SCIENCE, TECHNOLOGY, AND SKILLS FOR AFRIC A’S DE VELOPMENT MARCH 2014 85714 Human Capital for the Oil, Gas and Minerals Industries Is Africa Getting the Most out of its Extractive KEY MESSAGES Industries Boom? n Africa has a window of opportunity to enlarge the economic After agriculture, the extractive sector is benefits from its booming oil, gas and minerals industries. the most important in most countries n The lack of specialized expertise is a major bottleneck obstructing in Sub-Saharan Africa. the potential for more well-paid jobs and home-grown supplier n At US$3.4 billion, Africa’s estimated companies. budget for mining exploration n Significant skills shortages exist both in terms of numbers and (excluding iron ore) is the second- quality, particularly within the science, technology, engineering largest in the world after Latin and mathematics (STEM fields). America (US Geological Survey n Establishing Public Private Partnerships and regional centers of Annual Review, 2012). excellence is key to building these specializations. n Exports of mineral products and n The World Bank is supporting 10 African countries as they train fuels account for up to 38 percent of workers for the extractive industries. total exports in Sub-Saharan Africa (UNSTAT 2010; World Bank 2010). n The continent is resource-rich, hosting 30 percent of the world’s Figure 1. Africa’s share of global mineral resources total hydrocarbons and mineral reserves; 12 percent of its crude >1 resource holding in top 10 globally 1 resource holding in top 10 globally oil reserves; well over a third of its bauxite, gold, uranium and chromite; 88 percent of its Morocco diamonds; and 95 percent of its vanadium. Mauritania With a strong focus on skills Niger enhancement, African countries have a clear window of opportunity Guinea to convert their natural capital into Ghana sustainable economic activities that Democratic can generate longer-term social and Share of global Republic of Congo Resource resources, % economic benefits. North Africa Phosphate 32 Specialized Human West Africa Bauxite Uranium 40 5 Zambia Capital: A Key Factor in Iron ore 4 Namibia Zimbabwe Maximizing Gains from Central Platinum 88 Botswana the Boom and Southern Africa Chromium Diamonds 84 60 Cobalt 49 South Africa Skills development is clearly linked to Gold 40 greater and more long-running gains Uranium 13 Copper 5 from the extractive industries. Evidence from eight African countries—Angola, Source: Deutsche Bank; Bank, Source:Deutsche Geological US Survey US Geological Survey (USGS); World (USGS), World Nuclear Association Nuclear Association Botswana, Gabon, Ghana, Nigeria, South Africa, Tanzania, and Zambia— and six sectors (copper, diamonds, Figure 2. Economic value distribution in minerals extraction gold, oil and gas, mining services 2% and timber) shows that skills, and the Suppliers institutions that affect firm- and sector- level capabilities, constitute the most 8% Employees important determinant of economic 50% 12% Company taxes benefits. Building specialized human capital adds value for local suppliers, Reinvested in the Group (capex) creates a large number of direct and 12% Dividends indirect jobs, and builds governance capacity. 16% Provision of capital (interest) Local skills training helps enterprises of all sizes become suppliers to the Source: Anglo American 2012 Sustainable Development Report oil and gas industry. According to the Anglo American 2012 Sustainable Development Report, economic is significant and worth considering. authorities manage the extractives value retained through employment According to an International Council sector transparently and responsibly. and local suppliers accounts for 66 for Mining and Metals study (2008), To date, regulation has been percent of the total value created Tanzania’s large-scale mining sector characterized by ad hoc negotiations through minerals extraction (see had created about 8,000 direct jobs, in the award of licenses and Figure 2). Unlike taxes, royalties, but 45,000 indirect ones. (See Figure concessions, alongside technical and fees, and other revenues paid to 3 for direct, indirect and induced jobs administrative regulatory oversight. government (such as through support created in Uganda). Modern extractives regulation involves to improved fiscal regimes), skills integrated economic, legal, financial, Authorities that regulate the extractive development enables more value industries need to upgrade both environmental and technical oversight, created from minerals extraction knowledge and skills. Building within a coordinated, multi-disciplinary to be retained locally. Greater skills governance capacity for the sector regulatory structure. This requires capacity enables higher levels of local employment and local procurement, is also critical so that regulatory building capacity in Africa. in turn promoting inclusive growth and community empowerment. Take Figure 3. Jobs generated in Uganda by Lake Albert basin the example of Botswana: De Beers development projects moved many of its downstream diamond activities from the United Concepts of direct, indirect and induced jobs generated by oil & gas projects Kingdom to Botswana. Making more diamonds available locally has shifted ESTIMATE more than US$6 billion worth of Induced ~80,000 annual rough diamond sales from London to Gaborone. An additional Indirect x5.6*** 3,200 manufacturing jobs have been ~54,000 ~60,000 created in Botswana since 2007 and Direct 16 locally-based diamond buying ~40,000 companies have been established. x2.3** ~19,000 Africa’s growing workforce should 8,000 ~14,000 be able to capitalize on direct and Min/Max 6,000 indirect employment opportunities generated by sustainable mineral Direct* Indirect Induced Total New Jobs sector growth. Although the extractive Source: SBC research on “stand alone” oil and gas cities (Stravanger - Norway, Aberdeen • UK, Macae - Brazil, Trinidad & Tobago) industry provides relatively few direct Note: *Number of jobs created was computed as peak of manpower (7,000) for Lake Albert Basin Devlopment jobs, the potential for job creation projects +15 percent was added to account for uncertainty through local linkages and the socio- **Ratio direct to indirect varies in the range of 2.3 - 3.8 depending on geography *** Ratio direct to induced varies in the range of 6.6 - 8.4 depending on geography economic impact of mining operations 2 SCIENCE, TECHNOLOGY, AND SKILLS FOR AFRICA’S DEVELOPMENT The Skills Gap in both “Continued innovation and human resources development are Demand and Supply key to reducing the dependence on the initial factor endowment GAPS IN THE NUMBER OF (natural resources) and to building and sustaining a locally SKILLED WORKERS embedded, competitive and diversified economy.” The extractives sector requires — Africa Mining Vision, African Union a wide range of skills in order to function effectively and to maximize the potential broader growth and countries have been able to produce at the tertiary level. A large number development benefits. A skills gap the skills required in the regional of youth could also obtain well-paid analysis of the mining sector in mining industry. jobs by undergoing quality vocational Zambia concluded that it was short training to become electricians, of about 540 skilled workers in 2012. Rebalancing towards technicians, and heavy-machinery On the demand side, the surveyed Science, Technology, operators, but the courses need to companies employed 9,978 skilled Engineering, and be designed in close collaboration workers, including 1,636 graduates, 1,427 technologists, 970 technicians Mathematics (STEM) with the employers. Whereas the and 5,943 crafts persons, out of a Fields development of tertiary level education programs is fundamental, total of 32,515 unskilled and skilled Despite increasing industry the highest impact on poverty and workers in the sector. Some 300 demand, graduates in engineering, jobs is likely to come from improving workers were expatriates and mostly manufacturing and other technical the relevance and quality of vocational employed in technical and managerial fields are scarce. Africa has the highest secondary level education. positions. In the coming five years, the share of social science and humanities study estimates that around 11,000 graduates in the world at 70 percent, compared to 53 percent in Asia (OECD, Leveraging Public skilled workers will be needed in the companies surveyed just to maintain 2012). Preparing more skilled youth Private Partnerships the current level of production. for the oil, gas, and mineral sector is Public Private Partnerships (PPPs) a great economic opportunity. This can play a major role in building GAPS IN QUALITY OF SKILLS can be done by expanding capacity specialized skills. Increasingly, of technical colleges, universities resource deals include commitments The global extractives sector is and secondary school systems that characterized by very high investment to infrastructure and human resource can provide specialized programs of development. For example, in 2001, risk and capital-intensive activities, appropriate magnitude and quality. At requiring high levels of skills. Lack De Beers signed a $7 billion deal in the tertiary level, extractives-related of relevant skills constrains local Botswana, including a commitment programs are often too generic, suppliers in upgrading firm-level to build a diamond sorting facility, with little laboratory capacity. At operational competitiveness, meeting secondary level, weak preparation in which created 3,000 jobs. technical requirements, instituting the sciences keeps many students out Mineral companies are interested in innovation and adopting world- of engineering and science degrees skills development for several reasons: class manufacturing practices. In Chile, the annual production of copper per worker is almost seven Box 1. Sierra Leone: From Mines to Minds times greater than in Zambia. This Sierra Leone’s “From Mines to Minds” pilot project is a public private partnership difference cannot be explained solely that brings together the London Mining company; the Sierra Leone Ministry by variables like scale, resources and of Education, Science and Technology; the German Agency for International equipment. Low productivity is in Cooperation (GIZ); and St. Joseph’s Training Institute, a nationally accredited and certified training provider. GIZ’s program document notes that only 23 large part driven by skills gaps that percent of middle level and 12 percent of senior level staff in the mining sector are rooted in weak technical and are Sierra Leone nationals. The project aims to improve the employment rate of vocational training. Despite the recent St. Joseph’s graduates from the mining district of Port Loko from 40 percent to expansion of private schools and 55 percent. It will reform the curricula and training delivery for four vocational training institutions in West Africa for trades, install infrastructure and equipment for new occupational profiles and future managers, engineers, and mid- ensure efficient use and maintenance of training equipment. level skilled technical staff, only a few HUMAN CAPITAL FOR THE OIL, GAS AND MINERALS INDUSTRIES 3 n Companies are willing to invest in making and planning for extractives. The World Bank training people to meet their own Common priorities include (i) retaining as Partner requirements. maximum value in-country (ii) ensuring The World Bank Group, with its n Local employment is consistently sustainability of benefits through local support to both governments the top concern of communities content commitments (iii) maximizing and the private sector, can serve located near extraction projects, job creation and (iv) stimulating other as a catalyst for coordination and often a central issue behind sectors. Clear governance frameworks, between the two in resource-rich disputes, grievances and conflict. greater autonomy to training institutes settings. For example, it is helping More local jobs result in more and realistic contractual commitments to coordinate mining infrastructure support for the project. can help foster partnerships with investments with national and n Local skills development can companies in developing curricula, regional infrastructure development help retain staff, with the added training and building education needs. A similar approach to advantage of having staff living infrastructure. skills development could include closer to their workplace. Further, PPPs could support cost- centers of excellence for education, n Some mineral companies invest efficient regional centers of excellence collaboration with the African Mineral in skills development to benefit that create specialized post-graduate Development Center (AMDC) and women and marginalized groups. education and research, concentrate research in the extractives sector, Governments also have a range limited top-level faculty, share and PPPs with companies that will of priorities, which drive decision- knowledge, and train continentally. employ graduates from these centers. Table 1. World Bank initiatives for skills development in oil, gas and minerals Project Description Amount Africa Centers of Strengthening several centers of excellence in West and Central Africa. US$8 million for Excellence (under each center preparation) Ghana Oil and Gas Component B will fund the government policy on local content, through support US$11 million Capacity Building to vocational training and tertiary education and research at the Kwame Nkrumah project University of Science and Technology (KNUST). Support for the Uganda The project aims to: (i) increase access for new students to quality courses; (ii) improve US$1.18 million Petroleum Institute Uganda Petroleum Institute, Kigumba (UPIK)’s infrastructure and learning quality; and (iii) develop a long term strategic plan for UPIK including access to financing mechanisms. Mozambique Mining Activities include coordination of efforts across sectors in designing qualifications, US$50 million and Gas Technical establishing technical advisory committees with broad representation for mining and Assistance Project gas, and training based on competencies. Tanzania Energy Sector Capacity building activities for the Vocational Education and Training Authority (VETA) US$35 million Capacity Building for Tanzania’s gas sub-sector, in alignment with project growth in both public and Project private employment related to it. MORE ON THE TOPIC • Issues Paper: A Coordinated Approach to Mineral Skills Development in Africa (African Mineral Development Center, 2013) • Bloch, R. and G. Owusu (2011). Linkages in Ghana’s Gold Mining Industry: Challenging the Enclave Thesis. MMCP Discussion Paper 1. Milton Keynes and Cape Town, The Open University and University of Cape Town. • Contribution of Mining Sector to Economy of Ghana, Business Africa. • Extractive Industries Transparency Initiative (EITI), Ghana Country Page and Report. • Extractive Industries Transparency Initiative (EITI), Tanzania Country Page. • Morris, Kaplinsky, and Kaplan (2011) “Commodities and Linkages: Meeting the Policy Challenge”. • Patrinos HA, Barrera-Osorio F, Guáqueta J, (2009) ‘The Role and Impact of Public-Private Partnerships in Education”, World Bank. • African Minerals Skills Initiative, Business Plan, May 2013. • Oyejide, A. and A. Adewuyi (2011). Enhancing Linkages of Oil and Gas Industry in the Nigerian Economy. MMCP Discussion Paper 8. Milton Keynes and Cape Town, The Open University and University of Cape Town. • Survey and Analysis of Demand for and Supply of Skilled Workers in the Zambian Mining Industry (2011) Passmore M. Hamukoma.