Concern over World Bank's position on funding mining projects

South Africa's Minister of Minerals and Energy, Phumzile Mlambo-Ngcuka, on Monday raised concerns that the World Bank was considering a limit on financing coal and oil projects in developing countries. Mlambo-Ngucka's concerns were prompted by the recommendations in an Extractive Industries Review (EIR), launched by the World Bank two years ago to evaluate the impact of its involvement in the oil, mining and gas sectors. The EIR has recommended that the Bank cease funding coal projects, and phase out its support for oil production by 2008. If followed, the recommendations will have a substantial effect on the Bank's involvement in such projects in developing countries - it is currently financing the development of oil fields in southern Chad, and building a 1,070 kilometer pipeline to offshore oil-loading facilities on Cameroon's coast. According to an Oxfam America report, most of the world's mineral-dependent states - 13 out of 25 - are concentrated in sub-Saharan Africa, and eight of the 25 oil-producers. In its final report, the EIR suggested that "there is still a role for the World Bank Group in the oil, gas and mining sectors - but only if its interventions allow extractive industries to contribute to poverty alleviation through sustainable development." It recommended three enabling conditions that would allow World Bank intervention: a pro-poor public and private sector policy; much more effective social and environmental policies; and respect for human rights. Underlining the complex relationship between mineral extraction and development, a report on Botswana by the Diamonds and Human Security Project of the Montreal-based organisation, Partnership Africa Canada, last year said that while the impact of diamonds on the economy had been clear, the "trickle down" benefits, in terms of the country's social indicators, had been less discernable. Under the pro-poor governance clause, the EIR recommended that before financing a project in any country, the World Bank should take into account the quality of the rule of law; the absence of armed conflict; respect for human rights; and whether the country promoted transparency in the revenue flows in the specific industry. Human rights bodies have noted that highly mineral-dependant economies are prone to corruption. A Human Rights Watch report on Angola this year alleged that state-earned oil revenue of US $4 billion - roughly equal to the entire sum the government spent on all social programmes from 1997 to 2002 - had disappeared from its coffers over the same period. An Oxfam America report last year, "Digging to Development?", concluded that "the statistical evidence clearly undermines the proposition that investments in mining can set a nation on the path of sustained development". The World Bank's review suggested that all extractive industry projects should be classified as "Category A" - likely to have significant adverse environmental impacts - "unless there are compelling reasons to the contrary", while the impact on social and health services, and the effect of projects on vulnerable groups had to be "fully identified". The private sector arms of the Bank - the International Finance Corporation and the Multilateral Investment Guarantee Agency - could only support projects when a country's government was "prepared and able to withstand the inherent social, environmental, and governance challenges", said the review. Mlambo-Ngucka's spokesperson, Khanyo Gqulu, said the minister was speaking on behalf of 19 African mining ministers, who met in Cape Town on Monday, when she told senior visiting World Bank officials not to buckle under pressure from the "green lobbyists". "She pointed out that South Africa already had pertinent environmental legislation in place, and the newly constituted African Mining Partnership was aware of the need for sustainable development which would be effective in alleviating poverty," said Gqulu. In a communique issued on Monday, the African Mining Partnership, launched in Cape Town under the auspices of the New Partnership for Africa's Development, noted that the EIR recommendations "could have a negative impact on the development of the continent's mineral sector, and resolved to engage the World Bank directly on a sustainable African minerals development strategy". "We are already implementing sustainable development programmes, while the developed world has already got away [without being subject to such strict conditions]," added Gqulu. Various NGOs, including Oxfam America, Friends of the Earth International and the Nigeria-based Environmental Rights Action, have welcomed the EIR recommendations. The World Bank management is expected to publish its response after 25 February for comment. This will be followed by a final paper, which will be considered by the Bank's board for implementation.