Sharing the wealth
Vale, the worldÔÇÖs second largest mining company, will be opening a new coal mine in Mozambique next year. Ben Sansom lifts the veil on corporate social responsibility and discovers the efforts Vale is making to ensure the benefits percolate through to the local community.
Mozambique is one of the poorest nations on earth. It was ravaged by a brutal civil war for 15 years after its independence from Portugal; but the country has made huge efforts since peace was achieved in 1992 to improve the national economy and boost its productivity. Among the many successful strategies for economic development has been the privatisation of a large swathe of state owned businesses and the attraction of considerable foreign investment into the country. As a result, Mozambique has enjoyed what the World Bank described as a ÔÇ£blistering pace of economic growthÔÇØ, averaging around eight per cent increase in GDP per annum between 1994 and 2006.
In spite of this undoubted success, described by the IMF as ÔÇ£one of the success stories in sub-Saharan AfricaÔÇØ, the trickle-down of wealth to those living in poverty simply has not happened at the rate that had been hoped for. Life expectancy is still very low and Mozambique has one of the worst infant mortality rates in the world, all thanks to the malaria-carrying mosquito.
Efforts continue to be poured into economic reform and into reviving agriculture and improving transportation. With political stability and modern mineral legislation, it is the exploitation of the landÔÇÖs valuable mineral deposits that have the potential to lift the nation out of poverty and provide employment as well as finance for improvements in health and wellbeing.
One of the companies playing a major part in this resurgence in MozambiqueÔÇÖs fortunes is the Brazilian mining company Vale. Launched as the state owned Companhia Vale do Rio Doce in 1942, Vale had grown to become the countryÔÇÖs principal exporter of iron ore within seven years, it being responsible for some 80 per cent of the nationÔÇÖs iron ore exports.
Privatisation followed in 1997, and since then the company has pursued a strategy of concentrating on its core mining business; divesting non-core operations; and strengthening and diversifying its portfolio of mining interests largely through acquisition.
Today, Vale is the worldÔÇÖs second largest mining company, employing over 100,000 people across five continents. Iron ore and nickel continue to be its largest business interests, but it is increasing its presence in coal, copper, potassium and phosphate rock. Since 2003 the company has grown at a rate of 11.2 per cent per annum and aims to increase that to an average of 12.6 per cent from 2010 to 2014.
ValeÔÇÖs strategic focus, however, is moving more towards organic growth. This year alone, the company intends to invest around $12.9 billion on sustaining its existing operations, and on developing and implementing new projectsÔÇöan increase of around 30 per cent on the 2009 budget. Some 76 per cent of this figure will be focused on organic growth: financing R&D, developing unexplored mineral deposits and developing brownfield projectsÔÇöthose near to an existing mine.
ValeÔÇÖs history in Mozambique goes back to the late 1980s when it began working on a pre-feasibility study for an integrated mine, rail and port project to develop the Moatize coal depositÔÇöthe worldÔÇÖs largest unexplored coal reserve. However, studies were suspended because of the internal conflicts and political instability.
In 2003, the company returned to Moatize, which is located in the Zambezi Valley province of Tete, some 1,700 kilometres north of Maputo, with a mandate to update the previous studies. In November 2004, under the guidance of the IFC (International Finance CorporationÔÇöa division of the World Bank), the government of Mozambique declared ValeÔÇÖs bid to explore and develop the regionÔÇÖs coal resources as the winner.
The project has been both costly and complex. The feasibility study alone cost around $80 million, and a further $1.5 billion has been invested in developing the mine. Work on the infrastructure and utilities required for the project has been extensive, and includes development of the 600 kilometre railway line from Sena to the Port of Beira; the construction of a new maritime coal terminal at the port; and the construction of a 1,500 megawatt coal-fired power station sited next to the mine. Vale is also building one of the largest coal handling and preparation plants in the world at Moatize, with the capacity to process 26 million tonnes of coal a year.
When the mine begins production next year it is expected to produce 11 million tonnes of coal a year for the next 35 years, but the company is already working on a pre-feasibility study to expand the mine and increase production to 26 million tonnes a year. The existing Sena-Beira rail line suffers from a number of constraints, and the company is therefore looking at developing alternative logistical solutions. It is currently examining the possibility of laying a new rail link of around 200 kilometres from Moatize to Nacala in northern Mozambique and building a seaport terminal in Nacala.
The social impact of the Moatize mine has already been significant. Vale has spent over $6.5 million on community development projects alone during the exploration phase of the project and plans to spend over $50 million more during the production phase. To date, the Moatize Medical Station and the Tete Regional Hospital have been improved, updated and provided with new equipment and staff training. The local orphanages have also been revamped and a new one constructed, while the existing hydroelectric plant at Ulongwe has been rehabilitated and the power supply infrastructure strengthened.
Much work has also been done on the softer social aspects of the community. Moatize lies in the Zambezi Valley region, one of the poorest and most densely populated regions in Mozambique. To help develop the local community and nurture social cohesion, Vale has invested in a literacy programme and is also working in a collaborative effort to support the growth of family-based agriculture and the establishment of associations and work cooperatives for income generation.
Employment at the mine will also be a big factor in spreading benefit to the local community. The construction phase of the project has provided work for around 2,000 people, 90 per cent of whom are local. Meanwhile, a professional training programme has been set up at purpose built facilities at the mine, and the company is in the process of training a total of around 340 local people in mining and industrial skills. Looking to the future, the company has also been surveying small and medium businesses in the Tete region to identify potential suppliers.
The company hopes that as the mine becomes established, the benefits of its presence will percolate through to the people of the Zambezi Valley and out into the wider community, easing the plight of those living in poverty. The efforts that have been made so far to disseminate the wealth are certainly a strong starting point.
