Africa’s natural resources no longer a curse?

Renegotiating deals can be problematic even if reasonable because companies want a generous return on their investments. Lopes argues that the “average net profits for the top 40 mining companies [in the world] grew by 156% in 2010”, while earnings for governments “grew by 60%, most of which was accounted for by Australia and Canada”.

Zambia’s example

Zambia, the world’s seventh largest copper producer, until recently had been making half-hearted attempts to amend mining deals. Facing pressure of legal threats from foreign investors for breaching agreements, former President Rupiah Banda decided against a review of existing contracts, to the disappointment of Zambians. In 2009, he removed a 25% windfall tax that had been introduced by his predecessor, Levy Mwanawasa, in 2008.

Current President Michael Sata appears to be taking a different approach. Since 2011, his government has been charging a 30% corporate tax on mining companies, up from 20%. This had the effect of doubling Zambia’s mining receipts to $1.36bn in 2011 compared with 2010, although strong demand for copper from China and an uptick in prices have also been responsible for the higher earnings.

In the case of Mali, by contrast, reforms have been slow and tentative. The government introduced a mining code after the 2012 elections that addressed mainly environmental issues. Guinea’s 2011 mining code is even more robust than Mali’s, mandating mining companies to sign a code of conduct against corrupt practices and to provide training for local employees. It also sets a 35% government ownership threshold for mining projects. “The code gives a correction to the old one for Guinea’s interest,” says Guinea’s mines minister, Lamine Fofana.

Some experts advise against changing the terms of existing agreements midstream. Ghana’s national chamber of mines is fiercely pressuring government to abandon the increase in corporate tax from 25% to 35% and a 10% windfall tax. However, the chamber is at loggerheads with the National Coalition on Mining, a civil society group, which supports the tax hikes. The African Agenda, a Ghanaian publication, writes: “The mining companies [in Ghana] are now the only stakeholders… who maintain that the status quo be maintained to ensure they continue to reap super-normal profits.” The publication urged President John Mahama to hold the line against lowering of taxes. “Be resolute… we will be with you every step of the way.”

Like Zambia, Ghana’s mining receipts rose sharply, from $210m in 2010 to $500m by 2011, according to the Extractive Industries Transparency Initiative (EITI), a coalition of governments and civil society working to improve transparency in the management of natural resources.

Helping hand from abroad

Due to special extenuating circumstances in individual countries, the Ghanaian and Zambian examples may not widely apply.

Nevertheless, Africa is receiving help from Canada, Australia and Chile – countries that have achieved success in mineral resources management. Canada recently established the Canadian International Institute for Extractive Industries and Development at the University of British Columbia to assist developing countries “to meet their respective needs for governing and managing the extractive industry sector”. It plans to offer fellowships and scholarships for government personnel, academics and graduate students.
The Australian government also supports companies operating in Africa and provides capacity building and social infrastructure aid in Africa. China is assisting with rail, hospitals, road and ports in mineral-rich countries such as Angola, Zambia, Sierra Leone and Mali.

The AMV wants “transparency in the collection and use of mining revenues”. Although commodity prices have dipped lately following a slowdown in the Chinese economy, according to the Financial Times, this could be cushioned by steady demand from India and Brazil. In addition, the European Union is ready for what it terms “raw materials diplomacy” to secure future supplies through an arrangement with the AU. The US National Research Council, a think tank, has advised its government to “understand the non-fuel minerals that are important to the nation’s economy and functions”.

Last year, Norway agreed to provide the AfDB $4.9m to assist the bank’s Legal Support Facility negotiate better oil, gas and mining deals on behalf of African governments. Heikki Eidsvoll, Norway’s minister of international development, says his country wants to “help turn Africa’s ‘resource curse’ into a ‘resource blessing’”. And the World Bank, the IMF, the EITI and African civil society are on board the AMV bandwagon.

With 22 African countries (out of 32 worldwide) adopting EITI standards, which require all information on mining to be made available to the public, analysts believe there is more transparency in the sector than before. In Gabon, armed with necessary information, civil society organisations now vigorously debate revenue management, which never used to happen. In Nigeria, there is an improvement in the “monitoring and management capacity of the relevant government agencies”, says an EITI statement, adding that Cameroonian government officials and NGOs now understand taxation, accounting and audit.

Nkosazana Dlamini-Zuma, the AU chairperson, says Africa’s future “will be determined by the manner in which we utilise our natural resources”. Such messages should spur African leaders and the mining companies to turn Africa’s mineral resources into a blessing.

This article was first published by Africa Renewal