SA lawmakers get schooled
LESSONS TO HELP TURN-AROUND
Resource nationalism has given way to kinder approach by governments from Zambia to Ghana.
For a country once rated as a global mining titan, South Africa has slipped a long way: from 60th on the Fraser Index in 2020, to 75th out of 84 mining jurisdictions in 2022.
That’s taking up residence alongside some dodgy neighbours such as Venezuela, Kyrgystan, China and Mali.
At the Mining Indaba in Cape Town this week, SA received some lessons in resource nationalism from the likes of Zambia, Ghana and Saudi Arabia. Those lessons may help turn around SA’s decades-long descent into investment pariah.
Resource nationalism used to be a rallying cry for the anti-mining lobby. This year’s Indaba has shown how far the sector has come.
The peace imperative
Zambia’s minister of mines and mineral development, Paul Kabuswe, said a precondition for mining investment is national peace.
“Zambia is known for its peace. We’ve changed five or six presidents [peaceably]. We have a stable environment, and investors can rest assured that their investments are safe. As a government we looked at impediments to investment and complaints and addressed them.”
One of the first reforms of the current Zambian government was to deduct mining royalties for tax purposes.
Resource nationalism was a hallmark of Zambia’s previous president, Edgar Lungu, who saw miners as adversaries siphoning $3 billion (about R48 billion) a year in “illicit financial flows”, according to Financial Times.
He imposed an extraordinary $7.9 billion bill on First Quantum Minerals for unpaid tax, attempted to remove Vedanta from Konkola Copper Mines, and choked foreign investment into the mining sector.
Zambia’s second chance
Current Zambian President Hakainde Hichilema, who defeated Lungu in a landslide victory last year, made it his mission to win back mining investors chased away by his predecessor’s disastrous policies.
Hichilema’s pledge to create jobs and restore Zambia’s economy hinges on his ability to restore confidence among investors and see stalled mining investments resume. “If he can get this right, the Zambian Copperbelt can be competitive once more and become a hive of global mining activity, creating jobs,” says S&P Global.
What’s needed to restore investor confidence in mining is a stable and predictable regime in terms of regulations and taxes, said Kabuswe.
Another key platform of the new government is zero tolerance for corruption.
Resource-rich poor countries
Ghana’s minister for lands and national resources, Samuel Jinapor, said it is remarkable that some of the world’s richest countries in terms of resources are also the poorest – and concentrated in Africa.
Among the mistakes made by resource-rich countries were negotiating with large mining companies to the detriment of the country, and lack of insistence on adding value to mineral exports. Within five years, the country will prohibit the export of bauxite, a key input in aluminium production, without significant value add, said Jinapor.
Ghana has extensive reserves of bauxite in the Atewa Forest area, which is worth eight times more in a refined state.
Governments
Daniel Litvin, MD of energy and mining group Critical Resource, advised miners to “mend the roof before the storm hits” – in other words, address thorny issues with host country governments before they become more serious.
Saudi Arabian vice-minister for mining affairs, Khalid Saleh Al-Mudaifer, told the Indaba a transparent licensing process and security of tenure for prospectors is essential to building confidence.