Content

German contribution

German development cooperation in the raw materials sector

Copper mine in Zambia.

At the 2007 G8 Summit in Heiligendamm, Germany sent out a clear signal for a new approach to international development cooperation in the extractive sector. This priority for development policy was reaffirmed under the German presidency at the 2015 G7 summit in Elmau.

The raw materials sector can play a major role in reducing poverty and achieving sustainable development. But this can only happen if the necessary political, economic and social environment is supported and stabilised in the partner countries. Good governance, an appropriate legal framework and a transparent and competent administration are key elements and a focus of German development cooperation.

The Federal Ministry for Economic Cooperation and Development (BMZ) has supported or is currently supporting a number of countries in their efforts to develop and sustainably manage their raw materials sector, including the Democratic Republic of the Congo, Chile, Peru, Viet Nam, Namibia, Liberia, Sierra Leone, Laos, Tajikistan and Mongolia.

Governance framework

A stable political environment and a reliable set of regulations are essential decision-making criteria for international investors and also a key factor for ensuring that the principle of sustainability is applied in a country’s extractive sector.

In the context of bilateral development cooperation, Germany therefore supports the governments of partner countries such as Mongolia and Laos in creating and implementing effective mining legislation. Regional projects with the same objective are being rolled out, for instance, in West Africa (currently in Liberia and Sierra Leone) and in collaboration with the Central African Economic and Monetary Community (Communauté Economique et Monétaire de l'Afrique Centrale, CEMAC).

Aspects of this cooperation include:

  • Building a transparent concession system to regulate the award of exploitation and extraction rights;
  • Creating a comprehensive set of environmental laws to protect the environment at all stages, from exploration to site decommissioning. Contaminated abandoned mining sites are a serious environmental problem in many countries;
  • Developing efficient and reliable property rights legislation and tax legislation that is geared to the special situation in the raw materials sector and ensures the right balance is found between the interests of an extractive industry and those of the host country;
  • Drawing up a general legal framework for overseeing compliance with rule-of-law principles and the enforcement of laws. Therefore, legal advice during the negotiation of contracts and when designing the legal framework plays an important role;
  • Developing financial instruments that allow revenues from the raw materials sector to be used for stable and inclusive economic development in the partner countries;
  • Strengthening government supervision of mining through capacity building measures such as the training of mine inspectors.

Transparency

One effective way of curbing corruption is to bring transparency to government administration of raw materials and to commodity and payment flows. This demands properly regulated procedures for the awarding of exploration and extraction rights, set criteria for conducting environmental impact assessments, a clear and efficient taxation system and unequivocal accounting rules for companies.

All this requires strong and effective supervisory bodies, such as fiscal authorities, courts of audit, environmental authorities, mining regulators and parliaments. The German government is helping its partner countries to build such institutions through its development cooperation.

Germany also provides political and financial support to the Extractive Industries Transparency Initiative (EITI). This initiative has set out internationally recognised standards for establishing the transparency of payments made by extractive companies to governments.


Sustainability

It is inevitable that extracting mineral resources will have an impact on the natural environment. For the raw materials sector to be sustainable, it must therefore comply with internationally recognised minimum ecological and social standards. This applies to the entire raw materials cycle: from exploration and exploitation of natural resources, the closure of mines and the rehabilitation of mining areas right up to the processing of raw materials and their use by final consumers and the recycling of final products.

While governments are responsible for regulating and overseeing mining-sector activities, the aspect of corporate social responsibility (CSR) also has a key role to play in this context. An international frame of reference is provided by a number of initiatives, including the Equator Principles, the UN Global Compact and the OECD Guidelines for Multinational Enterprises.


Developing and strengthening the extractive industries sector

The main benefit for countries from the mining of natural resources is long-term revenues, e.g. tax payments from mining companies. For countries that export raw materials it will be beneficial in the medium to long term to develop their own supply and processing industries as they will create far more jobs than the mining industry itself. But exporting countries cannot do this without having in place the necessary infrastructure, skilled labour and appropriate credit services.

Through its Financial cooperation, Germany supports its partner countries with loans for raw material and infrastructure projects. Projects in the area of Technical Cooperation include training measures aimed at upgrading local experts. There is also a strong focus on technology transfer. Introducing modern, efficient and environmentally sound machinery and plants, along with the relevant technological expertise, is vital in building a sustainable raw materials sector.


Extractive resources and human rights

The extraction of raw materials in developing countries is often associated with human rights abuses. Due to a lack of legal regulations and government inspections, small-scale mining, in particular, often takes place under very tough working conditions. Among the biggest problems faced here are the resettlement of indigenous communities, poor working conditions, inadequate health and safety provisions, use of child labour and the violent repression of workers by armed groups in conflict-ridden regions.

Germany takes a strongly human rights-based approach in its development policy. This is why support in the raw materials sector is focused on projects that advance the implementation of social and environmental standards or serve to reduce conflicts connected with raw materials.


Certification and conflict prevention

When deposits of high-value commodities such as gold, diamonds or tantalum are located in conflict areas where there this no monitoring under the rule of law, they may be used to finance armed conflicts.

German development cooperation has been backing efforts in Africa to combat the illegal extraction of and trade in "conflict minerals" since the founding of the International Conference on the Great Lakes Region (ICGLR). To that end, the ICGLR established a "regional initiative to curb the trade in conflict minerals". Measures under the initiative include setting up a regional database to track trade flows and developing a warning system that draws on anonymous tip-offs.

Through its development cooperation, Germany is also supporting the development of a certification mechanism in the Democratic Republic of the Congo and its neighbouring countries to give legally extracted raw material access to the international extractives market.


Small-scale mining

The number of people working in small-scale mining varies according to the prices of raw materials and ranges from 15 to 30 million. Depending on the economic conditions, small-scale mining is thus a major source of income for local communities in many regions. However, small-scale mining operations are often illegal, with sometimes appalling working conditions, and causes very severe environmental damage. Basic human rights are often violated, for instance women's and children's rights or health protection. Another problem is the spread of HIV/AIDS.

Through its development cooperation, Germany actively promotes the implementation of social and environmental standards in small-scale mining. It supports the introduction of technologies that not only deliver economic advantages but also reduce environmental damage. Moreover, Germany provides microfinancing services that enable mine operators to pay for necessary investments.


BMZ glossary

Close window

 

Share page