- February 17, 2019
- Posted in Africa
Standing before hundreds of mining investors and executives last week, Ghanaian President Nana Akufo-Addo issued a firm warning: stop expecting supercharged profits from Africa’s mineral riches.
It’s a theme that has simmered for years, as governments across the continent seek a bigger share of benefits from their natural resources. The debate ratcheted up in 2018, with countries including the Democratic Republic of Congo and Zambia—the continent’s No. 1 and 2 copper producers—becoming increasingly insistent that producers must pay up.
There’s also been a backlash against the terms under which foreign companies agreed to invest in the first place—many mining codes, investment pacts and joint ventures were drawn up based on lower commodity prices and by previous regimes. In his Cape Town speech, Akufo-Addo said African nations shouldn’t be expected to give special financial incentives to secure investment that producers wouldn’t get in other parts of the world.
For Congo and Zambia at least, geology is on the government’s side
For Congo and Zambia at least, geology is on the government’s side. The countries are home to some of the richest copper deposits at a time when the biggest miners are universally bullish on the metal and almost all are looking to expand their exposure. Congo’s resources of cobalt—a key ingredient in rechargeable batteries that’s found in the country alongside copper—are even rarer.
In Congo, arguably the most important of Africa’s mineral-rich countries, the government introduced a new mining code last year that raised royalties, added taxes and canceled a clause that would have protected producers against fiscal changes for 10 years.
“Never forget that money is a coward.”
There has been strong opposition from the mining industry, but no concessions. While producers may have hoped for a reprieve when the country elected a new president in December, there have been initial indications that the code won’t be revisited. Still, President Felix Tshisekedi has yet to appoint a team or clearly outline policy, so the situation may change.
Zambia, which is situated on the same giant copper belt as Congo, has also increased its mining royalties. While companies threatened to cut jobs and close mines, the government says it’s standing firm.
“The mismatch that exists between the huge resources that the country sits on and the poverty levels in the rest of the country cannot continue,” said Zambia Mines Minister Richard Musukwa. “There is no one who goes to pay taxes while smiling. It’s only natural for them to defend their positions.”
So far, the mining industry has been vocal in its opposition to the changes, but its options are limited. Having poured billions of dollars into building mines that take years to start making money, many have little choice but to grumble and get on with it.
Still, producers warn that the increased uncertainty will put future investment at risk.
“Never forget that money is a coward,” said Robert Friedland, founder of Ivanhoe Mines Ltd., which is developing huge copper and zinc mines in Congo. “When a politician says something dumb, when a government does something dumb, money runs away at the speed of light.”