.18.

9frameworks.

On relations with communities, the World Bank recommended theparticipation of affected people and NGOs in a consultative process. It also suggested theprotection of indigenous peoples. But regarding the compensation of private landowners,(share between state and company), the study remained far less prescriptive than on otherissues. In relations between communities and mining companies, the Bank suggested thatthe ultimate power of decision rested with the state and the Mining Minister if
negotiations failed.
From a developmental perspective what is of central importance is the manner in whichthese documents have conceptualised the role of local states, for the proposed measures
have had a key impact on shaping the institutional reforms which have been
implemented. In this regard, with a view of creating a suitable environment for theprivate sector, the 1992 study specifies the need for: "A clearly articulated mining sector
policy that emphasizes the role of the private sector as owner and operator and of thegovernment as regulator and promoter".16 (Our underlining). Nothing is said concerning
other key functions of governments which are to supervise, to plan, to mediate effectively
and to enforce with a view of bringing binding results.
2. Three generations of mining codes.
A comparative study of the mining codes of five African countries permitted identifying
three generations of codes of which that of Ghana (1986) represented the first, Guinea(1995) the second, and Tanzania (1998) Mali and Madagascar, (both 1999), the third.
The case of Ghana is interesting because the liberalised legislation did indeed provoke amining boom in that country. However, with the benefit of hindsight, questions arise
from a developmental perspective as to the real benefits accruing to the local economy
and population because of the sector’s limited capacity to generate local employment,
because of the extensiveness of fiscal incentives, the lack of capacity to encourage valueadded processing, the huge amounts of foreign exchange earnings retained offshore
which means less control over the country’s foreign reserves, and more generally, the15
16

Ibid. p 47.
Ibid.,p. 53.

lack of capacity of the state to manage resources to meet development goals. 17 In this10

regard, an analysis of the linkage effects of foreign investment in the mining industry
usually employs the concept of retained value, the share of the total value of production
retained within the host country18 to evaluate the contribution of the sector to national
development. The higher the actual value of export value returned to the national
economy, the more the economy is positively impacted by the sector. In Ghana, holders
of a mining lease are permitted by the Bank of Ghana to retain a minimum of 25% of theoperator’s foreign exchange earnings in an external account for the purpose of procuring
equipment, spare parts, raw materials and for dividend payment and remittance in respectof goods for expatriate personnel, among others. Each company negotiates directly withthe government the exact percentage that can be retained outside Ghana.
Currently companies maintain between 60% and 80% of their export earning in foreign
accounts. On the average the Bank of Ghana maintains that an average of 71.2% of valueof all mineral exports is held in offshore accounts. The retained value of 28.8% isperceived as over estimated as no adjustment is made for the import content of local
purchases, such as petroleum products, explosives, and other consumables in the mine.
Consequently, estimates that government revenues represent less that 40% of the retained
value may be considered overly generous.
The Ghanaian experience is particularly striking because it illustrates that a mining boom
may be accompanied by only modest mining employment as production increases and amuch lower contribution to GDP than might have been expected, 2-3%, while mining
represents approximately 40% of total merchandise exports earnings since 1992.
The second generation of codes may be illustrated by the Guinean experience. Hereamong the various aspects of increased liberalization and as illustrated in Article 1619 of
the 1995 Mining Code, the protection of the environment is presented above all as the17

Thomas M. Akabzaa, Boom and Dislocation. The Environmental and Social Impacts of Mining in the
Wassa West Distinct of Ghana, Third World Network, Africa, 2000.
18
Craig Emerson, Mining Enclaves and Taxation. World Development Vol 10. No. 7, 1982, pp 561-571.
19
Article 16 « Protection de l’environnement » reads : « Les opérations minières ou de carrières doiventêtre conduites de manière à assurer la protection de l’environnement conformément au Code del’Environnement. Les entreprises doivent prendre les mesures nécessaires à la prévention de la pollution del’environnement, aux traitements des déchets, émanations et effluents, et à la préservation du patrimoine
forestier et des ressources en eau. »11responsibility of operating companies. The same approach is taken in the 1994 Plan
National d’Action pour l’Environnement (PNAE) which, in contrast to the previous 1993
proposal20, sets out a very minimalist role for the state in the area of environmental policy
and recommends that it should be private operators which should intervene in this area.21
Hence nothing is said about the potential role of Government in re-regulating to ensure
development objectives whether these concern access to a net sustainable return of valueadded, monitoring and capacity to enforce environmental and social norms or labour
standards. Such a strategy is based on the assumption that openness will encourage
vigorous competitive markets in which prices rather than social policies will drive thebehaviour of firms and factors of production they employ and so provide an optimal
allocation of resources. Realistic sustainable environmental outcomes, continues thismode of reasoning, are most likely to be achieved by privately owned companies acting
in response to the pressures of the free market. However, as K. Andersen has suggested, it
is not sure why this “best environmental practice” works. In other words, self-regulating
markets may well depend on quite specific circumstances. Among those proposed, itwould seem that the most important would be intense public scrutiny and highly
competitive markets, notably in countries which have deposits sufficient in size and grade
to attract multinationals. The same author continues:“The primary challenges for the government, and its regulators, will be to negotiate
financial terms and agreements which capture a sufficient share of the rent; to haveregulations in place which are fair, appropriate, and consistent; and, if necessary, to havethe capacity to enforce agreements and compliance with environmental regulations.”22
If developments in the Guinean mining sector since the late 1980’s and 1990’s reveal one
thing it is the country’s difficulty in meeting this primary challenge - negotiating financial
terms concerning the conditions of extraction of its key resources, bauxite and alumina, inorder to maintain minimally stable, rather than declining export receipts and government
20

Bonnie Campbell, “Environmental Policies, Mining and Structural Adjustment in Guinea”, Journal of
Mineral Policy, Business and Environment. Raw Materials Report, published by Raw Materials Group,
Stockholm, vol.13, no.1, April 1998.
21
République de Guinée, Plan National d’Action pour l’ Environnement, PNUD/UNSO/GUI/90/X20, Parc
Scientifique Agropolis, Montpellier, September 1994, p. 22.

12revenue from this critical sector. Moreover, in the absence of intense public scrutiny
and in the presence of a leading mining sector characterised by oligopoly, it is difficult tosee how openness, accompanied by state withdrawal, could be claimed to contribute toguaranteeing vigorous competitive markets.
In the absence of public scrutiny, competitive markets or such a capacity for stateintervention, present conceptualisation of Guinean economic growth strategies andenvironmental legislation may well have unfortunate, cumulative and perverse
consequences in that they contribute to endangering natural resource endowments,
increasing poverty, and hence compromising more sustainable patterns of social andeconomic development. In this regard, a study carried out in 2001 in Guinea incollaboration with the Institut des Sciences de l'Environnement of the Université duQuébec à Montréal suggests to what extent environmental impacts have escaped proper
scrutiny:“There has occurred a deterioration of the quality of air due to dust emissions frombauxite in the atmosphere and this is especially the case during the dry season (November
to May). The quantity of dust emitted is such that its effects are felt even in Guinea
Bissau, that is several hundred kilometres away from Kamsar (the port from which
bauxite is exported). Moreover, massive deforestation linked to mining activity has
contributed to displacing of certain animal species because now that the soil is barren, it
is very poor. The Compagnie des Bauxites de Guinée (CBG) is presently trying todevelop a reforestation technique which will be lasting in view of the advanced state ofsoil degradation. To these problems one must add the management of wastes and oils
which result from the maintenance of mining installations and equipment, as well as the
management of different social impacts which result from the displacement of local
villages due to the extension of the area of activities.”23 (Our translation).

22

Kathleen Andersen,” Mining, privatization and the environment” in Journal of Mineral Policy, Businessand Environment, Raw Materials Report,(Stockholm), vol.11, no.3, 1995, p.27.
23
Geneviève Nolet, Envirobref, Institut des Sciences de l'Environnement, Université du Québec àMontréal, February-March 2001.

13

One is left with the impression not only of the inadequacy of past measures ofenvironmental protection but also of the gap between this heritage and the present
approach as set out in current legislation in this area.
With regard to what we have categorised as the third generation of mining codes, threecase studies were considered. Mali is interesting because its 1999 code was explicitly
modelled on that of Ghana. With regard to the environment, while there are in factprovisions for impact assessments, research carried out in this area points to thegovernment’s absence of resources, its lack of access to information and the lack ofheadway made so far in this regard. 24 In a similar manner in the case Madagascar25, inspite of the introduction of legislation to ensure environmental protection and a new 1999
mining code, there is good reason to question whether the government of this country,
just as that of Mali, is in fact in a position to ensure the enforcement of norms in this key
area, should they not be respected by private operators, for the reasons pointed out by theWorld Bank:« After several years of budgetary reductions, Government institutions lack the humanand financial resources to enforce the law, especially in the context ofdecentralization. »26

Under the circumstances, although countries such as Mali andMadagascar do possess legislation in the area of environmental protection, its application
is far from assured particularly in the context of the increased liberalization contained intheir respective mining codes. This situation appears to leave responsibility for themonitoring and enforcement of environmental norms largely up to private operators and,because of the heritage recognized by the World Bank, there is good reason to remain
sceptical concerning the capacity of local states to question or remedy the resulting
practices.
24

Soulemayne Dembele, “Environnement au Mali. ONG: Partenaires ou Prestataires de services?” In InfoCCA, Bulletin de liaison du Comité de Coordination des Actions des ONG au Mali, no.152, Bamako,
September 2000.
Claudie Gosselin and Touré Bani, “Cohérence des politiques et interventions canadiennes dans la lutte
contre la pauvreté: Le cas du Mali”, The North-South Institute, Ottawa, November 2000,
25
Bruno SARRASIN, Élaboration et mise en œuvre du Plan d’action environnemental à Madagascar(1987-2001) : construction et problèmes d’une politique publique. Doctoral dissertation in Political
Science, Université de Paris 1, 2002
26
WORLD BANK, Project Appraisal Document for a Mining Sector Reform Project, Report No 17788MAG, Washington, D.C., June 2, 1998, p. 6.

14

A last example, that of Tanzania, whose new mining code was introduced in 1998 as
the result of a five-year World Bank-financed sectoral reform project, may serve toillustrate further development issues. Mining in Tanzania has been identified as a priority
economic sector, slated to grow to 10% of GDP (from its current level of 1.5%). 27 A
“strong, vibrant, well-organized private sector” is envisioned.28 In support of this goal,
Tanzania has taken steps to create a policy environment that is highly attractive to foreign
investors. It allows 100% foreign ownership (‘national treatment’ accorded to foreign
investors); guarantees against nationalization and expropriation; and offers unrestricted
repatriation of profits and capital. As with Mali and Guinea, the revised mining code
offers a low royalty rate of 3%, as well as a variety of incentives such as waived importduties on mining equipment and tax exemptions.
While the previous 1979 Mining Act required applicants for mining licenses to present aplan for local procurement of goods and services, such a stipulation is entirely absent
from the 1998 Mining Act. Moreover, the World Trade Organization’s Trade Policy
Review of Tanzania 2000 states: “The authorities indicate that Tanzania does not have
any local content requirements.”29 Given that provisions to build backward and forward
linkages (such as value-added processing of minerals) to resource extraction within theeconomy would normally be considered important development objectives, it appears that
the Tanzanian government has abandoned, or been obliged to abandon, thesedevelopment objectives.
Other changes in the legislation governing the mining sector in Tanzania reveal themanner in which state or political control of the sector is reduced while private investor
influence is enhanced. For example, the 1998 Mining Act introduces a clause (#10)
providing for a “Development Agreement” to be negotiated between holders of mineralrights, and the Minister of Mines. This agreement “may contain provisions binding on the
United Republic … which guarantee the fiscal stability of a long-term mining project27
28

World Trade Organization, Trade Policy Review of Tanzania, (Geneva: WTO, 2000), p. 55.
Ibid.

15

…and may contain special provisions to take effect in the event of a change in theapplicable law.” (Mining Act, section 10.2) With regard to environmental regulations, theDevelopment Agreement may “define the scope, and, as may be appropriate in any
particular case, limit the extent of the obligations or liabilities of the holder of a special
mining license.” While the Development Agreement is not to be inconsistent with the
Mining Act, when the Mining Act confers discretionary decision-making on the Ministeror Commissioner, such discretion must be exercised in accordance with the provisions of
the negotiated Development Agreement. This Development Agreement clause thus
effectively provides private mining companies with a potential legislative loopholethrough which, in certain areas, more favourable arrangements can be obtained from thestate. Such provisions constrain the Tanzanian state’s future ability to introduce policychanges aimed at advancing broad developmental goals.
The process of liberalisation illustrated by these three generations of mining codes
appears to be cumulative and open-ended as illustrated by the fact that Mali’s code was
explicitly modelled on that of Ghana, but now it is Ghana’s legislation which is underreview in order to bring it more into line with what exists in Tanzania. Under thecircumstances, the question which arises is whether a country which deregulates andliberalises in order to be fully competitive in the context of evolving norms andincentives and which respects its obligations under WTO rules, can indeed ensure theenforcement of environmental norms, pursue development objectives that build backward
and forward linkages to resource extraction (such as value added processing of minerals),
introduce “trade balancing” involving export/import restrictions if necessary to build up
local content so as to stimulate local productive activities. The answer appears to be morethan uncertain.

3. Conclusions
1.

Recent forms of « re-regulating » African states and societies, which have as theirobjective creating legal and regulatory frameworks conducive to attracting foreign29

Ibid., p.14.

16

investment, while clearly contributing to the latter, appear to fall very short ofpermitting sustainable development strategies and the introduction of norms andstandards whether with regard to the protection of the environment, social impacts
or labour, conducive to such strategies.
In fact, it may be argued that it is quite the opposite trend which appears to havecharacterised present recommendations 30 which favour a weakening of the fiscal
basis of the state, of its capacity to monitor and enforce and consequently,
decreasing legitimacy and state sovereignty.
In this regard, the study commissioned by the World Bank "Review of Legal andFiscal Frameworks for Exploration and Mining" proposes a "shift in the policy
orientation of developing countries in favour of enabling and facilitating private
investment in mineral resource development"31. Four of the seven components ofthe proposed policy shift set out with a view of creating a favourable investment
climate, concern the regulatory function of the state. The capacity of the state toimplement developmental goals is seriously compromised by the proposal that itshould withdraw even further from regulation of key macro economic instruments.
Moreover, its capacity to ensure a sustainable flow of net returns from mining
activities and its capacity to maintain political sovereignty are in fact challenged ina very direct manner as the following recommendations illustrate:"(i) Economic reform that liberalised the general investment regime (in the areas oftaxation, currency exchange, banking, trade and labour) and opened all sectors toforeign investors.
(ii)Allowing or expanding private access to resources previously reserved to thestate, which involves a major change in the concept of sovereignty for many
developing countries.(Our underlining).
(vi)A reduction in the levels of ad valorem royalties required by the state.
30

Van der Veen, Peter, “The World Bank Experience. Lessons From 10 Years of Mining Sector Reform:
The Road Traveled”, Mining Taxation Workshop, Mining Department, Washington D.C., April 4-5, 2000
31
Koh Naito, Felix Remy and John P, Williams, Review of Legal and Fiscal Frameworks for Explorationand Mining, produced for the World Bank, Mining Journal Books, London, 2001, vol 1, p.6.

17(vii)A reduction in corporate income tax rates, as well as customs duties onimported capital goods, so that they fall within a generally accepted range." 32
The study considers that there has been a fundamental shift in the role of the state innatural resource development which is illustrated by the experiences of Chile andSouth Africa. As a result, it concludes that: " in the early 1990's, two southernhemisphere countries with highly successful mining industries based on a liberal
enabling environment…had become acceptable models to which other countries
could look for inspiration and lessons to enable and facilitate private mining
investment."33
2.

On the one hand, there is little doubt that present forms of liberalisation andregulatory frameworks which are designed to minimise risk and ensure a favourable
investment climate, explain the increased presence of investors in the sector mining
sector. This interpretation is confirmed, in the case of Canadian interests, byMichael Knuckey of Noranda, who underlines that while decisions to invest arecomplex, part of the explanation is to be attributed to: "changes in political systems,
liberalization of investment policies, and the adoption of enticing new mining laws(that) have created an appearance of reduced political risk in many places that wereclearly off limits in the past."34

3.

On the other hand, there is increasing evidence to suggest that such a degree of
deregulation in the absence of a capacity to enforce existing norms in areas
concerning the flow of export receipts, environmental protection or social impacts,

32

Ibid., .
Ibid..
34
Michael Knuckey, "Noranda Mining and Exploration: A New World, A New Direction" paper presented
to the Prospectors and Developers Association of Canada (PDAC) and the Canadian Institute of Mining
and Metallurgy, Toronto Branch, March 13, 1996. See www.noranda.com. Quoted in The North-South
Institute, Canadian Corporate and Social Responsibility, Canadian Development Report 1998, Chapter 4,"Beyond Best Practice. The Mining Sector ",p.75.
33

18

cannot help but lead to a pattern of confrontation which is neither in the interestof local populations, their states nor industry.
4.

Given the degree and forms of state withdrawal over the last 20 years, the question
is no longer whether norms and standards should be defined or what should be thebasis of such norms and standards, but who should define them and how should
their enforcement be ensured.

5.

The above analysis suggests that these issues cannot be resolved by individual
actors within the industry. More generally, the above suggests the extent to which it
is not for industry to undertake to re-regulate new norms for social and economic
development in lieu of the state, notably through the intervention of local orinternational NGO's. The issues are clearly so large that such an approach may wellturn out to be counter-productive for several reasons.

6.

A mining boom will not lead to a process of economic diversification capable ofgenerating long-term sustainable development in the absence of effective public
policies which encourage such a process. In fact, in a study on Latin America andthe Caribbean, the World Bank expressed the fear that:« exploration successes will not necessarily translate into mines, related industries,
employment, and the increase in national wealth if the requisite conditions are notin place»35.

7.

As the North-South Institute's 1998 study points out, evidence to the contrary islacking :« No research has been carried out enabling conclusions to be drawn about whether
Canadian mining investment in general, …contributes or not to sustainable
development. Technology transfer, the generation of employment, provision of

19

capital, and export earnings are often referred to as benefits of multinational
mining investment. We found no data, however, establishing overall effects inrelation to these factors.»36
8.

On the specific issue of labour standards, according to the OECD, the right ofassociation is non existent or seriously impeded in certain mining countries.
Fundamental labour standards, according to the 1998 North-South Institute report,
are seriously restricted in several African countries where mining investment isimportant, notably in Botswana, Tanzania and Zimbabwe.37

9.

Given the present context of increasing deregulation of state developmental
functions, it is critical that private sector actors not substitute themselves to state
actors but rather recognise the negative implications of present trends as these areneither to the advantage of foreign investors, nor the local populations.

In the absence of the capacity of local states to formulate and enforce norms andstandards, the question as to who and how this is to be done takes on a particularly
important character.
In the short term, it is clear that the answer cannot come merely from individual
corporate actors. In view of the very real risk that the present situation should deteriorate
and lead to a pattern of increasing confrontation, there are however, two types ofmeasures which may be taken.
Individual companies can agree to:
1.Adopt a UN protocol or convention on the conduct of business, based on the
Draft Fundamental Human Rights Principles for Business Enterprises drawn up by
the UN Sub-Commission on the Promotion and Protection of Human Rights. These

35

World Bank, « A Mining Strategy for Latin America and the Caribbean : Executive Summary » WorldBank Technical Paper, no 345, Industry and Energy department, 1996, p. 3 (http//www.worldbank.org).
Quoted in Canadian Corporate and Social Responsibility, op.cit. , p.78.
36
Ibid.,pp.77-78.
37
Ibid.,p.80.

20

principles should be the basis of an international regulatory framework that isbinding on states and business enterprises.
2.Implement the OECD Guidelines for Multinational Enterprises, and ensure thatthe designated National Contact Points are given greater prominence, with powers
for monitoring and enforcement. A company's willingness to implement the OECD
guidelines could become a condition of eligibility for all northern government
guarantees and export credits.
Finally, in the present situation of the absence of the capacity of local states to monitor
and enforce norms, it becomes the responsibility of the countries and states of origin of
the companies to ensure respect of norms and standards contained in such guidelines. The
fact that such practices have already begun to be implemented in countries several
Scandinavian countries and are recommended by the European Union's "Guidelines for
European Enterprises Operating in Developing Countries" (1998) is clearly proof of thefeasibility of such measures.
Ultimately however, responsibility to define, monitor and enforce norms and standards
must rest with local states. The current process of redefinition of the role of the statethrough the introduction of increasingly standardised legal and fiscal frameworks with aview of creating a favourable environment for investment but at the expense of its
capacity to respond to the challenges of development is neither viable nor in the interestof either local populations or foreign investors.

Dr. Bonnie Campbell, Professor
Département de science politique,
Faculté de Science Politique et de Droit,
Université du Québec à Montréal,
CP 8888, Montreal, H3C 3P8 Quebec, Canada.
Tel: 514-987-3000 Extension 4574
Fax: 514-987-0218
campbell.bonnie@uqam.ca