Cape Town plays host to economic dissonance

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It’s that time of year again – economic dissonance week in Cape Town. It starts off calmly enough at the Cape Town International Conference Centre (CTICC), where the wealthy and powerful players of the global mining industry get together to plan the year ahead and then it picks up a bit of turbulence a day or so later when the Alternative Mining Indaba (AMI), held a few kilometres away, brings together the considerably less wealthy and less powerful players.

Over at the CTICC the story is of “Africa Rising”, of this being The African Century. The CTICC story is all about the great wealth that the industry is capable of bestowing on the lucky countries with mineral resources.

Jobs will be created and economies developed if the mining companies are given the scope to do what they do best – extract minerals.

The presentations and marketing material tell a story of a powerful and largely benign industry seemingly able to extract mineral wealth from the ground without disturbing the pristine environment that greets them on day one. Even the enormous equipment used to gouge into the earth’s core looks clean and pretty.

And as for the people at all these mining sites scattered across the globe? Well, they also look clean and pretty. And, of course, they look immensely happy for the employment that the mining industry has favoured them with.

At the CTICC, where legend has it that some delegates walk around with billion-dollar cheques just in case the right deal comes their way, the dress is dark suit with that intense I’m-on-the-cusp-of-a-really-big-deal look.

At presentations companies and analysts talk of the need to curb costs, with the implicit – and sometimes explicit – demand that governments rein in wage demands, reduce tax charges and allocate mining licences more swiftly and easily.

Alternative

The implied alternative, for individual governments, is to risk alienating companies, which will easily find more welcoming jurisdictions where the authorities are prepared to be less demanding on crucial matters relating to labour, the environment and tax.

Down the road, in an inevitably less salubrious setting at the AMI, representatives of communities, labour and NGOs discuss ways to distribute more widely the benefits from mining activity.

The title of this year’s indaba, “Our resources, our future, putting local people first”, hints at the inevitable clash with mining companies, whose sole concern is “our shareholders”.

The presentations at AMI, where there is no visible dress code, are in stark contrast to those at the CTICC.

At AMI we saw grim videos and listened to shocking stories of huge swathes of land left in a toxic state; local communities were destroyed as mining wreaked havoc on the air, water and land supplies needed to sustain not only their livelihoods but also their lives.

As the first day’s AMI session progressed it became increasingly difficult to work out how the two sets of seemingly opposite interests – community members and shareholders – could be reconciled.

The community members talk of the “illusion of economic growth” because they never experience it; they talk of the high levels of corruption and increasing inequalities. While there has been some improvement in living standards, this is frequently negated by the impact of environmental destruction and increased inequality.

A parliamentarian from Zambia urged delegates to put pressure on their governments to enforce maximum tax rates. The rapid mechanisation of the industry means job promises are generally not met. The promised boost to foreign exchange earnings amounts to little because most of these foreign earnings are consumed by the companies, which import much of their inputs.

Others argued that governments should be taxing revenue, not profit, which is far too malleable a figure in the hands of sophisticated companies.

Meanwhile, shareholders talk of the need for strong, sustainable earnings growth in a stable regulatory environment. And, increasingly, governments in mining-rich countries are regarded as unwilling to secure harmony from all of this dissonance – or incapable of doing so.


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