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Mining for Development: Shift emphasis from CSR budgets to local procurement to have greater impact on poverty reduction

This week, Building Markets and Anchor Chain participated in the Mining for Development conference in Sydney, Australia. Here is what we had to say.

The development opportunity offered by mining lies in the potential for an increase in local procurement.

Local spending is how companies can maximize benefits to local communities. Increased local spending helps small and medium sized enterprises (SMEs) create and sustain jobs, invest in their businesses, and establish performance records that make them more competitive and sustainable.

Poverty can be beaten when people have jobs. In the world’s poorest economies, 9 out of 10 jobs are created by small business owners. Access to opportunity and capital is the best way to help these business owners create jobs.

Leveling the playing field for small businesses is required for them to win, grow, and scale by gathering, aggregating, and disseminating information. We do this through our teams of talented local staff. Local grassroots knowledge has a big impact. Our model is called the Sustainable Marketplace Initiative.

Because local spending is where the war on poverty can be won, mining companies should stop thinking about their CSR budget as their community development budget. Increased spending through local businesses can have a far greater economic impact than any CSR budget. By purchasing and spending locally, you are spending your money twice. By buying local, companies obtain the goods and services necessary for their operations while revenues are used to pay and hire local workers, thereby supporting families and communities. Money is re-invested in business, community health, employment, and education sectors.

Companies should think about their procurement budget as their community development budget: a small increase in local contracts can have an exponential impact on community development. Kinross Gold, for example, spends 0.2% of its budget on CSR, while over 50% of its revenue is spent on local procurement. AngloAmerican, which considers local procurement as the most important contributor to local private-sector growth, has recently increased its local spending. The company’s procurement budget is 100x its social investment budget.

Development is ultimately about generational transformation and genuine impact. Because of the long-term timelines of the extractive sector’s operations, it is well placed to influence development. Therefore, it’s not surprising to see aid agencies like AusAid and CIDA beginning to work more cooperatively with the extractive industry.

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As explained in the video above, what is wrong with aid is also what is wrong with mining. Local spending reduces poverty and has other benefits.

Canada spends $800m a year on its official development assistance to Africa, while there is over $30b dollars in Canadian mining investments in Africa. How many of these billions are spent locally? This is important information to bring to light, as those investments are the best opportunity for reducing poverty.

Our own data tells the story of impact can on the scale of national economies. To date, we have helped local entrepreneurs win over $1.1 billion in new contracts. This has helped local businesses create over 65,000 jobs. Our goal is to double these numbers in the next 3 years. We invite the extractive industry to join us in this goal and spend their billions locally to build strong local economies for years to come.

Data tells the story of the large scale impact of local spending

 

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