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Monday, 21 November 2011
Page: 9104


Senator MARK BISHOP (Western Australia) (22:05): As a member of the Joint Standing Committee on Foreign Affairs, Defence and Trade, earlier this year I participated in a delegation to Africa. That formed part of the committee's inquiry into Australia's relationship with the continent. Together we visited South Africa, Zimbabwe, Ghana and Ethiopia. The committee's comprehensive report was tabled back in June.

Tonight I will address one of the recommendations of the committee. While not forming a central theme within the committee's report, it is nevertheless of vital importance to Australia's mining industry. Let me first provide some context on what I suspect is a little known feature of Australia's relationship with Africa. In this time of global financial insecurity, we are blessed with a wealth of mineral riches in Australia. We are also blessed, thanks to generations of good government, with sound governance arrangements, allowing for the extraction of minerals in a socially and economically responsible way, providing financial returns for the common good. We have efficient transport, good technology, environmental safeguards, and the protection of the public interest in a free market economy, all of which we take for granted. Yet across the Indian Ocean the African continent is only opening the first chapter on perhaps the same experience. Let us hope that it can be, because on the proper development of minerals in Africa rests the greatest contributor to its political, economic and social salvation.

It is estimated Africa has about 30 per cent of world mineral resource production, broken up as follows: bauxite, 43 per cent; copper, 13 per cent; diamonds, 27 per cent; gold, 21 per cent; iron ore, 17 per cent; nickel, 6.5 per cent; platinum, 78 per cent; and uranium, 38 per cent. Goodness knows what the potential resource base might be, as survey work is probably best described as being in its infancy. In commodities such as bauxite, iron ore, copper and uranium, Africa has the potential to be a major competitor to Australia. This is especially true of trade with China, with which it is already deeply engaged. Australia's interest in Africa, however, is much more. It is reported that 150 ASX listed mining and exploration companies are active in 40 African countries. Others estimate that as many as 230 companies could be involved in a wide range of interests. Of these companies, 30 are estimated to have African based operations, with a further 50 routinely involved on assignments. It is a very active part of the Australian mining industry, with estimates of $24 billion in investments.

At government level there has also been a longstanding association. The Department of Resources, Energy and Tourism has an active remit for advice. The Department of Foreign Affairs and Trade is engaged, particularly in conjunction with Austrade and AusAID. State agencies also have an important role to play overseeing mining industry development, extraction and export. More than any other country in the world, we have a long history of the institutional stability and know-how African countries crave. There are myriad ways Australia can assist African countries to maximise the benefits of a profitable mining industry. The obvious area for many is skills transfer, in which we are rich. More-stable African countries, such as Ghana, are said to have that capacity.

However, the area which most caught my attention is that of legal regimes and the appropriate regulatory framework. The importance of a stable institutional frameĀ­work and sound regulatory frameworks for Africa cannot be underestimated. In fact a key recommendation in the report of the Joint Standing Committee on Foreign Affairs, Defence and Trade was that:

The Department of Foreign Affairs and Trade and the Department of Resources, Energy and Tourism should establish and fund a special unit tasked with establishing a regulatory framework model for the mining and resources sector which African countries could consider adopting according to their requirements

I quote that in full knowledge of the massive demands it would place on the aid budget. This is especially true in areas of humanitarian effort such as health, education and other social infrastructure assistance.

However, to repeat my earlier point, nowhere could assistance have more long-term economic benefit than in addressing regulatory regimes. The fact is that since the time of early multinational colonial settleĀ­ment, the attitude to mining in Africa has been one of crude exploitation. Indeed it is still said that the greatest attraction of mining in Africa is that returns can be in excess of 100 per cent. That is, of course, if the appropriate risks are taken. As WA exporters to Africa, who currently have a trade valued at $427 million annually, have found, those risks are many. The most serious risk of course is political instability. This is fed by serious levels of corruption and the lack of simple and transparent legal regimes, occurring across the board. Added to that is limited financial capacity, poor infrastructure, clogged and inefficient ports and poor transport. There is also ineffective government administration.

Yet, with respect to mining in particular, some African nations are looking for assistance. Some are already engaged with government mining regulators in both Western Australia and Queensland. They speak highly of the codes in these two states. They speak highly of the state agreements system in Western Australia. Indeed, during the committee's visit African officials and ministers could not have made their request more strongly—hence the committee's recommendation. They know that without such legal foundations the benefits flowing from mineral riches cannot be tapped for the national good. They know that without those foundations foreign investment is difficult to attract. They know that control over exploration and development is needed to ensure investment in economic and social infrastructure and to generate worthwhile jobs. Therefore the need for regulatory investment is paramount. Addressing social symptoms is worthy and understandable, although it is a poor alternative to building economic capacity. That is a simple truism. At the same time, the difficult nature of the task should not be underestimated. I am indebted to the 2009 submission by Geoscience Australia to AusAID in which the complexity of such regulatory regimes is explained in detail.

The effects of the 'resources curse' are well understood: exploitative behaviour leads to poor financial practices, corruption, environmental degradation and social unrest. It is recognised that, in the short term, the successful growth of mining industries depends on the good practices of international companies. I acknowledge the evidence that companies such as BHP Billiton, Paladin, Rio Tinto and others adopt the same standards that apply in Australia when local standards are inadequate, in the knowledge that international standards are also. Here I should note that many Australian companies are signatories to the Extractive Industries Transparency Initiative. The Gillard government has joined 11 other nations to support the initiative on a pilot basis. The announcement was made on 4 November by the Minister for Foreign Affairs, Mr Rudd, and the Minister for Resources and Energy, Mr Ferguson. Funding of over $12 million will support the initiative.

Proper governance has its roots in political stability, strong institutions, full transparency and effective accountability. A tall order for some, but there is growing evidence of success that now needs to be built upon with adequate regulation. The emphasis must be on sustainability, certainty in the investment environment and strong commitment to economic infrastructure. A good regulatory environment can provide all of this.

Most important for investment certainty is the need for established law and regulation on granting mining tenements—that is, after granting exploration permits, the issue and certainty through legal protection of mining leases for the long term. There also needs to be certainty around the application of royalty regimes. Underpinning all is the means by which mining companies and governments agree on both exploration and development. The process must be transparent, consistent, fair and predictable in such a way that long-term investment is low and financial risk is low. Hence, the importance of what Geoscience calls a draft template, so gaps can be identified and filled from ready-made examples.

This is a large and complex area crying out for Australian assistance. We have the corporate support and wealth of operational knowledge. I have spoken to my colleagues the Minister for Foreign Affairs and the Minister for Resources and Energy, who are both very committed to this process. (Time expired)