The Next Frontier

African governments turn to resource nationalism to deliver the goods

Fifty years ago, the world saw an Africa that was waking up to demand political independence and the civil and human rights that come with self-determination.
The rise of nationalism spurred the decolonisation process that started in earnest in Egypt and Ghana, culminating in South Africa’s independence in 1994.
But since then, the living conditions of African peoples have not improved as quickly as was anticipated. And increasingly, there is a lobby for African countries to have greater control of their natural resources so as to better manage their development processes.
Enter resource nationalism, the “new” political philosophy that many believe will make the next 50 years of Africa’s development trajectory better than the preceding half-a-century.
Dr Oladiran Bello, head of the Governance of Africa’s Resources Programme at the South African Institute of International Affairs says, “At one level, it (resource nationalism) seems to be a misnomer used to describe just about any assertive stance taken by governments on extractive sector governance.
“At another level, it has been used to denote grassroots level activism, extending in some respect to the labour unrest which the rhetoric around the nationalisation of mines in South Africa may have exacerbated.
“Actions regarded as resource nationalism have thus varied widely, from tax hikes, through demand for greater state equity and indigenous participation, to renegotiation of stability clauses in mining contracts. Also, so-called beneficiation strategies – pursued by South Africa, Brazil, Indonesia, Vietnam and others – involve demands for value-added processing before exporting.
“The term has generally described initiatives by host governments to secure greater financial, regulatory, and sometimes operational control over extractive activities.”
According to the African Economic Outlook 2013, released this past week in Marrakesh, Morocco, control of agriculture, mining and energy resources are central to growth and development.
The report is produced by the African Development Bank (AfDB), the OECD Development Centre, the Economic Commission for Africa and UNDP.
The African Economic Outlook 2013 projects continental growth at 4.8 percent this year and 5.3 percent in 2014.
“Now is the time”, said Professor Mthuli Ncube, Chief Economist and Vice President at AfDB, “After ten years of improved stability, sound macroeconomic policies and blossoming trade links, growth has made African nations freer than ever to choose their own development paths and implement active policies for economic transformation.”
And many African governments are strengthening policies and laws that give them greater say in how their natural resources are managed.
According to Dr Jacek Guzek, a consultant with Deloitte and Touche South Africa, 25 out of 52 surveyed African countries have implemented resource nationalism-related policies in one form or the other so as to increase local/state participation in the economy, particularly in mining.
He was speaking at Namibia’s recent Mining Expo in Windhoek.
According to his research in SADC, Zimbabwe is leading the way on this front through its land reform programme and empowerment laws; while Namibia was pushing for higher taxes and royalties in addition to classifying a list of minerals as “strategic” and to be henceforth only exploited in partnership with the state.
Dr Guzek also noted that the DRC is reviewing its mining code to increase local participation in the extractive sector, and that Tanzania is steering new legislation to curb exports of raw minerals. Angola too wants greater local participation in its huge natural resources sector. Zambia wants to control around 35 percent of all mining.
It does not end there. Similar trends are being noted in Nigeria, Sierra Leon, Chad, Uganda, Eritrea, Burkina Faso, Guinea and Ethiopia. Mali wants at least a 25 percent stake in mining activities, and public opinion in Ghana supports a windfall tax on extractive firms.
And there is real fear in Europe and North America about the rising pro-resource nationalism tide.
The Economist, a UK publication, has claimed: “There is nothing new about resource nationalism… In the past it was mostly focused on oil companies and driven by anti-market ideologies.
“The new resource nationalists, however, have embraced capitalism and shifted industry. Few governments think they can do a better job of extracting the minerals themselves; they just want a bigger pay-off from those whom they allow to do the mining.
“And rightly so. Mineral wealth belongs to local people and their leaders are only doing their job when they extract the maximum rent over the long term. But they must do so sensibly.”
Global consultancy Ernst and Young says in its Business Risks in Mining and Metals 2012/13 report that resource nationalism is the biggest risk facing foreign firms in Africa.
Dr Guzek, speaking at Namibia’s Mining Expo, further stoked skepticism about the efficacy of resource nationalism, and essentially called on those in the extractive sectors to unite against this trend.
“Mining companies in different regions must band together to lobby local governments and meet with key officials to negotiate mutually beneficial regulation; before this can work, mining companies must establish a strong in-country presence bolstered by senior executive involvement, and include NGOs, unions another key country stakeholders in the negotiation process.”
But the fear-mongering has not stopped proponents of resource nationalism from pressing ahead.
Prof Arthur Mutambara, Zimbabwe’s Deputy Prime Minister, has said: “As a government, we are now saying that an investor can no longer come in and invest working capital for them to assume control of our resources.
“We have made it clear that when an investor comes in, he or she is attracted by the minerals underground. Although we don’t know the value of the mineral, it certainly can’t be zero?
“The value of that mineral is our share of the equity; so, the investor must also put in his share of the equity before the project begins to mobilise working capital. This is critical…
“Yes, they can list (on the) Australia and Canada (stock exchanges), but the primary listing must be here. We want our own people to participate in the economic activities of these companies and improve liquidity on the local market.”
·  Reporting by Wesley Nkwazi in Johannesburg and Phillip T Shingirai in Windhoek

June 2013
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