Socioeconomic development
Mining and mineral operations can provide a strong base for the economic growth of a local area, a region, or a nation. Rio Tinto focuses on the ways in which it can bring sustainable socio-economic benefits to the areas in which it operates.
Our direct economic contributions are measured by the sum of payments to suppliers and the value that they add. However, our true contribution is far greater than this figure when the secondary or "multiplier" effects of the contributions are included. This is because local and regional economies enjoy additional benefits when workers spend their wages, when governments spend revenues from taxes, and when local communities make use of infrastructure that we create for our operations.
- Economic contributions
- Community contributions
- Tax & royalty
- Procurement
In 2008, Rio Tinto's direct economic contribution was US$58,065 million. This comprised payments to suppliers of US$29,653 million, and value added of US$28,412 million. Value added represents the value that a business adds to the materials and services it has bought. It is equivalent to the sum of all labour payments, the taxes and royalties disbursed to governments and others, plus all returns to capital - including interest payments, profits paid out to shareholders, and money retained in the business for future investment and to replace depreciated assets.
Direct economic contribution
Approximately 44 per cent of our direct economic contribution was made at the local and regional level, with:
- 82 per cent of our wages and salaries being paid to local residents
- 42 per cent of our taxes being charged by local and regional governments
- 58 per cent of all purchases supplied at the local and regional level.
Altogether, this represents an economic injection of US$25,808 million into these economies.
Although mining is not a labour intensive activity, payments for labour represent an important injection of capital in the economy, particularly at the local and regional level. Our workforce remained at around 106,000 during 2008, including the 67,000 people brought into the Group with the acquisition of Alcan. During 2008, we incurred US$7,009 million in wages and employee benefit costs.
Finally, capital spending was US$3.9 billion, including the purchase of land or other property, equipment, and new construction or expansions.
Indirect economic contribution
The final economic contribution of a company is far greater than its value added and payments to suppliers, once secondary, or "multiplier", effects on the rest of the economy are considered.
These effects reflect indirect gains from the activities of the company and its suppliers, the economic activity induced by workers spending their wages, and the circulation of taxes and profits. Further economic benefits arise from the generation of export revenues, and the frequently extensive local infrastructure established by companies but utilised by locals. These are commonly referred to as "induced" and "indirect" contributions. They are not normally easy to measure accurately and are thus excluded from our calculations. Multipliers are dependent upon regional factors such as the size, industrial structure and location.
The table below illustrates how the multiplier effect can work. If the economic multiplier is said to be 2.5, every US$1 million we spend in a region generates a total of US$2.5 million of economic activity in the area.
| Our direct spending | Indirect and induced spending | Economic multiplier |
|---|---|---|
| US$1 million | US$1.5 million | 2.5 |
|
For example: |
For example: |
Recent work commissioned by Rio Tinto suggests that the output multiplier for Rio Tinto's operations in Australia is approximately 2-2.8.