African states should own half of new mining ventures, says Mohohlo – by Paul Vecchiatto (South Africa Business Day Live – May 10, 2013)

AFRICAN governments should own at least a 50% stake in any new mining venture in order to ensure the country receives more of the revenue that flows from a project than the mining company receives.

This is a recommendation of Linah Mohohlo, governor of Botswana’s central bank and a member of the Africa Progress Panel.

Speaking at Friday’s launch of the panel’s Africa Progress Report 2013, Ms Mohohlo pushed the point that only if there were transparency in monetary flows could there be real transparency on how mining companies operate on the continent.

However, Ms Mohohlo stressed that her recommendation was not a call for nationalisation in any way.

“What it is, it is a recommendation. As a former central banker I believe that only central banks can and should handle the revenue flows that stem from mining.

“The country, or the government, must receive more of the revenue flows out of a project than the company does,” she said. Ms Mohohlo said governments had to use the minimum shareholding of 50%, plus a sound tax regime that included clear guidelines on collection and definite dates for the end of the tax holidays often granted for a project to start.

She said governments had to ensure their citizens benefited from the monies that flowed from mining projects, by using them to alleviate poverty and supply social services.

“The state’s role is far greater than just being a partner that extracts profits and collects taxes,” she said.

African governments were improving their institutional capacity to deal with large multinational mining companies, Ms Mohohlo said, but a lot of work still needed to be done.

The Africa Progress Report bemoans the lack of transparency exhibited by a number of African state-owned mining companies and their relationships with offshore companies.

It describes the relationships as opaque, saying it is impossible to identify the ultimate beneficiaries.

The report cites research by multinational watchdogs Revenue Watch and Transparency International that interrogated the reporting practices of 44 major global and national oil and gas producers.

A case is the Nigerian National Petroleum Corporation, which produces limited information on its balance sheet despite having been implicated in potential fuel subsidy irregularities that may have cost that country $6bn between 2010 and 2011.

“The lack of transparency in African state companies in the extractive sector is a concern in and of itself given their role in handling large revenue flows,” the report says.

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