Five myths about resource nationalism

  

Resource nationalism is currently a hot topic, both in Africa and internationally. In an article published in the latest Willis Mining Market Review, Nader Mousavizadeh cuts through some of the common myths surrounding resource nationalism.

Myth 1: Resource nationalism is only found in emerging economies

Resource nationalism is generally perceived to only occur in emerging economies, with African resource-rich countries leading the way in terms of increasing the stake of government in mining, mainly through tax and royalty regimes.

However, Mousavizadeh points out that developed countries, notably the US, Canada and Australia, have increasingly adopted resource nationalist policies, such as the blocking of Chinese investments.

Global mining giant BHP Billiton’s failed bid for Canada’s PotashCorp in 2010 was also blamed on resource nationalism. “Under Canada’s Investment Act, the federal government must review and approve certain foreign acquisitions of Canadian firms. However, prior to the BHP Billiton bid for PotashCorp, [the Canadian government] had blocked just over 1,600 foreign acquisitions since the adoption of the Act in 1985,” notes the article.

Myth 2: Resource nationalism = expropriation

The Oxford dictionary defines expropriation as follows: “to officially take away private property from its owner for public use.”

Mousavizadeh notes that in the 1970s, many large-scale mining investments in Africa and other developing countries were expropriated or nationalised as a result of high commodity prices at the time. “Resource nationalism was ideologically driven as newly independent countries stressed the need for state control of national assets, and the number of expropriations peaked at 80 in 1976.”

According to Mousavizadeh, this extreme form of resource nationalism is not likely to happen again. “Today, with only a few exceptions, a pragmatic approach prevails and governments tend to confine themselves to increasing taxes and royalties or boosting local empowerment initiatives.”

“Africa has a long and painful history of failed nationalisations, especially in the extractive sector, which have contributed to two decades of lost development. While this does not mean that African [countries] will not seek to negotiate better terms for their extractive sectors, this type of ‘resource nationalism’ is very distinct from the revolutionary resource nationalism that triggered the expropriations of the past …”

Myth 3: BEE and indigenisation measures are tools for resource nationalism

According to Mousavizadeh, Black Economic Empowerment (BEE) policies and indigenisation measures are often interpreted as forms of resource nationalism.

However, he notes that such policies have often much more to do with ensuring long-term societal change. “BEE especially reflects a social transformation agenda found mainly in countries with historical racial inequalities, such as South Africa, Namibia and Zimbabwe.”

Myth 4: Social development spending shields companies against resource nationalist policies

Mining companies often think that by investing in the environment and communities surrounding their mines, they are more likely to be treated fairly by government.

Mousavizadeh says this is a false assumption. “The importance of the so-called ‘social licence to operate’ varies between countries. A sound corporate social responsibility strategy can certainly help to mitigate the risks of resource nationalism by positioning the company as a provider of benefits within the host country. But the assumption that mining companies will be able to avoid increased taxation simply because they have established a good relationship with local communities is unrealistic.”

Myth 5: It’s all about getting a bigger share

Resource nationalism is not always driven by economic interests.

Mousavizadeh says that bilateral relations, diplomatic ambitions and popular sentiment also play a role in nationalism policies. He uses the example of Zimbabwe, where some politicians adopted resource nationalist policies for their own political gain.



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