The debate is always underpinned by a focus on mining companies, particularly foreign multinationals, and the lingering belief that companies are benefiting unduly from Africa’s resources.
The issue is in the spotlight again, not just because of the furore around SA’s proposed new Mining Charter but also because of developments elsewhere in Africa.
The Democratic Republic of Congo’s mining code has been taken off the shelf and is now under review again by legislators in that country.
The code, introduced in 2002, gave generous incentives to mining companies to get them to invest in the war-torn country, but the government wants to change the playing field with new proposals that will force companies to part with more money.
A review of the code has been under way since 2012 and it was shelved in 2015 due to strong resistance from mining companies in a climate of low commodity prices. As copper prices have recovered and cobalt prices have spiked, the issue is back on the agenda. The new code contains proposals to hike taxes on profit to 35% from 30%, to double the state’s free share of new mining projects to 10% and to increase royalties on copper and cobalt revenue to 3.5% from 2%.
Mining companies say the new provisions would make their operations unprofitable, given the high operating costs in one of the world’s most dysfunctional states. They have called for a level playing field, saying that in the past, the regulations have not been equally applied to all companies and the industry lacks transparency.
Defenders say the requirements are not out of kilter with regional norms and that miners are enjoying high-quality mineral deposits and low taxes.
In Tanzania last week, the government submitted three bills to parliament that have caused alarm among investors. They aim to allow the state to force mining and energy companies to renegotiate their contracts.
This comes in the wake of a long-running spat with the country’s biggest investor, gold miner Acacia, over alleged underreporting of exports, leading to a ban on unprocessed exports, which has led the company to consider closing its mine.
Tanzania, one of Africa’s poorest countries, is expecting $30bn in investment into its burgeoning gas industry. There are concerns about how the legislation will affect these investments. President John Magufuli says the reforms will increase transparency and revenues, and that companies have not been paying their fair share of taxes. Investors in the commodities sector generate most of the country’s revenues and maintain they are being continually squeezed for more money.
These stories show how complex the issue of equitable distribution of resources is and how far apart governments and business are on this issue.
Governments remain suspicious of miners in particular, tending to focus narrowly on revenues without looking at the broader benefits to the economy of mining investments and failing to take into account the long-term and risky nature of mining.
Companies, which are able to take their investment elsewhere, tend to push for the best possible deal from governments compromised by a lack of bargaining power and options.
The issues are complex but they are not helped by a lack of positive engagement on each party’s responsibilities and contributions.
They are compromised by poor governance and the failure of states to invest their revenues responsibly.
• Games is CEO of business advisory Africa @ Work.