Alarm Bells Over Resource Nationalism in Africa Sound the Wrong Alarm

At the annual gathering of the International Bar Association recently convened in Rome, Peter Leon has once again sounded the alarm over 'resource nationalism' in various mineral-rich African jurisdictions (see his latest article https://www.businesslive.co.za/bd/companies/mining/2018-10-12-growing-government-control-over-resources-sounds-alarm-bells/). Leon, partner and Africa co-chair at law firm Herbert Smith Freehills, explains that resource nationalism entails increasing government control over natural resources. Unlike 'outright nationalisation' of the 1960s and 1970s, however, contemporary resource nationalism takes the form of higher royalties and taxes, free state carried interest in mining ventures, compulsory minimum quotas for ownership, local beneficiation and the procurement of local goods and services.

In Tanzania, for example, laws enacted under a certificate of urgency in July 2017 vest sweeping powers in the national assembly to review and instruct government to renegotiate mining contracts, require at least 16% State free carried interest in all mining companies (a figure that may be increased to 50% to match the value of historic tax benefits granted to the company), and institute an immediate blanket ban on the export of unprocessed minerals. And in a novel move, 2018 Tanzanian indigenisation regulations were extended to professional services related to the mining industry. For example, a mining company engaged in a mining activity in Tanzania that requires legal services may only retain a Tanzanian legal practitioner, or a firm of Tanzanian legal practitioners whose principal office is located in Tanzania. (These developments may well concern the agile agents of the globalised legal profession.)

Leon speaks from within and reproduces the sustainable mineral development consensus, a narrative rigorously promoted by the World Bank, other international financial institutions and the globally-organised mining industry since the mid-1980s. This consensus advocates for an investor-friendly mining regulatory frame with minimal State involvement in mining activity, protection of exploitation rights, 'fair' taxation arrangements that favour taxing profits rather than the value or units of mining production, and environmental managerialism, amongst other features.

Resource nationalism in Africa, similarly to the neo-extractivist route that progressive governments have adopted in some South American states, entails continued and deepening reliance on the extractive industries, but with a more active and assertive State intent on using mineral resource rents to secure broader social and economic policy objectives.

Increasing resource nationalism is alarming, according to Leon, because mining investors are 'easily spooked' when rules change in the middle of long-term mining investments. The drivers for resource nationalism are multi-dimensional, which has a 'populist appeal' he suggests. The desire to secure votes in upcoming electoral cycles and to benefit from rising commodity prices are chief amongst these.

However, this is a false alarm.

The real alarm is that the extractivist policies of African nations - whether rooted in the sustainable mineral development consensus OR resource nationalism - are failing Africa. This much is evident from the World Bank's recently published report The Changing Wealth of Nations (2018) (see https://openknowledge.worldbank.org/handle/10986/29001), a global survey of Adjusted Net Savings (ANS). ANS is an alternative measure to GDP that tracks changes in the economic, ecological and educational wealth of nations by subtracting from national income the consumption of fixed capital (wear and tear of machines), adding educational expenditure (development of human capital), subtracting the depletion of natural capital, and adding the costs of pollution. 

The report's assessment of Africa is devastating. Not taking into account the platinum and diamond mining sectors, it is estimated that Sub-Saharan Africa loses roughly $100 billion of ANS annually. Africa is the ONLY region with negative Gross National Income when ANS is taken into account, on average negative 3 per cent for the period 1990 - 2015. Resource-rich and stable countries showing massive levels of negative growth include Angola (-67.8%), Equatorial Guinea (-38.8%), and Guinea (-8.1%). Ghana, a former darling of the sustainable mineral development consensus that fell from grace with mining taxation reforms in 2012 and 2014 respectively (see https://politicsweb.co.za/documents/mining-regulatory-trends-in-africa--peter-leon) comes in at 0.8% positive GNI, while Tanzania scores 5.7%.

Whether ANS accurately captures the cost of sickness suffered by mineworkers, the toll borne by their caregivers, land dispossession, loss of cultural solidarity, and long-term or irreversible ecological degradation (amongst other ills associated with mining) is also a question worthy of consideration.

The real alarm is that on average Africa is becoming poorer and extractivist policies, whether more or less progressive in terms of State control, are entrenching the continent's position as the supplier of raw materials to an industrialised core.

Instead of continuing to service the critical and strategic mineral needs of the developed world for a pittance, African nations must stand together to demand higher returns reflecting the full costs of extraction. This should come together with demands for repaying the debt of historic unequal ecological exchange, and the need for post-extractivist mining conducted within the social and ecological carrying capacity of the Earth.

(The ideas in this article are further developed in Mining and Environment in the Anthropocene: The Role of the State, by Tracy Humby (Edward Elgar, forthcoming 2019).