PRIMA COBWEB A PANECEA OF RESOURCE CURSE

Some of what transpired on global academy for mining, oil and gas workshop

at mount Meru Arusha Tanzania July 2014 was the new scenario in mining

sector called PRIMA COBWEB conceptualized by Gilay Shamika.

The famous scenarios in mining sector or extractive industry in general are

resource curse and Dutch disease. Now we have a new one called prima

cobweb as a solution for resource curse and Dutch disease.

Resource curse signifies the predicaments facing the community around which

the resources are available. Instead of the community to benefit from those

recourses, ironically they face predicaments and become marginalized.

While Dutch disease is defined as too many expectations of the Government

and citizens to the extent that all eyes are on resources sector and abandon the

attention on other sectors. In return the Government and the citizens achieve

nothing from mining sector and other sectors because they were left

unattended, the nation is ultimately like having economic disease, everything

paralyzed.

During his presentation on the workshop, Eng.Gilay Shamika came up with

what he called five foundation blocks of mining sector; Policy, Regulation,

Investment, MDAs and Acts. He insisted that if these blocks are

comprehensively linked (cobweb), they dont give any loopholes to either

investors or Government officials vested power to run the sector.

He convinced the audience that, nothing important in managing the mining

sector responsibly which is out of these five foundation blocks. In a broad note,

the mining sector is built on those five blocks.

He went further by driving the point onboard by assimilating those terms

figuratively in architectural manner for the participants to get the wide concept

of prima cobweb;

PRIMA COBWEB CONCEPTUAL ANALYSIS IN DEVELOPMENT OF LEGAL

AND REGULATORY FRAMEWORKS TO CURB RESOURCE CURSE OR

DUTCH DISEASE

POLICY CONCEPT

Policy is like architectural drawing showing the whole structure of the house

needed either by owner or tenant. If is for owners residence, the drawing will

base on the wants and needs of the owner at a pace but for renting, the

drawing may need some time to be adjusted to allure and encompass the

renters needs and wants, which were not specifically according to the owner

pre-requisites. The owner is compelled to change the drawing to satisfy the

tenants otherwise the tenants will turn down the deal.

Like architectural drawing, Mineral policy is the guidance showing the

roadmap of the specific country towards the demand, supply and allocation of

both minerals and the revenues collected from Minerals. The Mineral policies

evolve in response to geological resources, politics circles, economics events

and advancements in technology. All these in totality are dictated by the wants

and needs of the investors. Like tenants, the investors wants and needs may

compel the country to adjust the policy as a threshold action for the influx of

investors in the country. Even if the country is endowed with abundant

minerals, if is not internally industrial-consumer of its minerals, it will be

swayed by investors and therefore it will not withstand its mineral expectations

and intent, to the extent that, a stand-alone mineral police will not be possible

rather it will confer its minerals policy based on FDI, investors-oriented

documented policy. The solution to this is to be focused in changing our

economy into industrialized economy; increase industries internally to use the

available minerals. The United States, Canada and Australia are all major

mineral-producing countries with good to excellent geological prospective. Their

dream is to turn into net consumer and importer of minerals for their

industries instead of exporters. China has already managed this, Brazil is on

the track.

REGULATION CONCEPT

Regulations are like house decorations. The decorations are done to perfect the

appearance of the house (policy). Some of the decorations are needed to widen

the relaxation of the dwellers (like regulators- officials vested power) and make

life worthwhile without confronting terms and conditions of the rent fees and

also with no changes to the erected house (Mining Act so to say). Decorations

like painting can be done by tenants at any time whenever there is a need

without prior consent of the owner or with just informing the owner.

That means there is flexibility in doing decoration to easy and smoothing the

recurring deeds.

In real sense basing on the above assimilation, mining act is supplemented

with mining regulations, rules, administrative orders, administrative guidelines

and other regulatory devices. Such regulations, rules and administrative orders

normally derive directly from a power granted in the mining act to a specific

government officer. Typically, the Minister for Energy and Minerals and, or

Commissioner for Minerals, is granted the authority to issue such

regulations/rules/orders to easy and smoothing the responsibilities needed

with limited time for decisions. To replace or amend a mining act is a

politicized, complicated and time- consuming process. Typically, an

amendment to a mining act will take long time; more commonly it will take

many years so to say. Regulations, on the other hand, can often be changed

very quickly and with limited political input. Thats why, lawmakers are

intentionally wise to consider which subject matter should be in the mining act

and which topics are better placed in regulations. Many mining acts are very

short and lay out only the fundamental framework of the mineral-sector

regulatory system. The details are provided in the regulations. Now you can see

the correlation of regulations logic with decorations logic above.

INVESTMENT CONCEPT

The investment issue has become a global central point of all mineral policies

regardless of the level of the economy of the country developed, developing

and transition economies. Investment and government mining policy are

closely linked. Even the most highly geologically prospective nations will have

difficulty in attracting foreign investment without adequate national policy,

regulatory and fiscal systems. Over the past few years the level of mineral

sector investment has increased in real terms, and those nations that have put

into place regulatory systems which reduce or allow a company to manage

risks at an acceptable level have, for the most part, enjoyed increased levels of

investor interest.

The most difficult thing is to balance the will of the government vis--vis the

common wananchi perceptions on the incentives given to investors. The

governments call incentives while wananchi call them loopholes and become

vocal and enraged with those incentives. To spur investments and at the same

time having policy which pleasing wananchi, needs time as a bargaining tool.

Academically, there are two schools of thought aired internationally. Which one

should start in country policy, economic democracy (China model) or political

democracy (Western model)? And who should decide the West or country itself?

The masterminds of these thoughts among others from Africa are Ngozi Okonjo

Iweala and Dambisa Moyo the author of DEAD AIDS TO AFRICA, WINNER

TAKES ALL and HOW WEST LOST TO CHINA.

MDAs CONCEPT

Mining Development Agreement (MDA) is like a single tenants special

agreement with landlord in a house with other tenants. You might have a large

house with different tenants in that house. But one tenant has some

exceptions with regards to others. May be, he has rent three rooms and he

promised to pay annually while the rest have single rooms and pay after six or

three months.

The one occupied three rooms, asks to be considered by landlord not to do

general hygiene of the surroundings because of the afore mentioned reasons

(occupied 3 rooms and pay annually), the agreement is reached with landlord

and communicated to other tenantsthose who are vocal and objected this

agreement are told to occupy three rooms and pay annually, like their fellow

and they would be considered the same agreement.

But coz they cant have such financial muscles to stretch, the agreement is not

in their favour. The agreement or favoritism so to say is based on the financial

capability of the tenant and the beneficiation of the landlord two ways traffic.

MDAs are of no exceptional compared to the above digestion, MDAs are part of

mining regulations of its own kind.MDAs are agreements reached between large

projects investors and the government on specific areas particularly fiscal

terms. The administrative officers granted power, discretionary upon their

satisfaction, reach that agreement coupled with vast privileges to investor and

the country. Sometime the officers may abuse the power conferred to them and

reach unfavorable agreement to country.

Thats why checks and balance had to be strengthened to thwart such faults or

remove MDAs negotiations into regulations and make it a topical in enacted

Mining Act.

However, governments use agreements to help regulate large mines but handle

smaller operations under specific provisions in the general mining code. In

many instances, even when an agreement is in place, some or all of the mining

code may still apply to the operation. In most cases what agreed are on the

fiscal regime perspectives (like waive of taxes and exemptions on imports

tariffs) but other operations still apply to the Mining code/ act.

Mining projects may be the subject of many types of agreement. At the upper

tier is the agreement, or agreements, between the mine and the government.

A second tier of agreements may define the nature of the mine vis--vis the

owners or controlling interests, i.e., such as a joint venture or shareholder's

agreement. On the third tier will be agreements between the mine and its

financiers, suppliers, contractors, labour and so forth. Additionally, there is

trend in some jurisdictions for mines to enter into agreements with local

communities, landowners, land-users or indigenous people.

NOTE: The legal system of the country (Common or Civil law system) has to

clarify which law supersedes the other if there is any conflict contradicts the

mining act. Is it the mining law or the MDAs and other agreements which will

prevail? And for those conflicts which cross-cut like labour, health, land, water

law and mining act, which one prevail. The ability of a negotiated agreement to

supersede other laws can be important for large Mining projects but some time

detrimental to the country.

ACT CONCEPT MINING ACT IN THIS SENSE

Mining Act is like a physical permanent erected house. The building passes

different stages, from architectural and engineering drawing to setting, building

foundation and walls, and ultimately finishing. Since this operations entails

time and resources consuming, the needs and wants to build the house

requires comprehensive and thoroughly considerations before starting that

exercise. Similarly the intention has to be clear if the house is for owners

residence or for renting. If the intention changes on the course or short time

after building, the whole processes are futile and it will take time and cost to

demolish the permanent structure and seek other building permit from

relevant authorities of which the concrete reasons had to be scrutinized.

Mining Act needs time and resources to be enacted and is permanent for a

solid period of time. Like house, the needs and wants of the Act, have to be

lectured, scrutinized, sensitized and ultimately well linked with policy and

regulations for smooth implementation. Thus, as a general observation,

important policy matters are addressed in the mining Act while administrative

details are embodied in regulations.

From aforementioned concepts, it for sure PRIMA is the five foundation blocks

needed to laydown the appropriate mining sector for the benefit of the nation.

Five foundation blocks of mining sector if linked well, they shall not provide

unnecessary clauses in any solid documents. He remarked.

Fig: PRIMA COBWEB Conceptual framework by Eng.Gilay Shamika2014

(Five Foundation Blocks of Mining Industry)

Like a cobweb, where is not easy to find the starting point to untie the cobweb,

Prima cobweb concept address the same logic, that mining sector is nothing

rather than PRIMA comprehensive linkage(cobweb).

PRIMA Cobweb do not provide contractual and fiscal regime loopholes either

done by Government officials or colluding with investors. The linkage provides

balance and checks.

The policy and Act may be appropriate but if MDAs are inadequate, then the

importance of good policy and Acts are irrelevant. Similarly, if MDAs are good

but policy and Acts are not, non-MDAs operators, will relax.

Prima is the five foundation blocks of mining industry and the panacea of

resource curse or dutch disease if laid down.

PRIMA COBWEB provide to and fro! The end of one block is the starting point

of another block. Likely, in order to laydown one block, you have to start from

the beginning to see if other blocks are aligned with the one you want to fix. It

provides a too way traffic and mirror image of each one.

New terms in Mining sector

Introduced by; Gilay Shamika gcshamika@yahoo.com,gshamika@tmaa.go.tz

Senior Engineer & Gemologist Ministry of Energy and Minerals Tanzania.

Prima Cobweb

Five Foundation Blocks of Mining Industry

PRIMA COBWEB

INVESTMENTS MDAs REGULATIONS POLICIES ACTS