Economics of mining on North Stradbroke Island

Howard Guille follows up his recent article, Politics of mining on North Stradbroke Island, by discussing the economics of sand mining including its contribution to employment of Island residents.

The economics of sand mining

Economics of mining on North Stradbroke Island

Sibelco’s Enterprise Mine  (click to enlarge)

Sibelco has repeatedly emphasised what it says is the economic contribution of mining to North Stradbroke Island (NSI).

In 2013 Sibelco told a Parliamentary Inquiry that it had commissioned an independent analysis in 2010 ‘to better understand the financial relationships between Sibelco and the NSI community’.

According to this analysis, undertaken by consultant Synergies:

  •  mining contributed $130 million to the local economy in the last year
  • $77.5 million represents a net economic welfare value added to the local community
  • sand mining employs almost 300 people on NSI with a further 230 employed on the mainland.

Synergies updated the estimates in 2013 to include the following:

  • $180.4 million in revenue
  • approximately $114.1 million direct value added
  • total royalties paid to the Queensland Government of $60 to $80 million over the period 2014-2035.
  • a potential loss of 281 jobs from the NSI economy

Others have repeated Sibelco’s claims; usually uncritically. For example, the Straddie Chamber of Commerce told the Parliamentary Inquiry that the sand mining industry injects over $100 million into the Island economy each year.

Sometimes the repeats come with some inflation. Mark Robinson, MP for Cleveland, has claimed there will be a loss of 600 jobs if mining ceases. Andrew Laming, Federal MP for Bowman, uses the same figures to say mining ‘injects $130 million, or five Tangalooma resorts, into the local economy annually’.

Examining the claims

North Stradbroke Island Employment by Industry (click to enlarge)

North Stradbroke Island Employment by Industry (click to enlarge)

The column chart shows the number of North Stradbroke Island residents (postcode 4183) employed in major industry sectors  for the last three censuses: 2001, 2006 and 2011.

The pie chart shows the percentages that major industry sectors contributed to total employment of Island residents as at the most recent (2011) census.

Because these charts are based on census data:

  • Place of employment for Island residents can be on or off the Island
  • Type of employment can be full or part-time, permanent or casual.
2011 Employment (click to enlarge)

2011 Employment (click to enlarge)

Important points are:

  • The number of residents employed in mining has fallen 35 per cent over ten years
  • Employment in all other major industries has increased
  • In 2011, more residents were employed in tourism (food and accommodation services) than in mining

The total number of Island residents in employment fell from 908 in 2001 to 850  in 2011 – a drop of 6%.

The Sibelco evidence to the 2013 Parliamentary Inquiry that ‘sand mining employs almost 300 people on NSI’ is difficult to substantiate from the Census data. Note it is also different from that reported by its own consultants who say based ‘on the Census and Synergies estimates’ mining employs 120 residents. They also say that in 2013, Sibelco reports that its resident workforce is now 145, almost 15% greater than reported in the 2011 census. It seems that Sibelco said one thing to the public and the Parliament and another to its own consultants.

Sibelco also appears to over-estimate the employment of Aboriginal people in mining by variously saying there are 45 to 50 people employed. The most recently available data is from the 2006 Census and shows that 22 out of 134 Island residents working in mining were Aboriginal people. It is very unlikely that the employment of Aboriginal people in mining would have more than doubled in five years when the total resident workforce in mining fell by 22.

The consultancy report by Synergies also seems to be being misconstrued. The study is an orthodox input-output model and the authors are technically first rate and enjoy high credibility. However, the conclusion is from an economic model and so depends on the assumptions of the model.

  • It is reasonable to accept that the total revenue from mining was $130 million in 2010 and up to $180 million in 2013; most of the increase was from a higher mineral price and higher exchange rate. Current revenue (2015) is probably below $180 million as the price and exchange rate have both fallen.
  • The important figure is the ‘value added’; this is revenue less operating costs. Like GDP, it is a measure of the contribution of an industry to an economy.
  • Sibelco and its supporters repeatedly state that mining puts the value added into the Island (or what they call the local economy). However, the critical question is how much of the value-added goes to Island residents and, indeed, stays on the Island.
  • As an economic construct, value added is the rewards from production that can be divided between profits, rents and wages. Sibelco is a privately-owned company and, so far as is known, none of the private owners live on the Island. Rents are paid in lease fees and royalties; these go to State Government coffers and there is no automatic return to the Island.
  • This leaves wages paid to Island residents as the way that mining income gets to the Island. A reasonable estimate for 2013 would be that the average gross wage payment was around $100,000 per person per year. With 112 resident workers, this would account for $11.2 million of the $114 million net value.
  • It seems clear that the assessment of mining’s economic contribution to the Island is exaggerated. The equipment, fuel and power used for mining are brought to the Island. The profits from mining go to people who live off the Island.

The 2011 Situational Analysis produced by the Economic Transition Taskforce made similar points:
• With revenue flowing to the head offices of the sand mining companies it is unlikely much of the $125 million of the sales revenue would stay within North Stradbroke Island
• It is also unlikely much of the $77.5 million profit component of value added would stay in North Stradbroke Island

A summary

Sand mining on Straddie (click to enlarge)

Sand mining on Straddie (click to enlarge)

The economic analysis was prepared as part of the corporate campaign run by Sibelco to get the LNP Government to give it longer mining leases. The results of the analysis have been, and are being, used to make a political and a self-interested case. This case inflates the level of employment of Island residents in mining and the value from mining that remains on the Island.

One implication is that the impact of closing mining is being exaggerated. For example, talk of 400 or 600 jobs lost on the Island is fanciful. Another albeit small example is the claim that the secondary effects will include 17 Island jobs lost in manufacturing and 11 in utilities. Yet, according to the Census, there are not 17 Island residents employed in manufacturing or 11 in utilities.

Mining is 13 per cent of employment on the Island. As it is better paid than tourism and more likely to be full-time, mining probably contributes 20 to 25 per cent of the employment income on the Island. In turn, if labour incomes are around half of economic product, this is 10 to 12.5 per cent of the value of total economic activity on the Island.

 The future

There is a need for a planned transition for Stradbroke. However, it is not of the scale claimed. A number of points bear noting; some are expanded in a detailed account of the ‘rents of paradise’.

  • The first concern must be for the current Sibelco workforce on and off the Island. They should be given access to long-term training and education in areas of their choice and to relocation assistance. The education and training should be substantial and lead to trade qualifications, advanced skills or degrees as the workers themselves choose. It should be fully funded by Sibelco and include paid time release. Such schemes have been used in a number of industries including the closure of BHP Steel at Newcastle where it was quite successful in getting people into new areas of employment and reducing forced redundancies.
  • The future of the Island lies in building economic activity from the bottom up. It does not lie in ‘big’ projects whether resorts or theme parks.
  • Economic development and Infrastructure must be directed at increasing social equality and reducing ecological impact and the carbon footprint.
  • The Island is a fragile natural environment; it is also a place with a higher proportion of the population, both Aboriginal and non-Aboriginal, living in poverty compared with most of the rest of Queensland. This co-exists with a high price, holiday home market supported by negative gearing. Economic transition should be focused on an equitable outcome for all island residents, not just those who are already profiting from the islands many assets.
  • Spending is needed on a lot of small things; for example, improved and cheaper broadband will be more useful than more roads. Reducing the carbon emissions of barges and providing cheaper transport networks throughout the Bay can also contribute. So can feral animal management and eradication.
  • Almost all the tourism in Moreton Bay and by extension, Redland City, occurs on Quandamooka land and waters. This could be a unique base on which to promote and market all the Bay islands and localities to visitors. Inbound tourists consistently say they want a genuine cultural experience in a natural coastal environment – what better destination than North Stradbroke Island, home of the Quandamooka People?

Howard Guille – 24 February 2015

In the interests of full disclosure, Howard Guille is a member of the ALP and currently Secretary of the Stradbroke Island Management Organisation (SIMO). However this article expresses his own views and does not purport to be the views of either organisation.

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3 thoughts on “Economics of mining on North Stradbroke Island

  1. This is so biased and one-sided! It is incredible that a minority that is uncontested in this small community can have so much power. This island has worked together With the inhabitants for generations and now some outside influences have thrown their weight around and are trying to change the status quo due to some philosophical theories, whether they be evidenced based or not! Anyone can make the numbers agree with your theory, that is just in the wording and the audience. The many years of success and generations of the island running as a team with private, education and other invested partners speaks for itself!!! Why change now and send our island to ruin and poverty!!!

  2. I have been a rate payer on the Moreton Bay Islands for nearly 40 years and it is disgusting to read all of the lies from Sibelco and our elected representatives. There has been no funds spent on progress of the Islands. Sibelco should have paid for a bridge/causeway from the mainland to Russell Island then on to Straddy. This would have been a major improvement to the use of barges and ferrys. The pollution of the bay and the injuring of the marine life would not be occurring and it a bridge/causeway would have given the residents and rate payers a life style that they deserve for the amount of rates and fees they are paying. I will be so happy to see sand mining stopped. The Redland Shire Council and past State and Federal Government and their representatives have all lied to the residents and rate payers. We demand a Royal Commission.

  3. Thank you Howard Guille .
    You have provided an analysis that exposes the exaggerations so often used to justify actions at all levels of government.
    Many Australians are sick to death of the Jobs-Jobs-Jobs call trotted out to justify many large projects including CSG and Galilee Basin hits to the land and its water. Of course jobs are needed along with money but let it be done truthfully.
    In his section “The future”, Howard shows how exaggeration masks the real solutions for the future of Straddie.
    Future-Thinkers required , not Yes Men.

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