IN THE STOPE
competitive, transparent licencing with clear use-it-or-
lose-it terms, and competitive conditions for exploration,
development and exploitation of resources that have been
made economic through private sector investment.
State participation in ownership is a contentious issue. In
a few cases it works. In most it does not. Where the state
demands free carry, fails to invest, and act in a confl icted
fashion, then it is not a good thing. Where the state is the
only owner and fails to act in a responsible fashion, actively
destroying wealth, it is also not a good thing.
Responsible custodianship may or may not require state
ownership. Yet these dimensions too often get confl ated. I
tend to prefer a situation where the state owns the mineral
resource, issues licenses, receives revenues through taxes –
and at times super-taxes through resource rent taxes –
and enforces regulation. It provides clearer rules of the
game, cleaner governance, transparency and limits confl icts
of interests.
Some countries have got it right though, even if their
policies and ideologies follow a nationalistic
framework, would you agree?
Absolutely. Resource nationalism
is not a bad concept. In fact, it is
an essential concept provided
it is appropriately applied. I
like neither the unfettered
rule of the market nor the
uncontrolled power of the
state. What I have described in
my previous answer is, in my
mind, resource nationalism
gone right.
What I see in many countries is resource nationalism gone
wrong – opportunistic, economically destructive, politically
convenient. In South Africa state capture is exactly that:
a pseudo-patriotic discourse that manipulates the public
sphere, kidnaps the public purse and enriches a corrupt
elite at the expense of everyone else. Show me where that
works! You may ‘succeed’ in oil-rich countries like Libya under
Gadhafi , or Equatorial Guinea. But in mining countries, not a
chance. There, it’s a zero-sum game.
The interesting question, for which I have no answer yet,
is why have certain countries like Namibia and Botswana
managed to establish a benign but at the same time a
resource nationalistic framework, and others have not. Why
does Zambia keep repeating the same mistakes? And the
DRC? Why has South Africa chosen the destructive policy
path it has?
The key challenges presented by mining are the enormous
investments necessary for exploration and development,
African Mining November 2019
In South Africa the ANC has been in government since 1994,
and despite this has failed to deliver a stable, predictable policy
environment and improving climate for investment and doing
business. No sooner has a minister announced a new policy,
than he or she will advise that this is temporary, and that
more changes are coming, all the while self-congratulating on
having delivered stability and quality. Odd… If that worked,
we would by now have known. The South African mining
industry is in perennial crisis, having gone from world-leading
to world-lagging. And policy is a key factor. I will point you to
a study we conducted on the matter last year, entitled Mineral
Policy Impact on South Africa's Mining. An Economic
Analysis. It is available on our website at https://
www.eunomix.com/our-work.php
"One does not
build a mining industry
by cutting investment,
production, exports. It just
does not happen.
Norway is resource nationalistic.
Saudi Arabia, UAE are all resource
nationalistic. In these countries
the proceeds from an abundance of
oil and gas are being put to good use
to the benefi t of the people. This, for me,
is a better system than the North American
model where the resource belongs to the company
and it can do whatever it wants with it and damn the social and
environmental consequences. The philosophy is of course that
the benefi ts will trickle down to the masses. I don’t buy that.
60
and then continuous investment during the life-of-mine.
This is most likely the main diff erence with oil and gas,
which are less capital demanding during exploitation.
Evidence tends to point to the fact that countries who get
it right understand that without sustained private sector
involvement mining investment cannot be maintained. So,
mining is a quintessential public-private partnership industry.
Governments who get that will get it right. Governments who
don’t will come way short, and their countries will more likely
become victims of the resource curse.
Could it be that countries like Namibia
and Botswana get it right because of
their small populations?
Our Eunomix Geopolitical and
Country Risk (GCR) solution ranks
all countries in the world on a
set of performance indicators:
security, governance, economy and
society. Interestingly, the smaller
African countries – population and/
or size – tend to do better than the
large ones. In the club of resource
rich countries, you will fi nd Botswana,
Namibia and Mauritania. They have small
populations. They have an easier time getting
consensus and settling key policies. Then there
are the island states of Cape Verde, Mauritius and the
Seychelles. These are resource-less and have had to use other
factors to develop.
How important is it for mining and exploration companies to
do proper risk assessments and due diligence studies when
they venture into Africa?
Investors tend to have very strange understanding of and
views on Africa, a sort of cognitive dissonance. On the one
hand there is that fear, unreasonable and irrational about
Africa – a fantasy creation that portrays our continent as
dangerous, unstable, unpredictable. But on the other hand,
and often by the very same people, there is the belief that
Africa has huge economic potential – resources, markets, and
what not – that are just waiting to be taken advantage of. This
dualism translates into irrational pessimism and exuberance.
This leaves rational, fact-based analysis and opportunity/
risk management out of the door. Mostly. Investors go, so to
speak, on a wing and a prayer, hoping to be successful, fearing
not to be. This is not the way to go.
Opportunity must be assessed and managed with a clear
eye. And so must risks. On the whole, doing business in
Africa is indeed more diffi cult than say Australia or Canada.
Proper in-depth due diligence must be conducted: country,
region, village, prospective local partners, and the likes.
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