Along with the many challenges that come with starting a mining business in a developing country, one common problem stands out: a lack of infrastructure to support the operation from extraction to market.
In fact, according to the World Bank, Africa faces a $31 billion funding gap ever year in infrastructure support. Traditionally, local companies would find ways to develop their own infrastructure to aid their business, including power generation and transmission, and transportation. But moving forward, an integrated approach of shared infrastructure-usage could fill that role.
While the material being extracted varies, most mines actually share infrastructure needs: railways and ports, power and water, and internet and telecommunications—all types of infrastructure that a host country typically lacks. By entering into shared-use arrangements with host countries, both the company and the country can benefit from infrastructure developed.
The importance of shared-use cannot be understated. Until 2030, the infrastructure gap in resource rich countries globally is believed to be four times higher than that of the past 17 years. And Africa is no exception. Power infrastructure in particular is a top business constraint for mining operations. This shortage inhibits the resource market because without consistent power supply, it is difficult for mining operations to convert to exports. With electricity demand forecasted to triple by 2030, the need for share-use power infrastructure within the extractives sector is significant.
A solution to shared-use power infrastructure is mining companies engaging in grid supply energy rather than self-service. By integrating a mine's power supply into the national grid, electricity can become more reliable which can help expand the mine’s operations, and consistent mining operations would lead to higher exports and tax revenues from mines, contributing to a higher GDP for the host country.
Shared-use infrastructure in other sectors like transportation can have similarly positive results for all parties involved. Countries reinvesting tax revenues from resource extraction into roads, for example, can encourage more firms to invest. Similarly, partnerships between companies to share the costs of building infrastructure like railways can prove to be profitable if they charge the host country an affordable usage fee, thus allowing for a tangible return on an important investment.
Much needed development: a map of planned rail infrastructure development in southeast Africa. Such developments are crucial for countries to develop their mining sectors. Source: CPCS.
Organizations like the Columbia Center on Sustainable Investment (CCSI) are already working to encourage partnerships likes this. CCSI received a grant from the Australian government to develop a framework that would allow multiple mines to share the same infrastructure. A framework of this magnitude is no easy task, which is why best use practices were integrated from around the world, using multiple in-depth case studies carried out in Liberia, Sierra Leone, and Mozambique, and expert opinions across academia, development organizations, and private and public sectors.
The Center for Industrial Development is aiming to facilitate similar collaborations between multiple sectors to invest in this need for infrastructure to sustain resource development. For inquiries into our research on this topic or for consultations, please contact us here.
While it may seem like a long road ahead, strides are taken everyday to help rectify this crucial need for infrastructure development. The benefits from shared-use infrastructure in mining can help African countries capitalize on their abundant mineral resources and convert these natural resources into positive economic growth.
Ande Troutman has been a Research Consultant for CID since March 2017 and specializes in energy policy and emerging markets. She has experience working on environmental policy in both state government and the private sector.