What’s So Bad About Resource Nationalism?

Tanzania president John Magufuli

June 13, 2018//-Jean-Sébastien Jacques, CEO of the world’s second-largest miner, Rio Tinto, has warned that rising resource nationalism is a growing concern for miners.

His comments come amid a wave of government crackdowns on mining companies internationally, including in Africa.

In the Democratic Republic of Congo the government is pushing through a contentious new mining code which will see royalties spike, while also declaring some resources “strategic” assets.

The move has incensed mining companies, including Swiss-based giant Glencore, which has rallied other companies to try and stop its implementation – unsuccessfully.

In Tanzania president John Magufuli is overseeing a crackdown on the industry which has included a ban on exports of copper, silver, iron and nickel ore in a bid to promote local value-added industries. The country is also looking to up the amount of tax mining companies pay. Last July it slapped a $190bn tax bill – four times Tanzania’s GDP – on Acacia, its biggest gold miner.

Magufuli has made it clear he does not like mining companies, saying they have “stolen” the country’s minerals. Earlier this year Zambia joined the fray when it demanded that Canada’s First Quantum Minerals pay $8.04bn in owed tax. Unsurprisingly, mining companies are not enthusiastic, but is resource nationalism inherently bad?

The answer partly lies in its definition. Loosely it refers to a situation in which governments seek greater control of or benefit from a country’s natural wealth. This hardly seems criminal, and few would argue against the idea that the primary beneficiaries of a country’s natural resources should be its citizens.

Perhaps even more important is that miners have, for a very long time, been getting the better of African governments. Companies have sought to position themselves as victims in places like the Democratic Republic of Congo and Tanzania, but the reality is that many mineral-producing African countries have a history of signing deals that disproportionately favour mining companies.

Rebalancing the relationship

The relationship could certainly benefit from some rebalancing.

The problem is that this tension often descends into a zero-sum game, with both sides adopting an adversarial position. Instead of compromise, it becomes a tug of war over who can get the best possible advantage over the other. At worst this results in lost revenue for both, in turn hurting the host country’s economy, and entirely defeating the purpose of developing its natural resources in the first place.

It need not be so. In each of the countries mentioned above miners have, reluctantly, engaged in discussions, suggesting there is a middle ground. The aim should be to seek this out as. Whether they like it or not, miners and governments need each other.

This article was originally published on africanbusinessmagazine.com.

 

 

 

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