Mapping the rise of resource nationalism in Africa
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Mapping the rise of resource nationalism in Africa

By Matthew Hall 12 Jul 2021 (Last Updated July 20th, 2021 16:26)

With African nations among usual suspects for resource nationalism, we look at risk and what regulatory changes could be in the works.

Mapping the rise of resource nationalism in Africa
The DRC is the source of more than two thirds of the world’s cobalt. Credit: Arne Hodalic

A recent study from risk consultancy Verisk Maplecroft found that the Covid-19 pandemic has contributed to a surge in governments pursuing resource nationalist policies – those that attempt to assert at least some sovereign control over natural resources. Around the globe, 34 countries saw their Resource Nationalism Index, the score Verisk Maplecroft gives to countries based on resource policy, rise significantly in 2020. 

Africa is home to the heaviest concentration of countries seeking to increase their control over resources.

Reasons for a surge vary depending on the country – but the economic impact of the pandemic has “aggravated an already growing tendency for government interventionism in the resource sector”, according to Verisk Maplecroft, as governments look to recoup some of the financial losses brought on by Covid-19.

We map the African nations where resource nationalism looks set to rise post-pandemic.

Zambia

Copper contributes just shy of 65% of Zambia’s total gross exports and was marked by Verisk Maplecroft as one of the riskiest countries for resource nationalism following on from the country’s attempted liquidation of Konkola Copper Mines (KCM). In February this year, a Zambian court threw out a motion by Indian mining firm Vedanta Resources that was aimed at stopping a provisional liquidator from splitting up its subsidiary KCM.

Last year, Zambia said that officials with the Ministry of Mines and Mineral Development would begin collecting samples from mine sites to prevent mining companies undervaluing their production to pay less in tax. The ministry alleged that some operators deliberately submitted low-grade samples for assessment, depriving the country of mineral royalty revenue.

Zambia’s copper output fell in 2019, pre-pandemic, due to the implementation of new mining taxes which also had the compound impact of reducing investment in the country’s mining sector. Zambia has been mulling an overhaul of its mining tax regime, with Vice President Inonge Wina saying that there is a need to simplify the tax system, which will enable the government to effectively audit mining companies’ reported profits. 

Wina said that the government wants communities in mining areas to benefit from any mining activities through enhanced social responsibility measures.

Democratic Republic of the Congo

The Democratic Republic of Congo’s (DRC) dominance in cobalt – the country is the source of more than two thirds of the battery metal – gives its government some considerable leeway to extract revenues from a material that is essential to electric vehicles and other green technologies.

The DRC Government introduced a new Mining Code in 2018, which added a further 50% tax on unexpected windfall profits, along with a host of other fees. Despite opposition and threats of reduced investment, the new regime went ahead, mandating that DRC citizens hold a 10% share in mining companies and enabling royalties on “strategic substances” to be increased at times of high global demand.

The DRC is ranked as the 175th least-developed nation, out of 189, according to the United Nations Human Development Index. As two of its major exports – copper and cobalt – become increasingly integral to green revolutions around the globe, the country could become a hotbed for protectionist measures seeking to assert more control and extract more revenues from miners. Verisk Maplecroft put the DRC in its top 10 countries at risk of resource nationalism.

Ghana

The re-election of Ghanain President Nana Akufo-Addo at the end of 2020 continues the risk of resource nationalism in Africa’s second-largest gold producer. Akufo-Addo has previously called for an end to the habit of African governments offering fiscal incentives to attract investment, believing that these deals need to be more beneficial to Africa.

“I believe we have come of age. We should not have to give unusual tax and royalties incentives. And mining companies should not expect to make extraordinary profits on our continent,” Akufo-Addo told the Investment in African Mining Indaba event in 2019.

The president has also taken a strong line on illegal mining, which digs up more than a third of Ghana’s gold. In April, Ghana’s military launched a nationwide operation to clear illegal miners out of the country’s water bodies, with Akufo-Addo seeking to ensure more environmental responsibility in the nation’s mining sector.

Prior to Ghana’s 2020 election, risk analysis firm Fitch Solutions said that the re-election of Akufo-Addo “will foster a continuation of the agenda to monetise future royalties, posing risks to mining investment in Ghana.

“In the longer term, if an LSE listing is accomplished, international miners could face increasing threats of resource nationalism as the government could seek to increase gold mining royalties.”. 

Tanzania

Tanzania introduced sweeping reforms to its mining sector in 2017, with several pieces of legislation written into law that were wide in scope and short on debate time. The changes meant that the government could renegotiate contracts that Tanzania’s Parliament considered “unconscionable”, increased the government’s shareholding rights, and increased royalties paid on minerals and metals.

Verisk Maplecroft predicts that “fiscal indiscipline” on the part of Tanzanian authorities means that businesses could face “forceful implementation of tax and regulatory reforms” to enable the government to make ends meet.

Tanzania has tended to favour artisanal miners, to the extent that the government revoked licences from multinationals Barrick and Glencore to open the land to thousands of small-scale miners. The first three months of 2020, before the more calamitous effects of Covid-19 had come to pass, mining contributed over 15% to the country’s GDP.

The president overseeing these changes to the mining sector, John Magufuli, was a major promoter of Covid-19 denialism until his death in March 2021 – rejecting lockdowns and social distancing measures in favour of prayer. 

When more than 500 cases of the virus were confirmed in Tanzania, his government stopped reporting cases to the World Health Organisation, declaring the test kits faulty and the nation free of the virus. His administration even rejected the premise of importing vaccines, including the free doses that it would be eligible for under the Covax initiative that aims to provide vaccines to poorer nations.

Tanzania had been experiencing years of economic growth up until the pandemic, but its wilful ignorance of the pandemic is likely to have major knock on effects for its economy – making further shake ups of mining laws more likely as the nation seeks to reset.