Measuring the Economic, Social and Environmental Impact and Return on Investment of Infrastructure Investments & Development Programs
Mining companies’ impact in the countries where they operate are vast. On the one hand there’s a tremendous positive impact from job creation, skills development and the payment of taxes & royalties. On the other hand, there is negative impact specifically from an environmental and social perspective.
The mining industry is highly regulated. Licence to operate is linked to much compliance and governance and there are also the increasing expectations from local communities that must be dealt with.
According to various global and industry standards, our client needs to report on their social, economic and environmental impact. To report, companies must have very specific strategies, with clearly set-out targets & performance management frameworks to deal with material economic, environmental and social risk. In addition, performance management systems to consistently measure and report on their impact are of critical importance.
Generally, mining companies’ sustainability strategies are supported by extensive resource and capital commitments. In addition, there are specific targets to be met that are set by national and local governments that tie directly to the condition of their licence to operate. Funding for these commitments are allocated in cycles of 3 to 5 years.
Our client’s expectation was to measure the impact of various interventions and investments including local procurement, enterprise and supplier development programs, as well as skills development and bursaries in addition to social and community interventions.
This case study, however, focuses specifically on measuring the impact of infrastructure programs & investments and excludes other aspects of the assignment.
What we did
- Our impact management and measurement process were underpinned by extensive stakeholder engagement to validate the value (quantitative and qualitative impact) brought about by the provision of infrastructure. In particular, we needed to confirm the impact of investments in schools, roads, hospitals and clinics.
- Our impact management process was supported by extensive socio-economic research to validate impact before and after the provision of infrastructure, and reviewing baseline studies to understand the depth, reach and scale of impact over time.
- Through the engagement and research process, we identified indicators to measure impact and return on investment. These indicators were then tested against local, provincial and national databases & datasets. Then they were segmented into dimensions of impact such as: direct, indirect, positive, negative, intended, unintended, the term of the impact (short/medium or long term) and economic, social or environmental impact.
- Once impact was validated and calculated, an impact report based on extensive impact analysis was provided. This substantiated the total impact and return achieved through the mining company’s investment in infrastructure.
The impact and return on investment
Some of the impacts identified, validated and reported on included:
Local and Provincial Government
- The provision of infrastructure like water, sanitation, roads, schools and clinics leveraged government funding. This multiplier effect was as much as 3 times the original investment.
- In addition, the infrastructure provided alleviated resource constraints of funding and skills at a local government level. This meant that limited or scarce resources could be used for other pressing needs.
- Lastly, service delivery from government not only improved, but access to services also increased for the local communities.
- Increased access to basic services improved the quality of life in local communities. Examples of this are:
- Health impacts: due to a decline in infant and maternal mortality.
- Education impacts: Improved access to education which contributed to reduced illiteracy, improved school attendance, enrolment rates, pass rates and throughput rates.
- Household incomes improved: Increased access to road infrastructure reduced household expenditure.
- Economic impact: Employment was created through the construction and maintenance phases of the infrastructure projects, which in turn contributed to increased household income, a reduction of unemployment and poverty alleviation.
Local Businesses (existing), new businesses, and service providers/contractors/suppliers:
- Local businesses improved their service delivery because of increased access to infrastructure.
- Profitability of local businesses improved, and cost savings were incurred.
- New businesses were started because of the increased economic activity in the area. Subsistence or survivalist businesses grew into more viable commercial entities measured by revenue and income generated during the period.
Unintended negative impact was also identified:
The region experienced an increased migration of people. This had a negative impact on the provision of services by government. Access to suitable or affordable housing was negatively impacted, crime rates increased, and existing infrastructure schools & hospitals were negatively impacted by issues such as overcrowding.
The return on investment assessment provided evidence of:
- Improved stakeholder relationships with community & government, neighbour, local businesses and peers.
- Reduced civil unrest, strikes, riots, violence and activism which contributed to savings and greater efficiencies.
Apart from the impact assessment, a cost benefit analysis and attribution/contribution were conducted. Some of our findings regarding attribution included:
- Lack of adequate road infrastructure, especially in rural areas, results in significant limitations for communities. These limitations occur in terms of access to socio-economic and cultural centres such as schools, clinics, markets and other business centres. Limited access to schools hampers educational access for learners. Lack of access to clinics hamper health development and limited access and mobility to markets and other business centres places limits on trade opportunities. Subsequently, this limits the potential opportunity for earning an income and an improvement in the day-to-day living standard. The result is a poor standard of socio-economic development.
- Road infrastructure provides accessibility and mobility, leading in turn to increased transport operations, economic activity, subsequent economic growth, and ultimately a healthy and sound economy. An adequate road infrastructure network provides an advantage to a country in terms of improved regional integration, which helps to promote regional and international trade while significantly enhancing the economic growth and development of a country; consequently alleviating poverty.
- Factors that are highly correlated with poverty (unemployment, limited to no income, low or no education level, etc.) are also related with low access to transport in the sense that men and women can afford little-to-no transport services, thereby constraining their mobility and access.
Direct and positive impacts on individual road users attributed to the investments of our clients included the following:
- Savings in Vehicle Operating Costs (VOCs)
- Travel time savings
- Reduced accident costs due to the upgrade of the proposed roads
- Possible savings in road maintenance costs
Induced or combined impacts: Induced impacts refer to benefits that can be attributed to local economic development because of the road investment.
- Enhanced self-sufficiency
- Increased production
- Increased and improved efficiency because of, amongst other aspects, improved access to markets for agriculture produce
- Improved access to social services such as healthcare and educational facilities
- Increase in household income and subsequently a more equal distribution of income
Other impacts identified (from different types of infrastructure investments):
a. Energy infrastructure:
- Increased production of renewable energy
- Improved electricity transmission network and interconnections
- Improved safety and security of energy infrastructure
- Improved energy efficiency and energy savings
b. Transport infrastructure:
- Improved rail infrastructure
- Improved ports infrastructure
- Better (cleaner, faster, cheaper and safer) transport infrastructure, providing better modal balance and promoting social cohesion and sustainable growth
c. Water and environment:
- Improved water resources management, including necessary related infrastructure
- Enhanced water management capacity
- Improved maintenance of water and waste-water infrastructure particularly at a municipal level
- Promotion of low carbon and cleaner industrial production, including promotion of innovative and environmentally friendly technologies
- Promotion of climate change adaptation technologies, including necessary related infrastructure
- Promotion of integrated waste management (household, municipal, industrial and mining wastes) including necessary related infrastructure
e. Social infrastructure:
- Better access to health care and improved health services in urban & rural areas
- Better education facilities and increased access to education in urban & rural areas
- Improved vocational training facilities
- Improved housing
- Improved public buildings and spaces