Extractive Industry (EI) Management ____________________________________________________________

1. Extractive Industry (EI) Management____________________________________________________________ Issues and Challenges & The Role of the ADB --------------------------------------------------------------------------------------------------------- Presentation by G. NEGATU Ag. Manager, Governance Division (OSGE.1) African Development Bank Tunis, TUNISIA

2. Defining Natural Resources • Natural resources are “gifts of nature”. • They are classified in three main groups: • Renewable (land, water, forestry, fisheries) • Non-renewable (minerals, fossil fuels, metals) • Non-depletable (wind, solar, energy)

3. The ADB and the EI Sector • Traditionally financed lending/non lending operations • Currently involved in private sector operations related to extraction of Natural gas, Minerals, Gold, Titanium, Copper, Alumina, Platinum, Coal, Zinc • The Bank Group…. • Ensures transparency through its due diligence work; • Ensures environmental & social protection through safeguard measures; and • Fights corruption & promotes good governance through sector specific anti-corruption measures. • The Bank Group is also developing a new strategy to guide its engagement in the sector.

4. Background & Context of Sector in Africa • African countries increasingly dependent on natural resource exploitation to finance Development and progress in MDGs • Several RMCs are joining league of oil economies and mineral exporters (Uganda, Sudan, Sao Tome and Principe, Mauritania, Tanzania) • Heavy dependence on EI has political and economic risks: • Commodity price volatility in global market; • Low income elasticity of world demand – low revenue; • Creates enclave economies; with few linkages to the rest of the economy.

5. Overview of EI Management in Africa • Political Issues: • Powerful & corrupt vested interests; • Conflict over ownership/exploitation rights (Sudan, Angola/Cabinda, Niger Delta); and • Illegal exploitation of resources (logging, oil theft). • Economic Issues: • Economic distortions (Dutch disease); • Enclave nature of activities (lack of linkages to economy, foreign ownership); and • Lack of corporate social responsibility.

6. Overview of EI Management in Africa (cont.) • Environmental Concerns: • Over-exploitation (timber in Ghana and Cameroon, Copper in Zambia); and • Ecological degradation (strip mining, gas flaring). • The Globalization Factor: • Intense geo-political competition for natural resources–India & China with limited resources and insatiable appetite; implications for price and standards

7. Overview of EI Management in Africa (cont.) • But all is not lost…… • Some RMC are managing their natural resources well (Botswana, South Africa, Morocco, Namibia) • Key lessons: successful harnessing natural resources for growth and poverty reduction depends on: • Sound management & regulatory practices; • Good governance & institutional capacity; • Respect for the rule of law; and • Good infrastructure

8. Key Challenges for NRM in Africa • Irreversibility of losses and conservation need determined by: • Traditions; • Property rights enforcement; and • Preference for the present relative the future. • Creating viable, integrated, and diversified value chain that sustain wealth and guard environment. • Prudent investment of windfall revenue to diversify economic base and ensure predictable revenue flows

9. Key Challenges for NRM in Africa (cont) • Equitable distribution of benefits • National versus regional and local; • Inter-generational equity; present vs. future generations • Targeted Pro-poor interventions & outcomes • Implementation of good governance and sound macroeconomic policies to: • Curbing rent seeking and corrupt practices; • Manage foreign exchange rate escalation—Dutch disease • Stabilization of revenue volatility and diversification; • Building domestic capacity: technical and managerial capacity for domestic natural resource management

10. Way Forward & The Role of the ADB • Dialogue on Economic Management: • Policy dialogue on effective revenue stabilization and expenditure management through (DBS, CSP, CGP). • Governance & Institution Building: • Enhanced ADB governance programming to promote transparency, accountability & decentralized revenue sharing. • Building capacity in sector ministries & local governments to improve NRM, accountability & transparency of revenue management, legislative capacity to create an enabling environment & promote stakeholder participation; all done through ISP, TA, DBS, SWAP, Grants

11. Partnerships for Regional Effectiveness • Local Level Partnership: with stakeholders to build capacity to manage natural resources, curb corruption & reduce conflicts • Regional Partnership: because many natural resources span national borders and create inter- jurisdictional externalities; to complement regional agreements/initiatives (NEPAD/APRM); for better harmonization of laws, instruments & support programs • International Partnership: to promote transparency, combat corruption and reduce possible conflicts; develop joint strategies to implement and enforce international standards and treaties; and promote corporate citizenship and reduce trade barriers • Government, Private Sector & Local Stakeholders Partnership for effective agenda setting, informed participation up-stream in the management of resources and revenues, and accountability pacts

12. ….Partnerships (cont.) • Knowledge sharing & best practices • Generate relevant and timely knowledge on developments in cutting edge technologies. • Distill lessons and best practices in the sectors, based on regional and global experience. • Convene other development partners around a harmonized and coordinated regional strategy and action plan for building capacity in the EI sector.

13. THANK YOU FOR YOUR ATTENTION