IGF SUSTAINABILITY FORUM MINING 4.0: HOW TECHNOLOGY AND INNOVATION ARE TRANSFORMING THE MINING SECTOR - Intergovernmental ...
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INDABA 2020 IGF SUSTAINABILITY FORUM MINING 4.0: HOW TECHNOLOGY AND INNOVATION ARE TRANSFORMING THE MINING SECTOR February 3, 2020 | 14:00–16:00 | Roof Terrace Room Cape Town International Convention Centre | Cape Town, South Africa MEETING SUMMARY SESSION 1: BUILDING SKILLS The Intergovernmental Forum on Mining, Minerals, FOR A SUSTAINABLE FUTURE Metals and Sustainable Development (IGF) This first session was devoted to exploring a hosted a Sustainability Forum on February 3, number of key questions facing the industry: 2020, with participants of the African Mining What do new mining technologies mean for Indaba in Cape Town at the Roof Terrace Room the future of work? What types of skills will of the Cape Town International Convention be needed, and how can mining companies, Centre. The theme of the forum was Mining governments and others ensure that local 4.0: How technology and innovation are stakeholders have the necessary skills to allow transforming the mining sector. The IGF mining to make its proper contribution to partnered with the International Council on sustainable development? Mining and Metals (ICMM), the World Economic Forum (WEF), the Organisation for Economic An expert panel lead by Aaron Cosbey, Senior Co-operation and Development (OECD), and the Associate from IGF, and comprised of Aidan Tax Justice Network Africa for this year’s annual Davy, Chief Operating Officer of ICMM; Jörgen forum. Sandström, Head of Mining and Minerals Industry Group of WEF; Kemal Öskan, Assistant More than 100 participants attended the General Secretary of IndustriALL Global Union; interactive discussions on the challenges and Froydis Cameron-Johansson, Head of and opportunities of innovation and new International and Governmental Relations of technologies in mining through the lenses Anglo American, shared their experience on of skills development and the future of work, these complex issues with the audience. The as well as the implications for government summary of the discussions follows. revenues. Participants came from diverse sectors, including government, the private sector, Aaron Cosbey set the context by noting civil society, international organizations, and that the session would focus on what new academia. technologies mean for the relationship 1
between mining companies and their host mobility. That means the right education and the communities as well as their host countries. right skills aligned with the right jobs—better He noted that mining is in the midst of a jobs. wave of profound transformation: disruptive, creative destruction, similar to that which has He argued that we are not looking at an already revolutionized manufacturing, retail, entirely negative future on the job front but communications, entertainment, and other highlighted that technologies are developing sectors. The technologies involved are in fact at an accelerating pace and that, as a result, syntheses and adaptations of innovations a number of tasks and abilities are likely to that have developed outside the mining sector: be performed by machines. He stressed that artificial intelligence and machine learning, these would open new opportunities for the blockchain, drones, geographic information mining sector, but that the sector would have to systems, electric vehicles, renewable energy manage this transition to ensure that gains are generation and storage, cheap radio-frequency maximized, negative impacts are contained, and identification sensors, 5G, the Internet of Things, opportunities are shared equally, regardless of and the processing capacity to handle big data. gender, age, and origin. Brought to bear on the mining sector, all of Sandström focused in particular on the need to this comes together to mean the mines of the facilitate the implementation of a positive and future will be data-rich optimized environments. proactive approach to better tackle the future They will look quite different from the mines employment and the related skills needed for of today, with more efficient operations using the jobs of the future. Key programs would have less energy, emitting fewer greenhouse gas to include reskilling and upskilling of existing emissions, logging fewer accidents, exploiting labour, targeted programs to attract new previously unviable resources, and opening up talents, strategies to facilitate inter- and intra- new opportunities for women and youth in the industry employees’ redeployment, and new sector. ways of thinking about corporate responsibility Cosbey observed that these are all very good to support those who would be displaced by things but that any technology has both positive automation. and negative impacts, and anticipating and He stressed that we need good data and aligned addressing the negative is crucial if we hope policy, with policy lighthouses or beacons to to benefit from the positive impacts that new help better coordinate between business and tech can provide. He prompted the panellists their associations and with a reskilling delivery to reflect on these issues from their distinct mechanism that works for all stakeholders. perspectives. Focusing on closing the skills gap with accelerators such as good policy is critical. The OPPORTUNITIES AND CHALLENGES WEF Mining and Metals Community Task Force, REGARDING TECHNOLOGICAL AND established as part of the Shaping the Future INNOVATIVE ADVANCEMENTS IN THE of the New Economy and Society Platform, can MINING SECTOR help to increase awareness and identify and promote leadership. He acknowledged that In line with Aaron Cosbey’s initial remarks, tensions are high because of fears of job loss Jörgen Sandström from the WEF opened by and agreed that some jobs—such as accounting, simply stating the future is here: 5G has rolled payroll desks, assembly, stock keeping, financial out in all industries and 6G is being tested in analysis, and driving—are being replaced. But he mining. At Davos, the discussions focused on reiterated that there will be new and better jobs social cohesion, with some predicting twice as and ended with a few examples of current jobs many jobs being created by the Fourth Industrial and future jobs to show the difference. Revolution. He noted that, as a sector, it will be incumbent on mining to reskill 1 in 10 people Aidan Davy from ICMM began by outlining the over the next 10 years and to consider how opportunities and challenges with the advent to support employees on pathways to social of technological changes such as increased 2
digitization, automation, and the other high Davy further contended that mining has been technologies in the mining sector. Based on his a significant driver of development in the past experience with ICMM membership and in recent 20 years in many resource-dependent countries, publications, he detailed the positive dimensions including in Africa.2 However, he explained and potential that technology and innovation that the challenge remains whether the social bring to the sector. From an industry perspective, progress and economic gains over the past two technology and innovation have great potential decades are going to be sustained over the to: next two decades as technology and innovation • Optimize operations and improve mineral accelerate. processing and recovery rates. Davy recognized that, realistically, local • Increase productivity, as exemplified by a communities are the most vulnerable to changes recent decision by one American company due to advances in technology and innovation. In to roll out machine learning technology terms of employment, jobs that are traditionally across mines in the Americas with the goal staffed locally or nationally (drilling, blasting, to raise its copper production across their truck driving, etc.) are expected to decline, portfolio of assets in the Americas by about given the trend toward automation. However, 5%.1 higher-skilled jobs, such as those linked to • Enable safer mining activity overall with data analysis and remote central operations, a lower carbon footprint and therefore will be more in demand. Unfortunately, the reduced greenhouse gas emissions. communities to be likely adversely impacted are those that are perhaps least well positioned to • Salvage or reverse a declining trend in take advantage of the economic opportunities productivity. In an era of declining ore that will come with advances in innovation grades, the application of technology and and technology. These will stay out of reach by innovation sustains productivity gains as virtue of shortcomings in social and economic opposed to losses. A reference was made infrastructure and related factors, such as the to the McKinsey Mine Lands Productivity often limited levels of educational attainment Index, which demonstrated a decline in and skills base in remote communities. productivity in the mining sector between 2004 and 2014 that, in some cases, was In addition, alternative economic opportunities running at about 10% per year. The data available to mining communities will probably showed that a reversal was only made with be compromised as sectors such as agriculture, a sustained focus on reducing headcount tourism, and manufacturing are subject to the and boosting labour productivity. Fourth Industrial Revolution. In remote mining 2 ICCM. (2018). Role of mining in national economies: Mining 1 See: Freeport turns to artificial intelligence to raise copper output Contribution Index 2018 (4th ed.). https://www.icmm.com/website/ by 90,000 tonnes. (2019, November 3). Financial Times. https://www. publications/pdfs/social-and-economic-development/181002_ ft.com/content/88628dc0-fe32-11e9-be59-e49b2a136b8d mci_4th-edition.pdf 3
communities, there is a direct correlation partnerships to deliver support and to between communities’ expectations of benefits acquire skills at scale. Collaboration from mining operations and their proximity to between institutions such as ICMM, WEF, those operations. IISD, the World Bank, the International Finance Corporation, Mining Share There is also a gender dimension to technological Value, and many others is a good path to advances: mining has traditionally been a understanding the nature and scope of the male-dominated sector. Because technological evolving skills landscape and to identifying changes impact jobs that are predominately opportunities for partnerships in supporting physical and manual, the types of jobs often the delivery of critical skills for a common carried out by men will likely be more affected future. than those of women. However, women will not necessarily benefit from this reversal and the technological advancements in the sector, A “SOCIAL LICENCE TO INNOVATE’’ AND as fewer women are involved in science and COLLABORATIVE REGIONAL DEVELOPMENT technology, engineering, and mathematics and Froydis Cameron-Johansson from Anglo will not have a competitive advantage in the American shared concrete and pragmatic mining sector. examples of initiatives undertaken by Anglo American in the area of innovation. Anglo ROLE OF INDUSTRY IN ENSURING THAT American has rolled out a robust innovation LOCAL STAKEHOLDERS HAVE THE program called “FutureSmart.” It aims to identify the technologies that will affect the mine NECESSARY SKILLS TO ALLOW MINING of tomorrow in terms of finding safer, more TO MAKE ITS PROPER CONTRIBUTION TO efficient, and environmentally friendly ways of SUSTAINABLE DEVELOPMENT unlocking mineral value such as reducing the When asked about the role of industry in the physical footprint, the potential for mines that effort to reskill workers, Davy further stressed are waterless, have no tailings dams, or have that there must be a shared understanding of a very low carbon footprint, etc. Furthermore, the skills required for mining communities to Anglo American is committed to its purpose as thrive in an uncertain future characterized by a company, which is to re-imagine mining to technological advances and the inevitability improve people’s lives. of mine closures. He noted that the definition However, she highlighted the challenges faced of reskilling needed to be expanded beyond by companies in developing countries in trying job training to include entrepreneurial training to achieve a just transition and delivering on and leadership skills. In addition, partnerships companies’ core values. Examples from existing between mining companies, governments, and literature and strategies are conceived for local communities will be necessary to effectively countries that have a really structured welfare plan for sustainable, diversified local economies. state and very high-functioning education Davy emphasized the following elements: systems, such as OECD countries. For a company • There is a need to understand the changing investing in a country such as South Africa, nature of the skills that are going to be where there are structural challenges with required for participation in the economy employment (unemployment rates that are at of the future. This will require mining least over 25%), the challenges are very different. companies and the industry working together with governments and educational Cameron-Johansson noted that reskilling institutions in civil society. might be too easily proposed as a solution to the changes wrought by automation. In some • There is a need to develop pathways for cases, there will simply be an irreconcilable gap communities and others to obtain the between the skills needed in the mine of the necessary skills for economic participation, future and the skills that existing workers can leadership, and economic diversification. acquire. Moreover, she cautioned, we need to • There is a need to collaborate on catalytic be careful with our assumptions if we claim 4
to be doing workers a favour by eliminating JUST TRANSITION meaningless repetitive jobs. Have we tested Kemal Öskan, Assistant General Secretary of that assumption in dialogue with those that are IndustriALL, a global union federation, pointed doing those jobs? to the lack of inclusion of workers in the debate Anglo American has developed five principles on automation and skills for a sustainable future, around a concept called “a social licence to the very same debate that will determine the innovate,’’ which is still at an early stage. The future of their careers. Neither companies nor principles address how companies should workers know with certainty the degree to which conduct themselves in considering the impacts technology in mines will affect employment, but of new technology: listening, engagement, there are examples from Australia, the United collaboration with those affected, transparency, States, and Canada that indicate significant and being true to purpose in viewing new job losses. Some estimates place the loss at 20 technology as improving peoples’ lives. million jobs in the mining industry throughout the world. For Öskan, this gap in dialogue must Anglo American has also adopted a be filled to ensure workers’ acceptance of the collaborative regional development approach measures to be taken by mining companies. The that fundamentally rethinks a mine as an search for the social licence to innovate must economic catalyst to create independent necessarily include dialogue and collaboration economic opportunities for the community. with, and acceptance by, local communities as This starts by identifying socioeconomic well as workers. development opportunities that offer the greatest potential in a region, using spatial He pointed to the auto industry as an example planning and analysis and working with of where that kind of collaborative process had development agencies, non-governmental worked. They started with an analysis of what organizations, and the community. Projects kinds of skills would be needed in the future, and are designed to become part of the regional then unions and employers sat down together development plan—not Anglo American’s to discuss the best ways forward toward, taking regional development plan but the local into account the perspectives of all sides. government's regional development plan. He argued that information sharing and Capacity building for municipalities is another consultation should be held at the project, key for success to ensure strong leadership national, and global levels to generate a and capability in project management and common vision and understanding of a just governance. transition. Broader reforms and discussions about sustainable industrial policy and education policy in partnership with governments will be critical in supporting the transformational changes to technology and automation. 5
SESSION 2: TECHNOLOGY AND as was the commitment of the international community to reach a political consensus for a THE FUTURE OF GOVERNMENT long-term solution to the tax challenges arising REVENUES from the digitalization of the economy by the end of 2020. Corrick expressed the view that The second half of the forum focused on the the consensus will resolve the different policy roles and impacts of new technologies in mining approaches among G20 countries, including, in on tax revenues from the sector, and what types particular, the issues between the United States of partnerships and strategies will ensure that and France on digital sector taxes. However, mining revenues for developing countries do not a number of technical challenges and policy erode. differences remained among the participants that would need to be resolved in order to reach The panel discussion was moderated by Howard an agreement. These include: Mann, Special Advisor, Tax Base Erosion and Profit Shifting (BEPS), IGF, and participating 1. The safe harbour approach proposed by the panellists included Kingsley Chanda, United States for the implementation of Commissioner General of the Zambia Revenue Pillar One.4 Authority; Alvin Mosioma, Executive Director 2. The so-called digital differentiation that will of Tax Justice Network Africa; and Lee Corrick, apply slightly different rules for very large Senior Advisor, Transfer Pricing, OECD. businesses versus other businesses. 3. The regional segmentation, as suggested by OECD/G20 INCLUSIVE FRAMEWORK ON some members, of the inclusive framework BEPS to take into account regional factors. The panel began with a brief update on the 4. The proposed binding nature of dispute OECD/G20 Inclusive Framework on BEPS on prevention and resolution mechanisms, as the Two-Pillar Approach to Address the Tax well as the scope of the dispute resolution Challenges Arising from the Digitalization of mechanism. The importance of this issue the Economy.3 Lee Corrick, OECD, recalled the for the African region, where a majority recent progress made during the Paris meeting of members are strongly opposed to any in January 2020 but also noted that there form of mandatory binding arbitration tax are challenges to be met in order to reach a sovereignty, was noted. consensus. The agreement on the ‘‘Unified Approach” was an important step forward, 4 The “safe harbour” approach was proposed in a letter from the U.S. Treasury Secretary to the OECD Secretary General in December 3 See the OECD and G20’s January 2020 statement here: https:// 2019. For more details, see: https://www.oecd.org/tax/international- www.oecd.org/tax/beps/statement-by-the-oecd-g20-inclusive- community-renews-commitment-to-multilateral-efforts-to-address- framework-on-beps-january-2020.pdf tax-challenges-from-digitalisation-of-the-economy.htm 6
NEW TECHNOLOGY, INTELLECTUAL • The potential losses of tax revenue, such as PROPERTY RIGHTS AND THE POTENTIAL personal income taxes due to employment loss as a result of technology. TO SHIFT TAX REVENUE Panellists were invited to reflect on how However, Kinsley acknowledged that new government revenue might become more technology could bring more opportunities vulnerable to profit shifting with the expansion to increase government revenue as costs are of new technologies and related intellectual reduced and efficiency and profitability in property rights. Howard Mann set the context mining operations improved. Conscious of that new technology that is rich in intellectual their lack of capacity, more and more African property rights is causing a significant shift countries are moving toward simpler fiscal in weight to the part of the value chain that schemes on production or taking a stake in comes before construction or operation and is mining companies. located primarily in the intangibles in developed Alvin Mosioma from the Tax Justice Network countries. concurred with other panellists that investing Corrick recognized that the problem is complex, in new technologies, building capacities, global, and prevalent in many industries, not only and enhancing human resources within tax in the extractive sector. He further stressed that administrations will be unavoidable if African the problem is not new but is being amplified countries are to tackle the challenge of by the BEPS debates globally. Drawing from the transition of the mining sector to new OECD experience in collaborating with a large technologies. He also identified double tax number of African countries’ tax administrations agreements with countries where intellectual over the past 10 years, it was noted that the properties are located as a risk to forgoing valuation of intellectual property has long been revenues, especially when the intellectual recognized as one of the most difficult issues in property is located in a jurisdiction considered transfer pricing. It requires important resources a “tax haven.” African nations should therefore and capacity in the tax administrations and be more involved in the global reforms in order highly specialized skills. In this context, the to streamline and modernize the existing double African continent is unfortunately not well tax agreements landscape. equipped yet with the expertise to appropriately Overall, the panel agreed that technology could consider complex intellectual property rights be both an opportunity and a challenge with and transfer pricing issues and related disputes. regard to national efforts to increase revenues, However, a few African nations have started depending on how prepared and capacitated the to follow some OECD countries in adopting tax administrations are. advanced pricing agreements as the preferred approach to preventing disputes. STRATEGIES TO SIMPLIFY TAX SYSTEMS Kingsley Chanda, Commissioner General of Panellists further discussed the rationales and the Zambia Revenue Authority, shared his strategies to simplify the tax systems. Leading experience from a government perspective on the discussions, Kinsley reiterated that the how the shift to a higher presence of intellectual complexification of mining operations and property rights and intangibles in the mining accounting systems and the limited capacities process is impacting the capacities of African of African tax administrations to audit those administration to collect revenue. He highlighted systems is a reason to resort to simpler strong some challenges arising in the African context in tax regimes and monitoring mechanisms. Kinsley dealing with the issues of intellectual property gave an example of the Mineral Value Chain rights and transfer pricing practices, including: Project, where the tax administration monitors • The lack of tax administration capacity the production of minerals from the entire value and the lack of adequate information and chain from production to export. This project communications technology infrastructure. provides data that can later be reconciled with the reporting data from mining companies. • The lack of expertise or resources for One element here was the need to learn from undertaking complex audits of mining experience how a mining company can be companies. 7
producing at a loss for many decades without (i.e., information on ore grades, quantity any opportunity for the country to levy corporate produced, schedules of production). Panellists income tax. Following such experiences, the agreed that more data is certainly useful when Zambian government is increasingly entering it is well understood and used, but to turn data into agreements and building partnerships with availability into opportunities, certain conditions investors to take significant stakes in their must first be met: business. • Governments must necessarily invest in Investment in the same level of technology digitalization, including tax administrations. used by mining companies is unaffordable for • Governments should learn more about most African countries. Therefore, the cost complex multinational organizational of technology is an additional argument for architecture and understand the integration African countries to go outside the traditional between affiliated companies. tax regimes based on profit and have simpler • Comprehensive solutions must be found ways and means of benefiting from the main across the different economic sectors. activities in their country. Standardizing tax- related technologies may help in this regard. • Data should be collected in a more “standardized approach” or hosted in more Mosioma further emphasized that the debate standardized platforms and language to is more complex, as the digital debate has not avoid swamping tax administration with clarified whether digital sales tax is a gross tax different sets of data that require different or a revenue tax, but it appears that it is not a skills and analysis systems (software). profit tax. Furthermore, the complexity of the mineral valuation and the tales of unsuccessful Increased co-operation and information sharing attempts to collect corporate income in among tax authorities in jurisdictions where the more than a few countries suggest the need same multinationals operate was also seen as for simpler tax schemes. Corrick closed the essential to preventing deliberate tax avoidance. discussion on this question by highlighting that other fiscal tools might be used, such as production-sharing agreements rather than profit-sharing agreements. In either case, governments might face the same challenges For more information about the as they face in current corporate income tax IGF please contact the Secretariat: regimes. 220 Laurier Avenue West, Suite 1100 Ottawa, Ontario Canada K1P 5Z9 There was broad agreement in the room that Email: Secretariat@IGFMining.org developing countries should explore innovative Phone: +1 613-778-8767 (Ext. 105) ways and long-term solutions to BEPS issues in the mining sector through simplified regimes. The view was also expressed that a more comprehensive reform at the global level IGFMining.org should ensure that profits from companies face the same level of taxation regardless of their @IGFMining location. Secretariat hosted by NEW TECHNOLOGY, DATA AND GOVERNMENT TAX REVENUES Mann framed the final discussion question around the opportunities that come from a very Secretariat funded by data-rich mine: investments in technology result in companies having access to real-time data on the various characteristics of their operations © 2020 International Institute for Sustainable Development 8
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