MINING INDABA
storage minerals – we need to invest in research and development
(R&D) so that the minute this industry starts to grow, we are right
there following the growth. For me battery minerals are the next
frontier, and I think it’s going to happen sooner than we expect.
South Africa has faced strident calls for the nationalisation of the
mining and natural resources sector, which, in my view, is the
final step along the spectrum of resource nationalism.
Recent events across Africa – including Tanzania, Zambia, and
the DRC – particularly with the amendments to the mining
Laws in these countries, are strong indicators that resource
nationalism is sweeping the African continent.
Calls for nationalisation (as in South Africa), and the measures
that are implemented from time to time in support of resource
nationalism (particularly, the changes to the mining laws), tracks
very closely with two phenomena; namely upcoming elections
(mainly as part of the election rhetoric and promises to gain
support), and the state of the economy at any point in time (the
worse off the economy, the greater the socio-economic demand
for jobs, services, commercial opportunities, and, ultimately,
participation in the actual or perceived wealth generated by
mining operations).
There are a broad range of measures along the spectrum of
resource nationalism, including the implementation of trade and
other tariffs, establishing restrictions on procurement (goods and
services) indigenisation and ownership requirements, increased
royalties, and restrictions on the export of certain minerals, or, at
the very least, the export of raw minerals, aimed at encouraging
local beneficiation. The most recent example of this, outside
of Africa, was the announcement of Indonesia to enforce a
complete ban on the export of raw nickel ore from 1 January
2020, two years earlier than initially planned. The purpose is to
secure supplies of raw nickel ore for numerous smelters that are
under construction, and the drive to increase local processing
capacity. South Africa has stopped short of nationalisation, but
has made provision (and created the mechanism) for outright
State ownership if the State wants to do so (it can apply for and
be granted prospecting and mining rights), and has actively
created the legislative framework for resource nationalism in
various forms including changing the mineral ownership regime
from private ownership to State custodianship of minerals of
behalf of the citizens, with the right-holder only being given a
right to the minerals under the prospecting and mining rights;
implementation of a standalone Mining Royalty Act, which also
casts the collection net a lot wider; implementation of ‘windfall’,
and ‘super’ taxes which impact the Mining and Natural Resources
African Mining Publication
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in
ar
Warren, the past few years have seen an increasing populism
and swing towards resource nationalism in many parts of
Africa, with issues in Zambia, Tanzania, and the DRC, to name
but a few. Do you expect this trend to continue into 2020 and
beyond, and do you foresee any major new trend emerging? If
so, what will they be?
h
.
Warren Beech, partner: Head of Mining and
Infrastructure at Eversheds-Sutherland talks about
regulations and resource nationalism in the sector.
www. africanmining.co.za
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REGULATIONS
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to be left out. We want to make sure that we are participating in
the value chain. We need to start investing in the research and
development now to start manufacturing batteries – components
for cell phones across that entire spectrum of producibles and
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Sector, and the implementation of indigenisation Laws (in the
case of South Africa this is Mining Charter 3, which requires
compliance with specific targets relating to black ownership,
procurement of goods and services, and diversity).
Changes to mining laws in other African countries, including,
most recently, Mali, are supportive of resource nationalism,
regardless of the terminology that is used.
Most, if not all African countries that have significant mineral
resources, face calls for outright nationalisation, and for more
stringent resource nationalism as their economies fluctuate,
and the political landscape and political players change. The
reality of attracting investment often challenges this position
– more mature governments typically implement the resource
nationalism measures incrementally to ensure that investors are
not scared off, but later become locked in by the investments
that have been made.
Commodity cycles also impact on the implementation of resource
nationalism measures – the better the cycle, and the better the
price, the higher the demand from citizens to benefit from this,
regardless of whether the uptick is sustainable or not. Increased
calls for resource nationalism are also part of a broader anti-west
anti-colonial past. Fears that there is a new wave of colonialism
through economic investment, are being explained away, on
the basis that ‘this time it is different’ (many African countries are
however realising that the investment from countries such as
China and Russia, are coming with its own ‘golden handcuffs’).
The China / Russia (and to a lesser extent, the other BRICS
partners) investment potential and dynamic is being used to
play off the ‘traditional’ western investment and investors, and
to drive up the costs of acquiring prospecting and mining rights,
in other words getting more, ostensibly to meet socio-economic
demand from citizens; induce more commitment to infrastructure
development at the cost of the investor, including, for example,
the ‘open access’ use of infrastructure by multiple / ancillary
sectors such as agriculture, and obtain support for policy and
regulatory change, desired by the relevant political party in power.
Representatives of various African companies have, on several
occasions, indicated that “if you don’t like what we are offering,
we will get Russia or China to invest”. Investment or potential
investment from Russia or China seems to give the African
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