Poverty…Nuts!

23 September 2010

Remembering the sanitised reply to the German demand for surrender given by General McAuliffe at Bastogne in November 1944, perhaps the time has come to say quite explicitly, ‘balls to poverty’. For it is ridiculous that the simple, obvious and unfailing solution to poverty is continually disregarded. The only reason for Africa not moving into the type of universal middle-class is the lack of political will to give its citizens full ownership rights of the land that they are, more often than not, squatting upon.

My readers know how I bang on about this, but what they may not know is how became aware of this great void in the economies of Africa. It came about because I was fortunate enough to be in the mining industry of the one country on the continent that had simple, unequivocal rules for obtaining mining claims – negotiable property rights.

I had grown up in the then Rhodesia assuming – as most of us did – that the ‘find it and it’s yours’ and ‘use it or lose it’ rule for mineral deposits applied generally elsewhere. Wrong! The law in other countries in Africa generally divided miners into two types; local ones who were regarded as incapable of being able to do more than scrabble at surface resources, and foreign ones who would come in and do the real thing. So the mining law was split into two, with the discoveries of the first, local, prospectors liable to be taken from them if they found something that was of a size to be worthy of foreign interest. No mineral property rights for locals.

Yet the free trading of mineral rights is essential if a vigorous mining industry is to develop. The popular view is that geologists find a mine, the miners mine it until the ore is all gone and then it shuts down for good. In fact almost no mines follow this simple, plodding, pattern. Almost no mines are built by the finders and almost no mines have resources which are fully known or understood before they start up. There is an average of perhaps half a dozen transfers of ownership, from prospectors to developers to miners before the money can be raised to build a mine. Very frequently the scale of the resource turns out to be much bigger or, sometimes, much smaller than expected and so the mine is greatly enlarged or diminished. But then the vagaries of the market may lead it to close, and then reopen again, a process repeated perhaps several times until – usually much, much later than anybody imagined at the start – the ore is finally exhausted bar a very low grade remnant…and then the metal price moves up again to new heights and people start wondering if it will be worth going back down to see if anything more can be found, and then a geologist comes up with a new theory about how the ore got there in the first place which, if true, means there will be much more to be found after all…

From a government’s point of view this process, based on the cupidity of mankind and being messy, uncontrolled, unpredictable and above all risky is immensely distasteful, if only because there will be failures and the government might get blamed. “You let these ignoramuses attempt to mine a valuable resource belonging to the state, and now they have gone bust and their employees (who are, these days, voters!) have not been paid. It is all your fault. What are you going to do about it?”

So governments in countries without a mining culture – without an example of a vigorous industry with big and small, rich and poor mines and the villages, towns and cities that have arisen around them - tend to get involved in mining in all the wrong ways, deciding what is to be mined, by whom and where, needing evidence of the technical and financial capabilities of the investors, wanting the resources proven up before mining starts, demanding that environmental impact studies and environmental management plans and closure plans be submitted and discussed and approved and with a significant government representation on the board, if not a substantial ‘free ride’. From their point of view it is much better that only big, solid, mining companies who build big solid mines come to their country, preferably with government officials on their local boards, who can be trusted not to take risks that could embarrass everybody. But best of all the government, who knows best, should allow there to be only one mining company in the country, its own. Hence Gécamines and a host of lesser failures – Stamico in Tanzania, the State Gold Mines in Ghana, ZCCM in Zambia and so on.

The analogies with private land property rights are direct. Countries where these rights are either held by the government (Tanzania, Mozambique, Eritrea and so on) or where the equivalent of the land title registration office is a run-down and corrupt part of the government system (just about everywhere else) are awash with poverty. As I have noted elsewhere, you can always tell a poor country by looking down a street there – the absence of the ‘For Sale’ signs of estate agents (realtors). Indeed, the absence, anyway, of estate agents.

The poor may always be with us, but absolute, desperate, poverty is unnecessary. There is great wealth there, waiting to be unlocked. So shout it out loud – ‘Balls to Poverty!’