Cotonou kills Sysmin.

The Cotonou EU-ACP partnership agreement signed on June 23 has buried Sysmin. The consequences for Africa are bleak. Francois Misser reports.

The EU's special instrument to support the mining sector of the African, Caribbean and Pacific (ACP) group of countries has been killed. But before the funeral, an unspent tranche of Euro465m must still be shared out among 12 countries, including nine African states.

Once this package is spent, ACP mining countries, hit by low international mineral prices, cannot expect further compensation from the EU.

The Sysmin was born in 1980. Its official raison d'etre was to help ACP countries to preserve their mining production capacity in the event of a fall in world prices. Over time, the instrument which was activated by criteria such as the dependency ratio of mining exports and falling world prices, was improved in several ways.

Gold, which was at first excluded from the system, was included in 1990. Eventually, Sysmin also played a part in helping ACP mining sectors diversify their product lines or to diversify ACP economies away from the mining sector.

Cold War dynamics

Some of the largest African parastatals such as Zambia Consolidated Copper Mines and Congo's Gecamines benefited from Sysmin loans and grants. Both the industry and ACP countries complained often about lengthy procedures, but no one questioned the relevance of the system until the end of the Cold War.

Then, abruptly, ACP mining products lost their strategic interest for the EU. At the same time, the EU came under pressure from the Bretton Woods Institutions to drop subsidies to the ACP mines. By the year 2000, Sysmin had become a complete heresy for the globalisation ayatollahs.

However, 12 ACP states, including nine African nations are still entitled to a tranche. Totalling Euro465m, African states to benefit from this fund include Zambia, Zimbabwe, Mauritania, Niger, Gabon, Senegal, Ghana, Namibia and Botswana.

Projects for which funds are likely to be secured include: A Euro30m programme aimed at encouraging the diversification of the Zambian mining sector out of the traditional copper and cobalt industry.

Consultants are expected to provide five years of technical assistance to the Geological Survey Department. The idea is to help small-scale miners involved in the production of precious stones who at present are unable to prepare feasibility studies to obtain risk capital from commercial banks and improve-marketing skills.

The project will also support government efforts to improve regulatory frameworks and the road access to mining areas. The potential for gemstone mining is excellent. Although official sales were $14.5m in 1998, independent estimates place the value of the informal sector at between $50m and $200m.

The smaller companies, employing under 100 workers and with turnovers below $lm can increase production considerable. Activity centres on the Ndola district (emeralds), the Lundaz, Mkuzi and Itezhi Tehzi districts (aquamarines and rourmalines) and in the Kalomo district (amethysts). Zambia has also requested Euro50m funding for its ZZCMs privatisation programme.

African beneficiaries

Another potential beneficiary is Niger, where authorities want to diversify the sector away from a reliance on uranium. Projects include assistance to the administration to enable it to set up investor-friendly regulation and to provide investors with updated geological data and maps. Assistance to the small-scale mining sector with the construction of access roads to key mining areas is also on the cards.

In Mauritania, a tender is expected before the end of the year for the supply of vehicles, office equipment and diesel-powered generators to the Office Mauritanien de Recherches Geologiques, currently prospecting for gold in the Ouassat-Sfariares region.

Increased funding is expected in the supply of equipment to Namib White Lime Pty and for an airborne geophysical survey of Namibia. Botswana has also requested a follow-up of the current Euro33.7m project to develop the copper, cobalt and nickel output at the Selebi Phikwe mine by BCL Ltd.

Euros40m has been earmarked for the Zimbabwean mining sector, while Gabon, Senegal and Ghana should also be among beneficiaries.

Other African mining producers such as Guinea, Burkina Faso and the Democratic Republic of Congo which failed to file requests before the August deadline, missed the opportunity to share the last of the Sysmin cake.

They can still apply to the European Development Fund (EDF) for mining sector aid, but it will no longer be in addition to their EDF National Indicative Programme aid and any funding will have to be made at the expense of other projects in areas such as poverty reduction, health and education.

The outlook for the future is bleak. The new system to replace Sysmin is so complex it might simply be impossible to implement. To be eligible for funds, the mining exports of the applicant country have to account for a minimum 40% of total exports; the decline in global prices must be at least 10% on average over three years before the request is made, and eventually there must be a 10% addition to the budget deficit in comparison with forecasts.

"This is absurd," commented one observer. "It means is that a mining country must have the highest possible budget deficit in order to be entitled for compensation.

But if a government pursues such a strategy, it risks not being able to fulfil its structural adjustment requirements and be penalised for that by the donors. Either way, you lose."