African governments are increasingly seeking a bigger chunk of their mineral resources wealth.[hidepost=9][/hidepost]
Last week, Reuters reported that the Ghanaian government is in talks with gold miners in the country over additional taxes. Finance Minister Kwabena Duffuor told Reuters that the ministry was in talks with the miners over options that included the introduction of a windfall tax.
“We are looking at the entire stability agreement, which is basically about the tax regime covering the mines with various options and we hope we would be able to reach some agreement soon,” Duffuor said, adding no clear position had emerged yet. He said the options, which also included the restoration of some waivers, would be applied on a case by case basis. “We want to carry along the mines with us throughout the negotiation because we see them as partners – at the end of the day it should be a win-win situation for us all,” Duffuor added.
The Ghana Mine Workers Union has also been calling for the imposition of a windfall tax in addition to raising the country’s stake in the mines to enable the economy to benefit from the attractive gold prices.
In related news elsewhere in the continent, Reuters also reported that Zambia wants to negotiate larger stakes in projects with foreign mining firms and plans to revamp tax collection to improve transparency and maximize benefits for itself. “We would like to increase our shareholding to at least 35% in all the projects, but that will depend on how well we negotiate with the mining firms,” Mines Minister Wylbur Simuusa said.
Simuusa added that the decision to seek a higher stake in the mines did not amount to nationalisation of the mining sector. “We just want to have more benefits from the mines. There is no cause for apprehension, because nothing will be done without consulting the mining companies,” he said.
In similar developments, it was recently reported that Uganda also wants British oil explorer Tullow Oil, France’s Total and Chinese group CNOOC to drop a clause shielding them from sudden changes in policy before approving a US$10 billion oil project. “The government of Uganda has written to the three companies and wants them to strike out the so-called stabilisation clause,” Angelo Izama, director of Fanaka Kwawote (FK), a Kampala-based energy think-tank, told Reuters. “Then Uganda will sign the (Production Sharing Agreement) and endorse the joint venture,” he said. It seems unlikely though that the companies will agree to remove a clause that helps mitigate the risk of their investment.
Understandably, these actions are expected to cause jitters amongst investors interested in investing in Sub-Saharan Africa. It is, however, encouraging to note that both the Ghanaian and Zambian governments are portraying a diplomatic stance towards the mining companies. As much as we believe that African governments have a right to seek the highest possible return from their mineral wealth, they should be careful not to do so in a manner that chases away the much needed investment.
Imara is an investment banking and asset management group renowned for its knowledge of African markets.