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Resource nationalism: good or bad?

Resource nationalism is building momentum across the African continent, according to Brian Menell, founder of mining investment company Kemet Group.

At the recent The Times’ Africa CEO Summit, Menell identified “resource nationalism” as a key trend in the African resource investment landscape that can be seen across much of the continent. As the number of African governments which are either democratically elected, or are increasingly sensitive to populist perceptions, grow, the focus on countering the perceptions of foreign exploitation of natural resources likewise grows. This increasing sensitivity to populist “anti-imperialist” perceptions has come at the same time as increased self-confidence and growing capacity on the part of many African governments. Hence the increasingly assertive examination of new models of participation in natural resource projects and companies on the part of state and domestic business interests.

The manifestation of this trend range from the “Black Economic Empowerment” legislation in South Africa, to the much more radical measures being put in place in Robert Mugabe’s Zimbabwe, to the calls by Alpha Conde, the newly elected President of Guinea, which is rich in bauxite and iron ore, for 33% back in rights for the state into all mineral projects in order to establish a large and fundable national mining company.

Menell believes that the “national mining company” model, to house minority interests in all mineral projects on behalf of the state, as an industry specific sovereign wealth structure, will become increasingly fashionable. He envisages a significant number of these state entities for mining assets, mirroring the much more established state oil companies, being created across the continent over the coming few years.

The natural instinct of the mining industry is to fight these developments in every way possible. They are generally seen as an enforced transfer of value which undermines project economics and must be avoided or minimised. Menell called for a more pragmatic and progressive approach to this unavoidable trend.

Menell suggested that if populist resource nationalism is resisted too rigidly by mining and oil industry investors, the measures that would, regardless of this opposition, be imposed, would be (and in a number of cases already have been) much more destructive and costly than they could be if the process was engaged with in a more positive and constructive manner.

He proposed that these mining sovereign wealth structures could be a very valuable contribution to the stability and sustainability of African mining investment jurisdictions, if they are established with sound principles and objectives.

Menell concluded his presentation by repeating his call to developers of African mining and oil projects to see “resource nationalism” as both a challenge, and an opportunity. A challenge to avoid forced transfer of value or ownership without fair compensation, and an opportunity to forge more sustainable and closer bonds with the countries in which they operate.

“If, as natural resources investors in Africa, we can overcome our natural aversion to any additional state intervention or participation, and constructively engage in the search for new models and structures to satisfy populist aspirations, we will find opportunity in adversity. We can do a lot to help guide the processes in directions that create more long term certainty and ultimately benefit all of our stakeholders,” Menell noted.

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