‘Mining is Lesotho’s best kept secret’
THE Lesotho mining industry remains a preserve of a few foreign investors, half a century after the country gained independence in 1966.
In recent weeks, some local communities have expressed frustration over this state of affairs and how development opportunities continue to evade them despite being home to one of the world’s most precious gems.
In this wide-ranging interview, the Lesotho Times (LT) speaks to the Minister of Mines, Keketso Sello (KS) on how the government is working to ensure proceeds from the country’s diamonds reflect on the local communities’ quality of life and the growth of Lesotho’s economy at large.
LT: You have been on a number of study tours of the country’s mines since you were appointed Minister of Mines last year. What is your impression of the mining sector now following these fact-finding visits?
KS: The mining sector is Lesotho’s best-kept secret in the sense that despite having a lot to offer to our economy, it has remained closed to the majority of people for various reasons. One of the reasons is that most people do not understand it. In some cases, potential local investors feel intimidated because of what they think is involved. Yes, the operations are technical in nature and capital-intensive considering our context, but that does not mean we cannot have local people also investing in the sector. Although we do have local expertise, our people do not have the required capital for full-scale operations. This is a sector that has struggled to reach its full potential because it was neglected for many years. By this I mean, the environment has not been accommodating enough and efforts to promote local participation has been weak. People don’t invest in sectors they do not understand or are not confident as to how they are going to develop their enterprises. As much as I see a lot of potential in the sector, I did not see much investment from the government side to, among other areas, fully promote local participation; ensure we get significant benefits to our economy, including the local communities; increase local capacity in the many areas of the mining field; and invest in developing the infrastructure and technology the country needs to further develop the sector for job creation.
LT: Which development areas should the ministry prioritise to spur the change you would like to see in the mining sector?
KS: We need to make sure we have the right legislation which tackles all matters that are stifling the growth of the sector. We are working seriously on the Minerals and Mining Bill to make it as inclusive and responsive as possible. We are still fine-tuning it based on the inputs we got during a stakeholder consultative meeting held earlier this year. Stakeholders want a law that is inclusive and particularly supportive of private sector participation in the mining operation to trigger the development of a value chain that would see some of the value addition processes being done locally. Once we get our legislation right, we will then focus on promoting local participation, particularly in the area of prospecting and ensuring that the available financial support mechanisms also cover establishment of small scale mining businesses. The whole logic of having the right legal framework is for us to create structures, systems and conditions that are responsive to our needs. We need to be well-informed and guided by a legislation in the development of our new development strategies and designing of programmes.
My wish is to see an environment that will enable more mines to be established in the country and more so Basotho-owned mining enterprises. We are looking at earning a position among the mining countries of Africa, joining Angola, Botswana, South Africa, the DRC, Cote D’Ivoire, Nigeria, Rwanda and others, whose mining sectors contribute a larger share to the economy. Look at the DRC: their mining sector makes 90 percent of the country’s exports while in Angola, one of Africa’s richest countries, diamonds are responsible for over 90 percent of the government’s earnings. We are therefore taking the development of the mining sector very seriously.
Currently, we have about four commercial mining companies in the country and I am confident that the situation will change as I have signed new sites for exploration. Recently we also issued three licences to enable mining of alluvial diamonds in the Polihali area, in Mokhotlong, where we will soon have a big dam construction. We would like to ensure that in all areas targeted for big projects such as dams, and happen to have diamonds or any other minerals, the Ministry of Mines should still have control over the minerals in the area. The fact that we are implementing some water projects in the country through the Lesotho Highlands Development Authority (LHDA) and other entities, does not mean that they should also take over the diamonds or that we should not be allowed to extract the minerals. We should first do the mining before any dam construction. In some previous dam projects, we lost an opportunity to utilise the mineral resources, which were discovered in the areas. We do not want to make the same mistake in the case of the Polihali dam project.
LT: Would you say over the years, the Lesotho government had much say on negotiating a win-win situation with the foreign mining companies?
KS: I think we need to empower ourselves through a responsive legislative framework and well-crafted strategies for us to have more say in the mining of our resources and negotiation of proceeds received from big sales. At the moment, a precedence that was set and supported by our old legislation and agreements with the mining companies, crippled our capacity to negotiate from a position of strength. The new Bill will enable the establishment of structures, including the Lesotho Diamond Centre where we will manage and be able to monitor all key processes. I know there are some elements in the sector that are opposed to us coming close to the operations for whatever reasons. But we are not going to beg them; we are going to enforce the law.
The Diamond Centre will also facilitate various developments and innovations such as allowing a certain quantity of diamonds to remain in Lesotho to allow local trading.
During my study of the sector, I have also identified a disturbing trend that will lead us to consider a different approach, as a result. The law says from each major sale, the government is entitled to a 10 percent share, but then it twists dangerously and allows room for the mining company to negotiate the 10 percent royalty with the minister. Over the years, ministers were arm-twisted into accepting far less than the 10 percent and coming down as far as four percent. I am saying, really, can we then be surprised why revenue from the mining sector has been on the decline? I don’t think that over the years we have realised what we should have and mainly because of some men wearing ties like me, who accepted peanuts and then turned around and said, “it’s in the best interest of the nation”. I wonder how a sane minister can negotiate downwards after a big sale. It does not make sense and it smells like corruption.
But that is not all. We also have issues on how some of the contracts with mining companies were negotiated, which showed that the government was negotiating from a disempowered point of view. Some of the mining companies present all sorts of excuses when it comes to paying dividends to the government, arguing that they are still repaying loans they got from foreign banks. It is a shocker. We are asking how one company can borrow money to come and mine our diamonds and use them to service their bank loan. How is that our fault and what kind of a business formula is that? It is unfortunate that these mining companies signed contracts and our previous government allowed such games that reflect dishonesty. It beats me how some of these contracts were negotiated. Their contracts allowed them to borrow elsewhere and to use our resources to pay back what they borrowed and then deny the government its dividends. My point is, if you say you are a foreign investor and at the same time explain that you don’t have money to operate and pay dividends, then thank you, go elsewhere. We want to negotiate with companies with money and not those seeking to solve their problems through our diamonds.
LT: In view of the conflicts we have recently seen erupt in some mining areas, what strategies are you putting in place to make sure local communities appreciate the presence of these mining companies?
KS: Firstly, local communities are the custodians of the natural resources, including the land and everything found in and on the land. As government, we manage the resources on their behalf, which means they should benefit from the mining operations for them to appreciate the presence of the mining companies. In some areas, this has not been happening in a manner that reflected an understanding of the importance of social responsibility. However, we have a lot to learn on the matter from other countries that have managed to bring development in communities through mining activities. But I would also like to add that extracting minerals comes with other services, which provides for cooperation between the companies and the local communities. The companies do procure some materials they need to run their operations. I believe through these services, the local communities can also benefit. But what we are seeing is that some mining companies are importing almost everything they need from South Africa. They do not even contract local companies to supply services because the agreements they have did not task local businesses to provide the required services as a way of stimulating the economy through supporting local employment creation.
We need to start doing things differently and we have, so far, established a team to manage social responsibility and ensure the implementation of programmes. We are going to discuss with the mining companies, who are our partners, for us to appreciate the need to care for the communities and also the profits.
We will work with them to stipulate expectations based on the needs of the communities and agree on timeframes to enable us to monitor progress. It could be that in the past agreements, this was a section that did not receive much attention. But we are saying these are communities that lost their fields and grazing land, which were their source of livelihood. As government, we should also do more in making sure that a part of the proceeds we receive from the mining sector goes towards developing the very communities the minerals are coming from.
LT: Would you see nationalising the mines as an option for Lesotho going forward?
KS: One of our ambitions is to have state-owned mines, even if we can have one or two as a trial, and see how it operates. There are a number of areas we are still exploring through the new Bill we are still strengthening. Shareholding has been discussed in many meetings because currently, we are only getting 30 percent and in some companies, 25 percent. We are exploring possibilities to see how we can increase our benefits and opportunities for our people.
What we are pushing for in the mining sector currently is a responsive legislation that can stimulate the participation of local small-scale miners, in addition to promoting foreign investors who will partner with local businesses and enable the transfer of skills. In the case of the small-scale miners, they will be licensed and can sell the diamonds through the Lesotho Diamond Centre. Presently, people are given licenses to trade as diamond dealers and we cannot trace where they are buying the diamonds and selling them. Some mines are contracted by big mining companies and they take their diamonds directly. As a result, there are a lot of shady deals involved in such a situation and big losses on our part.
Going forward, we are also looking at prospecting for other minerals other than diamonds. Recently, we signed an MoU with a foreign company to prospect for coal in Mohale’s Hoek, and they are in the drilling stage. We have also signed another MoU with another company to explore for oil in Butha-Buthe because for years, it has been suspected there could be oil in that district. Currently, the company is conducting a desktop study.
We are also soon to get technical assistance to conduct massive exploration of all minerals in the country using new technology, which we currently do not have, to ascertain what other minerals we might have in Lesotho.
In addition, we are soon going to establish a laboratory for us to be able to test our samples locally. Over the years, we have been relying on South Africa, which is very costly. The government has approved this project and our development partners have pledged to help us with some of the equipment we will need to operationalise the laboratory.