Resources

Mapping the rise of resource nationalism in Africa

A recent study by risk consultancy Verisk Maplecroft found that the Covid-19 pandemic has contributed to an increase in the number of governments pursuing nationalist resource policies – those that attempt to assert at least some sovereign control on natural resources. Around the world, 34 countries saw their Resource Nationalism Index, the score that Verisk Maplecroft assigns to countries based on resource policy, increase significantly in 2020.

Africa is home to the highest concentration of countries seeking to increase their control over resources.

The reasons for an increase vary by country – but the economic impact of the pandemic has “compounded an already growing trend of government interventionism in the resource sector,” according to Verisk Maplecroft, as governments seek to recoup a part of the financial losses suffered. by the Covid-19.

We are mapping African nations where resource nationalism is expected to increase after the pandemic.

Zambia

Copper contributes just under 65% of Zambia’s total gross exports and has been ranked by Verisk Maplecroft as one of the riskiest countries for resource nationalism following the country’s attempted liquidation of Konkola Copper Mines. (KCM). Last February, a Zambian court dismissed a petition from Indian mining company Vedanta Resources to prevent a provisional liquidator from splitting up its KCM subsidiary.

Last year, Zambia said officials from the Ministry of Mines and Mining Development would start taking samples from mine sites to prevent mining companies from undervaluing their production to pay less taxes. The ministry alleged that some operators deliberately submitted low-grade samples for evaluation, depriving the country of revenue from mining royalties.

Zambia’s copper production fell in 2019, before the pandemic, due to the implementation of new mining taxes which also had the combined effect of reducing investment in the country’s mining sector. Zambia is considering an overhaul of its mining tax regime, with Vice President Inonge Wina saying there is a need to simplify the tax system, which will allow the government to effectively monitor the reported profits of mining companies.

Wina said the government wants communities in mining areas to benefit from all mining activities through enhanced social responsibility measures.

Democratic Republic of Congo

The dominance of the Democratic Republic of the Congo (DRC) in cobalt – the country is the source of more than two-thirds of the metal in batteries – gives its government considerable leeway to extract revenue from a vital material electric vehicles and other green technologies.

The DRC government introduced a new mining code in 2018, which added an additional 50% tax on unexpected windfall profits, along with a host of other fees. Despite opposition and threats to cut investments, the new regime has moved ahead, demanding that DRC citizens hold a 10% stake in mining companies and allowing for higher royalties on “substances”. strategic ”in times of strong global demand.

The DRC is classified at 175e least developed country, out of 189, according to the United Nations Human Development Index. As two of its main exports – copper and cobalt – increasingly become part of the world’s green revolutions, the country could become a hotbed of protectionist measures aimed at imposing more control and extracting more income from the economy. minors. Verisk Maplecroft has put the DRC in its top 10 countries at risk of resource nationalism.

Ghana

The re-election of Ghanaian President Nana Akufo-Addo at the end of 2020 continues the risk of resource nationalism among Africa’s second-largest gold producer. Akufo-Addo previously called for ending the habit of African governments of offering tax incentives to attract investment, believing that these agreements must be more beneficial for Africa.

“I think we’ve come of age. We shouldn’t have to offer unusual tax incentives and royalties. And mining companies should not expect to make extraordinary profits on our continent, ”Akufo-Addo said at the Investment in African Mining Indaba event in 2019.

The president also took a tough stance on illegal mining, which extracts more than a third of Ghana’s gold. In April, the Ghanaian military launched a nationwide operation to remove illegal miners from the country’s water bodies, with Akufo-Addo seeking to ensure greater environmental responsibility in the country’s mining sector.

Ahead of the 2020 Ghana elections, risk analysis firm Fitch Solutions said Akufo-Addo’s re-election “will help the continuation of the future royalty monetization program, posing risks to mining investments in Ghana.”

“In the longer term, if an LSE listing is completed, international miners could face increasing threats of resource nationalism as the government may seek to increase gold mining royalties.

Tanzania

Tanzania introduced sweeping reforms in its mining sector in 2017, with several pieces of legislation enshrined in law that had broad scope and little time for debate. The changes meant the government could renegotiate contracts that the Tanzanian parliament deemed “ineligible”, increased government shareholding rights, and increased royalties paid on minerals and metals.

Verisk Maplecroft predicts that “fiscal indiscipline” on the part of the Tanzanian authorities means that companies could face “the forced implementation of tax and regulatory reforms” to allow the government to make ends meet.

Tanzania has tended to favor artisanal miners, as the government revoked the licenses of multinational corporations Barrick and Glencore to open up the land to thousands of small-scale miners. The first three months of 2020, before the most calamitous effects of Covid-19 occurred, mining contributed more than 15% of the country’s GDP.

The president overseeing these changes in the mining sector, John Magufuli, was a major promoter of Covid-19 denial until his death in March 2021 – rejecting lockdowns and social distancing measures in favor of prayer.

When more than 500 cases of the virus were confirmed in Tanzania, his government stopped reporting the cases to the World Health Organization, declaring the test kits faulty and the nation free from the virus. His administration even rejected the principle of importing vaccines, including the free doses to which it would be eligible under the Covax initiative which aims to provide vaccines to the poorest countries.

Tanzania enjoyed years of economic growth until the pandemic, but its willful ignorance of the pandemic is likely to have major effects on its economy – making further upheavals in mining laws more likely as the nation seeks to reset.

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