In comments on the last round of public participation for the double application by Trans Hex that closed recently, Professor Patrick Bond has raised an alarm about the “net negative” effect this kind of mining will likely have on the inter-generational wealth of South Africans.
His criticisms – addressed to the Department of Mineral and Petroleum Resources (DMPR), Trans Hex and the Environmental Assessment Practitioner (EAP) SRK Consulting – suggest that the proposed offshore mining project (WC30/5/1/1/2/1047PR) falls short of the National Environmental Management Act (NEMA), as well as commonly accepted economic research and governmental agreements on economic sustainability.
Professor Bond says that Trans Hex has failed to disclose how “the non-renewable commodity resources extracted and depleted would be compensated for, using scientific methods and with accountability systems, as mandated in the May 2012 Gaborone Declaration and the NEMA.”
The Gaborone Declaration for Sustainability in Africa was signed by several African countries, including Environment Minister Edna Molewa, who promised to “use our abundant natural resources for the health, education and sustainable future of current and next generations”.
Professor Bond holds a PhD in Geography and Environmental Engineering from Johns Hopkins University, and studied economics at Swarthmore College and the University of Pennsylvania’s Wharton School of Finance. A Distinguished Professor is an honour bestowed on a “faculty member who is a recognized national or international leader in their field and a scholar who has demonstrated a high level of productivity”.
Part of this work has been to engage in many South African economic policy processes. He drafted the Reconstruction and Development Programme White Paper in 1994. He also works closely with civil society groups in South Africa, Africa and the world.
“I am particularly interested and affected, as are all South Africans, by the notorious problem of retaining non-renewable resource wealth for current and future generations,” he writes. “Consistent with the NEMA’s ‘polluter pays’ foundational principle, it is vital to properly cost the entire project, by including discussion of the potential adverse effects of net resource depletion.”
According to Professor Bond, SRK Consulting has not made any “effort to assess the sovereign wealth implications of the proposed commodity extraction” of Trans Hex in their bid to mine and prospect for diamonds and a host of heavy minerals in concessions that total 321km2 of ocean along 80km of the West Coast.
The professor points out that the Gaborone Declaration – hosted by then President Ian Khama and sponsored by the World Bank and Conservation International – recognised the limitations of Gross Domestic Product (GDP) as a measure of wellbeing and sustainable growth, because as a measure of economic impact, GDP ignores depletion of wealth.
This is why Minister Molewa and other signatories committed in Gaberone to “integrate the value of natural capital into national accounting and corporate planning”.
Professor Bond explains that environmental officials and Statistics South Africa have made efforts to define and measure natural capital, and points to research papers that show “resource depletion and eco-system destruction” as being “rarely compensated for properly in South Africa”.
This is why Professor Bond believes that because “corporate planning” is specifically mentioned as part of an agreed solution, Trans Hex must “take the Gaborone Declaration’s mandate seriously, not ignore it”.
He cites Nobel Economic Laureate economist Robert Solow and colleague John Hartwick, who asked whether the shrinkage of “natural capital” from commodity exploitation could be offset by the investment in productive capital and human capital (education).
The Hartwick Rule that came from their work falls within the field called ‘Resource Economics’. It proposes that a society can only develop sustainably if it reinvests the revenue generated from extracting non-renewable resources into capital that can be reused down the line. This ensures that living standards do not decline as the resource declines, thus maintaining well-being in society through the generations despite the depletion of the natural resource over time.
If one applies the Hartwick Rule in this instance, contends Professor Bond, the extraction of minerals that causes ecological wealth to decline should only be permitted if it offsets this decline by a contribution to intergenerational wealth up and down the value chain via profits, taxes and wages.
Professor Bond points to some of the world’s worst cases of “uncompensated natural capital depletion”: the diamonds extracted from Kimberley since the late 1860s and the gold extracted around Johannesburg since the mid-1880s.
Despite the net-negative impact of such an extraction, “a vast amount of underground natural wealth still exists in South Africa in the form of minerals, measured conservatively at $2.5 trillion by Citibank in 2012,” says the Professor.
However, “the World Bank considered South Africa a major net loser of non-renewable resource wealth” because the depletion of its natural resources is not compensated for. Extractivist models of development do not advance people and their economies, but result in the loss of sovereign wealth, with many African countries becoming poorer as a result, he says.
In his objection, Professor Bond says that the Environmental Impact Assessment report (EIA) for the Trans Hex application recognised the broader principle of not “compromising” future generations but the EAP behind the application SRK Consulting, did not provide adequate detail about how Trans Hex would achieve this.
He referred to one of the specialist studies covered in the EIA, the Social Impact Assessment for Diamond Mining Rights in Marine Concession Areas 11B and 13B, West Coast, South Africa (SIA), which conceded that according to the NEMA, “sustainable development requires the integration of social, economic and environmental factors in the planning, implementation and evaluation of decisions to ensure that development serves present and future generations”.
But the SIA had not contributed anything concrete. It is “mere rhetoric; and does not translate into the natural capital accounting (within corporate planning) mandated by the Gaborone Declaration”, writes Professor Bond.
The socio-economic analysis by SRK Consulting excludes the needs of future generations, while its EIAr summary includes only considerations that the “implementation of a safety (exclusion) zone around prospecting vessels will exclude other users of the sea from these areas during prospecting”.
The assessment even admits that fishing boats will be excluded from fishing areas, and reduced fish numbers would potentially occur, saying that there could be “(indirect) socio-economic implications for the affected industries through reducing commercial catch”.
However, a generic panacea is proffered: “Investment contributing to the economy, generation of employment, income and skills and increased prosperity due to socio-economic development initiatives are potential benefits of the project.”
Professor Bond writes that the SIA contains no information on socio-economic benefits or costs to future generations, only cultural recognition, “which is extremely important in its own right”.
Referring to the coastal communities of Papendorp, Strandfontein, Doringbaai and Ebenhaeser, the SIA outlines the sea as a lifeline for the fishers:
“It provides sustenance through fishing, a means of trade and transportation, and a source of recreation and inspiration. A sense of place connected to the sea also fosters a strong sense of environmental stewardship. Those who live close to the ocean understand its delicate balance and the impact of human activity on marine ecosystems. This awareness often translates into efforts to protect and preserve the marine environment for future generations.”
In perhaps the most apt example of the confluence between culture and inter-generational wealth, Professor Bond quotes an excerpt from the SIA about the for the fisher communities of Papendorp, Ebenhaeser and Doringbaai, and their “cultural connection with the sea and the Olifants River as they have interacted with the sea and river for numerous generations. Most of the residents, especially men, are generational fishermen. This is their way of life and is regarded by locals as a cultural activity”.
The SIA even quotes a fisherman in Ebenhaeser as saying: “Fishing was handed over to me by my father and to him by his father. My grandfather told my father that ‘I do not have inheritance money for you in Standard or First National Bank, but I do have inheritance for you in the sea and the river’”.
Professor Bond also points to the use of the beaches and ocean for relaxation, tranquillity and enhanced spirituality.
“The cultural integrity of shoreline communities is vital to protect. But the limitation of current and future generations’ rights to the sovereign wealth – especially non-renewable resources like diamonds – is simply not addressed in the SRK analysis, which does not even mention the natural capital accounts that would throw light on genuine net benefits or costs.”
“It is reasonable to assume that, like nearly all non-renewable resource depletion in Africa, the net impact of Trans Hex’s operations will prove negative. It is up to the company and its EIA consultants to follow the Gaborone Declaration, NEMA and the basic principle of intergenerational sustainability. Their failure to do so is revealing.”
“The project should not go ahead under such conditions,” writes Professor Bond.
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