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Extractive Industry (EI) Management ____________________________________________________________. Issues and Challenges & The Role of the ADB --------------------------------------------------------------------------------------------------------- Presentation by G. NEGATU

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extractive industry ei management

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


defining natural resources
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)
the adb and the ei sector
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.
background context of sector in africa
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.
overview of ei management in africa
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.
overview of ei management in africa cont
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
overview of ei management in africa cont1
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
key challenges for nrm in africa
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
key challenges for nrm in africa cont
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
way forward the role of the adb
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
partnerships for regional effectiveness
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
partnerships cont
….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.