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Mozambique: Mining an Opportunity

Last Updated: August 2009
IDA at Work: Mining an Opportunity

Challenge

Mozambique is rich in minerals and has a favorable geological environment for the development of mining activities. However, in 2001, the impact of mining on the economy was hardly noticeable—representing less than 1 percent of GDP and less than 2 percent of exports. In addition, the Ministry of Mineral Resources estimated that about $10 million in gold and $30-40 million in semi-precious stones were illegally exported from Mozambique each year. Annual fiscal revenues attributed to mining represented about $1 million a year. As a result, the country seemed to be missing out on a great opportunity to expand its economy, create jobs, and reduce poverty.

Approach

The IDA-financed Mineral Resources Management Capacity Building Project was launched in 2001 to improve the institutional capacities in Mozambique’s mining sector. It aimed to reform the regulatory framework, encourage the expansion of private investment in mining, and alleviate poverty in areas where small-scale mining prevailed.

Results

This project helped develop a successful, formal mining sector. As a result, the average annual investment in the mining sector has increased—from US$10 million in 2001 to US$90 million annually from 2002-2006. As a result of this investment, mineral exports are set to skyrocket: from approximately US$6 million in average annual mineral exports from 2002-2006, to the promise of more than US$1 billion annually with the new Moatize coal mine, under construction since March 2009.

Highlights:
- Mozambique’s capacity to process new mining licenses increased exponentially. The old system had major delays in processing new titles. With the establishment in 2003 of a new mining cadastre with four regional bureaus, the system operates efficiently today. As a result, 315 licenses were processed in 2001, 305 in 2002, 590 in 2003, 785 in 2004, 978 in 2005, and 866 in 2006.
- Mining code modernized. New regulations placed the country’s mining legislation on par with international best practice. This included approval of: a new mining law, environmental regulations, trade regulations, regulation for safety and health, and basic norms of environmental management of small-scale mining.
- Geological infrastructure developed. Mozambique had extremely outdated geological information and maps. It was hard to clarify or quantify mineral resources and, consequently, difficult to attract investment. The project conducted a geophysics regional airborne survey covering 192,441 line kilometers (about 168,189 km2) and a high-density airborne survey covering 521,837 line kilometers (about 136,218 km2). With that, the project produced and published geological maps.
- Information streamlined and shared. All map data was delivered to the National Directorate of Geology, where the project established a minerals information system. The project also refurbished the National Museum of Geology, which is helping improve general knowledge of the sector for all interested.
- Established a robust environment management system. Before, the country lacked a robust system to hold mineral licensees accountable to fulfill environmental requirements. The project linked the environmental permitting process to the mineral license application process, so the two could be tracked together. To support that innovation, an environmental and social auditing diagnostic was conducted; an environment monitoring unit was created under the Ministry’s National Directorate of Mines; and an Environmental Management Information System was established.
- Improved sustainability of small-scale mining. Before, small-scale mining was ad hoc and potentially damaging to health and the environment. The project established pilot small-scale mining sites—in clay and gold—to demonstrate improved techniques. These included: 12 sites as ceramic pilots in four provinces, equipped with kilns, with 50 people (including 20 women) trained in their use; and 6 sites as gold pilots in three provinces, with 90 people trained.
- Private sector activity flourished. In 1996, there were 10 private operators. Upon project completion, this number jumped to 22, including large actors with great potential to generate significant revenue for the Government. The project provided direct support on the Moatize coal concession and subsequent approval of a $2 billion mine development plan.

Contribution

The Mineral Resources Management Capacity Building Project was launched in 2001. Of total project costs of US$38.4 million, IDA financed US$21.2 million. In an effort to promote transparency in Mozambique’s nascent mining sector, IDA is currently supporting the Government to implement the International Extractive Industries Transparency Initiative. This multi-donor initiative sets global standards for companies to publish what they pay and for governments to disclose what they receive from extractive industries, thus promoting greater transparency and accountability.

Partners

The Nordic Development Fund contributed US$11.7 million, the Republic of South Africa US$1.3 million, the African Development Bank US$1.2 million, and the Government of Mozambique US$1.1 million.

Next Steps

With a strong foundation for institutional capacity, investment, and production, Mozambique now needs to ensure fairness, transparency, and responsibility so that new revenues go where they are supposed to go—and benefits accrue to the nation as a whole. This is not a time for the Government or IDA to consider the job complete. As part of this effort, IDA sponsored the Resources Industries Corporate Social Responsibility discussion aimed at enhancing the development impact of resource industries through the effective use of its revenues and investments in corporate social responsibility.

Learn More

Mineral Resources Management Capacity Building Project (2001-2007)
Project Documents


For more information, please visit the Projects website.

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