Infusing Environmental, Social and Governance (ESG) Standards in Africa’s Critical Mineral Sector
Introduction
The DRC-Africa Battery Metal Forum recently held a discussion on the potential of the Democratic Republic of Congo's (DRC) critical minerals mining industry, with an emphasis on Environmental, Social, and Governance (ESG) standards.[i]
As the world shifts towards energy transition metals like copper, manganese, and lithium, the demand for these minerals increases, leading to price fluctuations and availability concerns. This poses a challenge to responsible and sustainable resource exploitation, requiring addressing issues like child labour and human rights violations. Multiple stakeholders, including government, development agencies, and local communities, must be involved in achieving this.
The importance of social investment in mining and the need for internal resources within organizations to uphold ESG principles has been stressed by various proponents.[ii]
Critical Minerals in Africa
Africa is home to a wealth of critical minerals that are essential for the production of renewable and low-carbon technologies. These minerals include cobalt, copper, lithium, manganese, platinum, and rare earth elements, among others.[iii] According to the United Nations Economic Commission for Africa (UNECA), the continent has significant reserves of these minerals, with roughly 85 percent of the world's manganese, 80 percent of the world's platinum and chromium, 47 percent of cobalt, 21 percent of graphite, and 6 percent of copper. Despite these reserves, the mining exploration budget in Sub-Saharan Africa was the second lowest in the world, roughly half that of Latin America, Australia, and Canada. [iv]
This is due in part to a lack of investment in the mining sector, in addition to political instability and corruption in some African countries. Additionally, many African countries have historically focused on exporting raw minerals rather than investing in downstream processing and manufacturing, which could add value to these resources and create jobs. However, there is growing recognition of the importance of critical minerals for the transition to a low-carbon economy, and many African countries are taking steps to increase their domestic production and processing of these minerals. For example, the Democratic Republic of Congo (DRC) is the world's largest producer of cobalt, and the government has recently implemented a new mining code that increases taxes and royalties on mining companies with the aim of increasing government revenue and promoting local beneficiation of minerals.[v]
Nonetheless some African countries are also taking steps to promote local beneficiation of minerals. South Africa, for example, has a beneficiation strategy that seeks to add value to its mineral resources through the development of downstream industries, such as the production of electric vehicles and renewable energy technologies. Similarly, Zimbabwe has announced plans to establish a lithium-ion battery plant, which would use locally sourced lithium and other minerals.[vi]
In addition to promoting local beneficiation, there is also a growing focus on ensuring that the extraction and processing of critical minerals is done in a sustainable and responsible manner. This includes addressing environmental and social impacts, such as water pollution and human rights abuses, in addition to ensuring that local communities’ benefit from mining activities. The African Mining Vision, adopted by the African Union in 2009, seeks to promote sustainable and equitable development of Africa's mineral resources, with a focus on maximizing the benefits to African countries and their people.[vii]
To achieve net-zero objectives in the Global North, access to Africa's abundant green transition minerals, which include bauxite, chromium, cobalt, copper, gold, iron, lithium, manganese, platinum, and uranium, is critical. African nations must capitalize on this opportunity by leveraging their mineral reserves for sustainable growth, economic diversification, and local development through value-added processing and manufacturing. It is essential to strategize how to maximize the value of these resources, promote productive transformation, integrate into global trade systems, and foster long-term industrial development. This approach will also contribute to a diversified, resilient, and affordable supply of critical minerals for the global clean energy transition.
As mining becomes more automated and digitized, it presents new opportunities for shared value creation, such as local procurement, shared infrastructure, and renewable energy development. However, it is crucial to ensure that this shift to clean technologies does not harm African communities through corruption, pollution, and environmental damage. To address these challenges, sound policies and strong institutions are necessary.
Moreover, many critical mineral reserves are located in biodiversity hotspots, conflict-prone areas, and land traditionally owned by indigenous peoples. Therefore, a sustainable development license to operate (SDLO) offers a comprehensive framework of principles and policy options to address ESG risks, manage public finance risks tied to extractive revenue growth, enhance the extractive sector's contribution to the Sustainable Development Goals (SDGs), and maximize the societal benefits of mining.[viii]
Mechanisms for Infusing ESG in Africa’s Critical Minerals Sector
Regulatory Frameworks: Develop and enforce robust ESG regulations specific to the mining sector. These regulations should cover environmental protection, labour standards, community engagement, and ethical business practices.[ix]
Transparency and Reporting: Require mining companies to disclose ESG-related information and performance metrics. Transparent reporting helps stakeholders, including investors, evaluate a company's commitment to ESG.[x]
Local Procurement: Encourage mining companies to source goods and services locally, supporting local economies and creating employment opportunities.[xi]
Capacity Building: Invest in local workforce training and education to improve the skills and knowledge of the labor force, especially in regions with mining operations.[xii]
Environmental Management: Implement responsible environmental practices, including land reclamation, water management, and biodiversity conservation. Mining companies should aim to minimize their environmental footprint.[xiii]
Ethical Supply Chains: Promote responsible mineral supply chains by addressing issues like conflict minerals and child labor. This can be achieved through certification programs and due diligence processes.[xiv]
ESG Financing: Encourage investment in mining projects that align with ESG principles by offering financial incentives, lower interest rates, or other forms of support to companies that adhere to these standards.[xv]
Technology and Innovation: Embrace advanced technologies and innovations that improve the efficiency and sustainability of mining operations. This can include automation, renewable energy integration, and environmentally friendly extraction methods.[xvi]
Conclusion
African countries are increasingly recognizing the significance of critical minerals and taking measures to promote local beneficiation and sustainable practices. In order to achieve success, it is imperative to establish regulatory frameworks, ensure transparency, and foster local engagement, while investing in education and technology. By achieving ESG objectives in the African critical minerals sector, not only will economic growth be stimulated, but communities and the environment can also be safeguarded.
As the world advances towards net-zero goals, African countries have a crucial role to play in the global shift towards clean energy, utilizing their mineral resources; while prioritizing ESG principles. The journey towards sustainable and responsible mining is essential in creating a more equitable and eco-friendly future for all.
[i] ESG in Energy Transition Critical Minerals Mining’ https://www.esi-africa.com/central-africa/esg-in-energy-transition-critical-minerals-mining/
[ii] Ibid
[iii] ‘Africa's critical minerals’ https://mo.ibrahim.foundation/sites/default/files/2022-11/minerals-resource-governance.pdf
[iv] ‘Prospects for U.S. Minerals Engagement with Africa’
https://www.csis.org/analysis/prospects-us-minerals-engagement-africa
[v] ‘Triple Win: How Mining Can Benefit Africa’s Citizens, Their Environment and the Energy Transition’ https://resourcegovernance.org/publications/triple-win-mining-africa-environment-energy-transition
[vi] Ibid.
[vii] ‘AMV – Africa Mining Vision’ https://au.int/en/ti/amv/about
[viii] ‘Critical Minerals and Africa: Avoiding a Zero-Sum Game’ https://resourcegovernance.org/events/critical-minerals-and-africa-avoiding-zero-sum-game
[ix] ‘ESG risks cast pall over quest for African critical minerals’ https://www.maplecroft.com/insights/analysis/esg-risks-cast-pall-over-quest-for-african-critical-minerals/
[x] ‘Minerals Security Partnership Governments Engage with African Countries and Issue a Statement on Principles for Environmental, Social, and Governance Standards’ https://www.state.gov/minerals-security-partnership-governments-engage-with-african-countries-and-issue-a-statement-on-principles-for-environmental-social-and-governance-standards/
[xi] Ibid.
[xii] ‘A Skilled Workforce for Strong, Sustainable and Balanced Growth’ https://www.oecd.org/g20/summits/toronto/G20-Skills-Strategy.pdf
[xiii] ‘Environmental Strategies in the Mining Industry: One Company's Experience
https://doi.org/10.17226/4982.
[xiv] ‘OECD Due Diligence Guidance for Responsible Supply Chains of Minerals from Conflict-Affected and High-Risk Areas’ https://www.oecd.org/daf/inv/mne/OECD-Due-Diligence-Guidance-Minerals-Edition3.pdf
[xv] ‘ESG Investing: Practices, Progress and Challenges’ https://www.oecd.org/finance/ESG-Investing-Practices-Progress-Challenges.pdf
[xvi] ‘The Future of Sustainable Mining: Embracing Technology for a Greener Industry’ https://www.linkedin.com/pulse/future-sustainable-mining-embracing-technology-greener-abhary/