Mining sector challenges in developing countries, Tigray, Ethiopia and inspirational success stories from Australia

The urge to make wealth, reduce unemployment, and improve the living conditions of its people pushes the Ethiopian Government to regulate the mining legislation to favour investment in the sector. The external perception is that some aspects of doing
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     Int. J. Mining and Mineral Engineering, Vol. 9, No. 4, 2018 321  Copyright © 2018 Inderscience Enterprises Ltd. Mining sector challenges in developing countries, Tigray, Ethiopia and inspirational success stories from Australia Yohannes Yihdego* Department of Ecology, Environment and Evolution, College of Science, Health and Engineering, La Trobe University, Melbourne, Victoria, 3086, Australia and Snowy Mountains Engineering Corporation (SMEC), Sydney, New South Wales, 2060, Australia Email: *Corresponding author Hilmi S. Salem Sustainable Development Research Institute, Bethlehem, Palestine Email: Benard Ayongaba Camgold Cameroon, B.P. 34386, Yaounde, Cameroon Email: Zarko Veljkovic Geological Survey of Serbia, Rovinjska 12, 11000, Belgrade, Serbia Email: Abstract:  The urge to make wealth, reduce unemployment, and improve the living conditions of its people pushes the Ethiopian Government to regulate the mining legislation to favour investment in the sector. The external perception is that some aspects of doing business in Ethiopia are too difficult, and they increase stakeholders’ investment’s risk and undermine potential benefits. Changes allow for business incentives that include security of tenure, the right to sell minerals, equipment and machinery’s preferential duty and tax  provisions, a 2%–8% production royalty, a 25% mining corporate tax, custom/duties exemptions, carry forward of losses up to ten years, and profits repatriation’s structuring. Ethiopia’s resource intensity trajectory is expected to take off in the coming years. However, without adequate mineral discoveries and a competitive extractive industry, it may land up in a ‘Catch-22’ situation. This hinders the overall progress of the country’s development without   322 Y. Yihdego et al. realising the development of the natural resources. This paper highlights the Ethiopian, mining industry status, strategy, and challenges, including ‘wirehousing and hotelling’, in relation to withdrawal of international companies without completing the mining projects at all stages of projects development (mine to mill), such as exiting during the initial stages of mining industry (i.e., exploration/finding the ore-body), without proceeding to the next stages (mining/extraction/ and transformation/concentration of minerals). Classic contribution of Australia’s mining industry to regional development via innovation, advancement, new discovery, capacity, and economy is presented to formulate, scale up/replicate, and appreciate the gap with the defies facing at regional state level (Tigray) and federal level (Ethiopia) and draw a lesson to other developing nations in relation to what a robust sustainable mining sector can bring to nation’s economy through different themes. This article has heaps of takeaway messages and has brought up untold embedded issues, which can  be an inordinate input to diverse background of miners, mining companies, financiers, stakeholders, and governments’ decision makers, and will be well received by global readers. Keywords:  mining industry and natural resources; minerals and metals; oil and gas; mining legislation; developing countries; Africa; Ethiopia; Tigray; Australia; business incentives. Reference  to this paper should be made as follows: Yihdego, Y., Salem, H.S., Ayongaba, B. and Veljkovic, Z. (2018) ‘Mining sector challenges in developing countries, Tigray, Ethiopia and inspirational success stories from Australia’,  Int. J. Mining and Mineral Engineering  , Vol. 9, No. 4, pp.321–367. Biographical notes:  Yohannes Yihdego is a Senior Scientist at SMEC. He received his PhD at the La Trobe University, Melbourne, Australia. He is also an Honorary Research Fellow/Associate at La Trobe University. He has been working as a consultant and Independent Certifier at multi-national/global engineering consulting firms – Cardno Lane Piper, GHD, SMEC. He has worked extensively on projects across Australia, Middle East, Asia and Africa, with water resource, mining, infrastructure, transport and energy. He worked at Bayan Airag Gold Project (Mongolia), Oyu Tologi (Mongolia), Khnaiguiyah Zinc Copper Project (Saudi Arabia), Padcal Copper-Gold Project (Philippines), Silangan Copper-Gold Mining Project, Mindanao Island (Philippines) and Stockman Copper Mine, Benambra (Australia). He has been working at multi-billions dollar infrastructure/engineering projects, including Snowy 2.0 Hydro-Australia’s largest pumped hydro-energy storage, Melbourne Metro Railway (Australia), Brisbane Airport (Australia) and remediation design (Kuwait). He is a Registered Professional Geoscientist (R.P.Geo) and a Certified Environmental Practitioner (CEnvP). He has produced hundreds of engineering technical feasibility/detail design reports. He has  published/authored several articles, book and book chapters. Hilmi S. Salem a Global Expert – has three university degrees (PhD, MSc, BSc) in Natural Sciences and Engineering. He has worked at academic, industrial, governmental, and non-governmental institutions in North America, Europe, and the MENA and WANA (Middle East, North Africa, and West Asia) regions. His work interests include environmental science and engineering (water, air, soil, and noise pollution, and wastewater and solid-waste management); civil engineering (water resources, geotechnology, geophysics, petrophysics, and seismology); petroleum and mining science and engineering (exploration and reservoir characterisation); renewable energy (sources and technologies); climate change (science, mitigation, and adaptation); socioeconomics (education, health, gender, geopolitics, and human     Mining sector challenges in developing countries, Tigray, Ethiopia 323   and civil rights); sustainable development; and policy- and strategy-making. He has published over 170 publications. Benard Ayongaba holds an MSc in Geology, HDE for Open Cast Mining and Quarrying, Paris School of Mines and is a certified PMP from PMI, Pennsylvania, USA. He is a member of the Society of Economic Geologists (SEG). Currently, he is a Senior Project Geologist with Cameroon gold and has  been a consultant for gold projects in Cameroon. He was involved in the World Bank BRGM geochemical survey for Cameroon; He worked for BHP Billiton Iron Ore. He has conducted rock quarry exploration and aggregate  production in Cameroon (ROCKAS, CMG). He occupied geoscientist and leadership roles for Geovic Cameroon Co-Ni laterite. Zarko Veljkovic has university degrees in Geology–Hydrogeology (BSc, MSc). He worked at the Faculty of Mining and Geology at the Belgrade University, Serbian Geological Institute and Geology Survey of Serbia. He trained in JICA training for Waste Management Technique. He worked on projects for multipurpose groundwater, geothermal energy, waste management and civil engineering works. He has published 15 papers. 1 Introduction Mining companies have been involved at a corporate governance level in many countries around the world (ICMM, 2012a, 2012b; Gunarathne et al., 2016; Suopajärvi et al., 2016). It is believed that recent approaches, experiences, and the successes of mining companies’ past undertakings could add tangible value to the countries where mines are found (Boadi, 2016; Ghorbani and Kuan, 2016; Xiao et al., 2017). While every country is different and has different cultures and criteria for foreign investment and project development, this study mainly reviews approaches that embolden and discourage foreign investment. External perception is that some aspects of doing  business in a country are too difficult, increase investment risk, and undermine the  potential benefits to all stakeholders (Jordan, 2009; Tiainen et al., 2014; Suopajärvi et al., 2016; Tiainen, 2016; US Department of State, 2016). This study discusses how this may  be refined and changed to encourage foreign investment in a country and, importantly, expedite project development through to production and value added to the secondary industry. This study investigates the mining industry in Ethiopia, as it is enriched with plenty of minerals, mines, and hydrocarbon resources. Recently, multi-national mining companies also have been involved globally in the development of new mineral resources’ projects in Ethiopia and have benchmarked this experience to their findings,  based on their first-hand knowledge of the gold, tantalum, gemstone, and Danakil region’  potash projects’ development in the country. Mining companies’ interest is to potentially establish a multi-commodity opportunity, successfully exploit the mineral from the in-situ mineralisation and the waste dumps (Govindan et al., 2014; Petkova et al., 2014; Govindan et al., 2016). Foreign investors into Africa continue to seek the ‘next wave’ of sectors beyond consumer-facing ones, with increase/decrease in Foreign Direct Investment’s (FDI)   324 Y. Yihdego et al.  projects. South Africa was the largest destination, with 95 FDI projects in 2015, followed  by Kenya, Morocco, and Egypt, while Ethiopia ranked 8th (Table 1). Companies already undertaking business in Africa will continue to invest, but will undoubtedly exercise a greater degree of thoughtfulness and be more sensitive. It is  believed that any shorter term changes in FDI levels (example, between 2014 and 2015: Table 1), will be recurring rather than structuring. It is predicted that the evolution of FDI will continue, specifically in relation to growing diversification. Several African economies will continue to mature as financial recovery happens gradually. Moreover, it is forecasted that levels of FDI will remain strong and will continue to propagate. Table 1  Top 15 destination countries by FDI projects (2015), Ernst Young (EY) Africa FDI destination  Number of FDI projects Change  Rank Country 2015 2014% Change   Share ( % )  2015  FDI  share ( % )   Jobs created (  share in % )   1 South Africa 95 120 8.30 Increase in FDI 16.90 6.80 8.80 2 Kenya* 74 62 53.20 Increase in FDI 12.30 3.60 8.00 3 Morocco 66 67 10.40 Increase in FDI 9.60 6.30 17.40 4 Egypt 53 59 11.90 Increase in FDI 8.60 20.508.60 5 Nigeria 41 49 8.20 Increase in FDI 6.90 12.109.20 6 Ghana 32 39 5.10 Increase in FDI 5.30 2.00 1.50 7 Mozambique 30 50 36.00 Decrease in FDI4.20 7.20 7.10 8  Ethiopia  28 32 6.30 Decrease in FDI3.90 2.50 9.70 9 Cote d`Ivoire** 24 15 86.70 Increase in FDI 3.60 5.00 3.30 10 Uganda 23 23 4.30 Increase in FDI 3.10 6.50 1.40 11 Tanzania 15 20 15.00 Increase in FDI 3.00 1.90 1.60 12 Cameroon 13 8 87.50 Increase in FDI 1.90 2.60 0.90 13 Tunisia 13 11 18.20 Increase in FDI 1.70 0.60 1.30 13 Algeria 13 13 0.00 1.70 1.10 2.50 13 Rwanda 13 11 18.20 Increase in FDI 1.70 1.70 1.20  Notes: *Kenya becomes bigger gainer with year-on-year FDI project numbers growing  by over 50%. **Cote d`Ivoire enters in the 15 top list. Source: East Africa rests the most resilient of all, with the four strategic economies (Kenya, Ethiopia, Tanzania, and Uganda) all dignified for growth of greater than 5% for the coming decade. Ethiopia is among the top ten countries on Africa’s Attractiveness Index (AAI) based on macro-economic resilience and market size (Figure 1). This study is a snapshot of the mining industry in Ethiopia, summarising briefly recent legislative reforms and initiatives in the mining sector. It includes mining code requirements and some of the practical issues that may be faced by investors. The aim of this study is to highlight and overview the challenges in the mining sector happening in developing countries, with Ethiopia (Tigray) as a case study. It is important for our approach to analyse the current ‘gap’ in order to clearly understand the country’s     Mining sector challenges in developing countries, Tigray, Ethiopia 325   approach and criteria for foreign investment, and how this can be understood externally and would be deployed by investors (Yihdego and Kwadwo, 2017). In line with this, experience from Australia with the role of its mining industry as a successful economic drive, and lessons drawn from it as a takeaway message is presented. Figure 1  Ernst young (EY) Africa investment attractiveness matrix (see online version for colours)  Note: Size of the bubbles indicates FDI capital investments, US$ billion (2007–2015). Source:  FDI markets and EY’s Africa attractiveness index; 2 Study area Ethiopia is situated in east Africa, in the region termed the Horn of Africa (Figure 2). With a population of 100 million, Ethiopia is the most populous landlocked country in the world, as well as the second-most populous nation on the African continent after  Nigeria. It occupies a total area of 1,104,000 km 2 . The country’s topography is  predominantly comprised of high plateaus. In less elevated regions, particularly the lower lying Ethiopian grasslands and shrub lands in the east of the country, the climate can be significantly hotter and drier. Dallol, in the Danakil’s Depression in this eastern zone, has the world’s highest average annual temperature of 34ºC ( Ethiopia). Ethiopia has its fair share of challenges not only for investors, but also for the Ethiopian Government (federal and regional states) and local communities. Ethiopia is one of the poorest countries in the world, with a very low per-capita income and high rates of unemployment. Currently, Ethiopia’s economy revolves around agriculture.
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