Resource nationalism reasonable, but adequate negotiation needed

13th July 2018 By: Jessica Oosthuizen - Creamer Media Reporter

Resource nationalism reasonable, but adequate negotiation needed

INSUFFICIENT IMPACT Increasing taxes, and free-carry stakes for the State in mining projects have not demonstrated a substantial alleviation of poverty
Photo by: Bloomberg

Resource nationalism is “completely legitimate” in principle; however, it seems to be used too often with a short-term political agenda, and often produces ill-advised reforms, says global law firm Norton Rose Fulbright partner Christophe Asselineau.

The seemingly increasing trend towards nationalist thinking, combined with and likely driven by growing economic inequality, had resulted in several changes in mining and tax legislation in various sub- Saharan African countries, Mining Weekly reported last month.

Democratic Republic of Congo (DRC) President Joseph Kabila signed a law in March to amend the 2002 Mining Code by increasing royalties, taxes and mining companies’ obligations. Last year, Tanzania approved amendments to its 2010 Mining Act, as well as two new laws asserting government’s permanent sovereignty over its natural resources.

Asselineau believes that increasing taxes, and free-carry stakes for the State in mining projects, under the auspices of resource nationalism, have to date not demonstrated a substantial alleviation of poverty or improved public services and infrastructure spending, much less redistributed benefits.

Governments could offer more stability in the way they approach resource nationalism by “truly negotiating” with the mining industry prior to implementing resource nationalism-inspired reforms, he suggests.

“This means government should take into account some of the industry’s ideas and arguments instead of just going through the motions.”

Asselineau notes that the waiting period between the announcement of changes to be made and the actual implementation of a new mining code or reforms, creates a legal environment which is, or appears to be, uncertain, consequently leading to a perilous investment climate.

This is also relevant to South Africa, where the mining industry is hindered by the uncertainty caused by the draft Mining Charter for the South African mining and minerals industry.

However, he remains hopeful for the future of the mining industries in countries where reforms have recently or are being made, adding that there have been tougher times for the mining industry in Africa.

Asselineau is a mergers and acquisitions (M&A) and projects lawyer with more than 25 years of experience advising on projects and M&A transactions worldwide, with a particular focus on Africa.

He has recently been involved in negotiations to manage changes in mining regulations in the DRC on behalf of the mining industry and in Tanzania on behalf of one of the larger mining operators in the country.