Mozambique's Mining Boom Damns the Poorest
Published by MAC on 2014-10-16Source: The Mail & Guardian
The following article deals with Vale and Rio Tinto's earlier foray into coal in Mozambique.
More important, however, is the new role of International Coal Ventures Ltd (ICVL), an Indian government sponsored polyglot which has now bought - for a song and a dance - Rio Tinto's collapsed Riversdale investment in the country.
It's a Joint Venture Company between SAIL, CIL, RINL, NMDC and NTPC "for securing metallurgical coal and thermal coal assets in overseas territories with the following objectives:
- "To ensure supply of imported met coal, of at least 10% of the 2019-20 requirements of SAIL and RINL, i.e. say five million tonnes per annum, from assets overseas as medium term target to be achieved by 2011-12, being a step towards security of supply.
- "To be an owner of about 500 million tonnes of met coal reserves by 2019-20.
- "To meet the requirements and to serve the organizational aspirations of other participating companies like CIL, NTPC and NMDC by providing a facility for enhancing and leveraging their domain knowledge and human capital for international mining business development and also for procuring high quality thermal coal for companies like NTPC"
Cut through the verbiage and one easily sees that this is a different beast from private Indian companies - such as Jindal and Essar, and of course Tata - that have already been guilty for much disruption of community livelihoods, thanks to their foreign ventures. (Some of which, as with Jindal's play in Bolivia, or Tata Steel's in West Africa, have failed).
It's different, not so much because ICVL may act more responsibly than these to the host countries and citizens now targeted - Coal India Ltd (CIL) is a serial offender in this respect - but because, together, these five outfits threaten to effect the largest captive supply takeover of other countries' metallurgical coal, ever carried out.
And one which would make China's similar foreign exploits almost pale into insignificance.
Take another look at ICVL's innocuous-sounding mandate (above). What does "enhancing and leveraging their domain knowledge and human capital for international mining business development" mean in practice, other than serving Indian interests over and above those of any other country?
Previous article on MAC: Mozambique: Mining resettlements disrupt food, water
Mozambique's Mining Boom Damns the Poorest
Nisha Varia
The Mail & Guardian (South Africa)
14 October 2014
Although investments in extractive industries have contributed to high economic growth rates in the past several years, this growth has not translated into significant reductions in poverty or improvements in health and employment for the general population.
For now, expectations around windfall revenues are unfulfilled and Mozambique remains one of the poorest countries in the world. In the meantime, the citizens directly affected by new coal mining operations are buffeted by uncertainty as foreign-owned companies facing losses change hands.
Just two years ago, analysts were making exuberant predictions about Mozambique's high rates of growth and its potential to become a major supplier of coal and natural gas to the energy-hungry markets of India and China.
Foreign investors - including global mining giants Vale and Rio Tinto - had scrambled to claim their stake in the potential windfall and spent billions setting up operations and building-related infrastructure.
Government officials, international donors and development banks optimistically marketed the country's resources. The fortunes of one of the poorest countries in the world seemed finally to be turning, they said.
Perhaps the infusion of investment and resulting profits would translate into self-sufficiency, modernisation and poverty reduction.
Activists, poverty-fighting groups and communities pressed for transparency and fairness in managing the country's natural resources. They worried that the people of Mozambique would not capture a fair share of wealth in deals brokered with sophisticated global mining companies. They demanded safeguards to ensure the money would not be siphoned off to benefit a well-connected elite, but instead channelled to help to transform the country as a whole. They demanded that residents uprooted from mining sites get fair compensation.
Adequate Safeguards
In their haste to take advantage of investor interest, the Mozambican government's speed in approving exploration and mining licenses outstripped its creation of adequate safeguards to protect directly affected populations.
In a 2012 investigation for Human Rights Watch, I found that people displaced from their farmland to make way for Vale and Rio Tinto's coal-mining operations in Tete province ended up in remote and less suitable places, with reduced ability to grow or purchase food, access water and pursue other livelihoods. Many of these households had previously lived within walking distance of a river and markets in the district capital, Moatize.
They struggled to grow their staple crops in the arid region 40km away where they were resettled. Eulália Z*, a farmer living in a Rio Tinto resettlement village, told me: "We are just suffering here. Where they moved us from - there we had enough food to eat and here we do not. There we could do something to earn money and here we can do nothing."
Families that were once largely self-sufficient faced food insecurity or depended on short-term food assistance when it was available.
After protests by farmers resettled by Vale, both companies have worked with the government over the past two years to remedy the situation, including providing resettled families with new plots of land, financial compensation and projects to improve water supply.
But uprooting people and resettling them in a similar or, ideally, improved quality of life is a complex endeavour. It will take years to smooth the profound disruptions to peoples' lives.
Fading Boom
Fast forward to 2014. The boom appears to be fading, and coal-mining companies in Mozambique are struggling with plunging coal prices, weak infrastructure, natural disasters and a flare-up in armed conflict.
A drop in coking coal prices from more than $300 a tonne in 2011 to less than $150 in 2014 has dramatically altered investors' calculations and risk tolerance.
Mozambique's limited reliable transport options to move large amounts of coal from Tete province to the coast has also dampened projections of coal exports.
Vale has suffered losses this year and is selling a stake in its operations. Investors remain bullish about natural gas, but increasingly skittish over exploitation of Mozambique's vast coal reserves.
Tom Albanese resigned as the Rio Tinto chief executive in 2013 in part because of a $3-billion write-down on the company's Mozambique operations. Rio Tinto had bought the coal mines from Australian miner Riversdale for $3.9-billion in 2011 and is now practically giving them away for $50-million to International Coal Ventures Limited (ICVL), a consortium of Indian coal companies.
The resettled communities found out about the sale in a meeting the day after the public announcement, giving them little opportunity to provide meaningful input.
The resettlements are ongoing. Although resettlement of 480 rural households has been completed, the timing and location for resettling an additional 200 urban households is pending.
Changing Companies
In the past five years, while their lives were shuffled around, residents affected by the coal mining venture have had to deal with a constantly changing set of companies: first Riversdale, then Rio Tinto, and now ICVL. The question now is what the sale means for the long-term obligations Rio Tinto took on to improve their precarious living situation.
In a conversation last month, Rio Tinto representatives said efforts were being made to smooth the transition. The contractual obligations towards these communities as stipulated in the mining licence would be passed on to ICVL, as well as 18 local staff already working with the resettled households.
However, some of Rio Tinto's programmes to support resettled communities go beyond their contractual obligations. It is unclear what will happen after the sale.
Outcomes can depend on how seriously senior management takes these commitments.
A leadership that has not gone through the original resettlement may not fully appreciate the depth to which ongoing support and commitments are required for resettled communities.
The relationships between company management and government officials can also facilitate or impede communication with resettled communities and progress on resettlement-related initiatives. Despite a similar transition of contractual obligations and some staff from Riversdale to Rio Tinto in 2011, the companies' approaches varied greatly.
Early Suffering
One reason that farmers in Tete province suffered early on was the absence of strong laws and clear policies to govern resettlement. The government has since taken steps to strengthen its legal framework, including a 2012 decree to regulate how resettlements are carried out.
But it still falls short on key protections relating to, for example, land quality, livelihoods, and grievance mechanisms. It says little about long-term protections and commitments or what happens when a coal mining operation shuts down or is sold.
Long-term commitments by the companies and the government to monitor and support the resettlements are key to minimising the harm suffered in the name of economic development.
The trajectory of Mozambique's extractive industries is still playing itself out, with potential for either disappointments or new wealth that may or may not be used transparently and wisely to improve the standard of living for the majority of its citizens.
Whatever the path, the government and companies should maintain an open, robust dialogue with citizens affected by these projects and provide guarantees for their rights - whether the extractive industries go boom or bust.