The struggle of every economic sector is to remain relevant as times and operating environments change. This is becoming even more challenging as the pace of change continues to change on several levels. Technological, regulatory, market and external changes are all happening at a fast pace leaving policymakers with no room for complacency. It is against this background that I enjoyed reading the article that appeared in this newspaper on June 8, 2021 entitled What would it take for the mining sector to adopt new technology? The article uncovers a basic truth about every sector; technology adoption and embracing will be key to its futureproofing, productivity gains, competitiveness and also regulatory compliance. The mining sector is no exception and the use of blockchain within the sector can be one such driving force of technology. The extractive industry sector is undergoing significant transformations in response to tightening financial regulations and divestment in mining activities. These changes are compounded by increasingly ethically aware consumers seeking an assurance that the products they buy do not contribute to the negative environmental and human impacts of mining, as well as by the disruptive effects of synthetic gemstone production in the market. These transformations will significantly impact resource-rich mining economies in sub- Saharan Africa. The use of blockchain technology in mineral supply chains has been presented as a panacea for some of these problems, including social and environmental issues. At its inception in 2008, blockchain first gained renown as the technology underlying the Bitcoin cryptocurrency. As a decentralised network, based originally on an electronic, peer-to-peer payment system, blockchains serve as a public digital ledger to record transactions without relying on financial institutions or third-party control. Among its core principles, the original decentralised blockchain rests on openness, transparency, and security. Specifically, the possibility of an immutable, or tamper-resistant, ledger has generated different applications for managing high-value assets, including minerals. Unlike public blockchains (fully decentralised nodes not placed under any single authority), consortium or private blockchains (controlled by a select group of approved or permissioned actors, usually private institutions) have been more conspicuous in the mineral sector. Particularly since 2018, these privately distributed ledgers have emerged in proof-of-concept or pilot stages to showcase how mining, manufacturing and jewellery actors may harness the potential of blockchain technology in the mineral sector. However, the industry is currently grappling with two related challenges: first, the technical difficulty of translating conventional methods of tracking the physical commodity – from tagging to fingerprinting – into blockchain-based solutions; and second, creating incentives for proper data entry and validation, as well as compensating for value and information fragmentation across participants in the supply chain. Since 2016 the mining industry has been at the forefront of an alternative to paper certification modelled on the digital-based blockchain ledger. From diamonds to cobalt to gold, there has been an explosion in blockchain-based initiatives for traceability purposes in mineral supply chains. These are often presented as the silver bullet to the perennial problem of record-keeping in commodity transactions. Blockchain technology seeks to expand the scope of existing traceability initiatives, including determination of origin and enhanced chain of custody. The digital transparency of blockchain projects offers the potential of a tamper-proof, immutable record of transactions, ownership, and origin. Unlike existing chain of custody initiatives, it effectively surrenders the need for intermediaries or trusted partners to verify, audit or certify the supply chain. To deliver on the promise of responsibly produced and traded minerals, blockchain technology must be combined with due diligence practices (the OECD’s Due Diligence Guidance, or another recognised responsible mining standard). Authorised parties should carry out risk assessments, mitigation, and remediation actions along all nodes of the supply chain, as well as verifying the quality of data collected and stored on blockchains. Blockchain-enabled initiatives should ensure full transparency on data collected, including information pertaining to mining sites, companies responsible for cutting and polishing diamonds, price, provenance, and ownership history. Self-sovereign data, in which only direct parties can access relevant information, would also help provide solutions that allow for interoperability between private blockchains for open communication across the digital ecosystem and to remedy informational asymmetries among participants in the supply chain. Alongside quantifiable data most directly useful for supply chain management and mineral traceability, blockchain and DLT promoters should design protocols that are accessible to and inclusive of upstream actors, artisanal and small-scale mining communities. It is therefore imperative that any technological strategy for the sector is part of a wider transformation map. Sectors need a holistic approach to their transformation and not fragmented or siloed initiatives. Technology is not an automatic solution but needs to be integrated within a set of policies, processes and procedures that are aligned with an overarching vision which feeds into skill acquisition, market development and firm investments. Future-proofing a sector through transformation maps needs to be holistic in nature, approach, and output. JP Fabri is a co-founding Seed Consultancy, a research-driven advisory firm based out of Europe. www.seedconsultancy.com | jp@seedconsultancy.com
