Resource nationalism takes various forms including higher royalties and taxes imposed on companies
Alarm bells are sounding for the mining industry over growing government control of resources in Sub-Saharan Africa, as states try to cash in on higher commodity prices and secure votes ahead of elections.
This phenomenon — dubbed resource nationalism — is unlike outright nationalisation seen in the 1960s and 1970s when governments took full control of mines. Instead it takes various forms, including higher royalties and taxes imposed by states on companies, and the introduction or increase of compulsory minimum quotas for ownership. An emphasis is also placed on aspects such as local beneficiation and procurement of local goods and services.
It has taken hold in Tanzania, the Democratic Republic of Congo and even SA, according to Peter Leon, partner and Africa cochair at law firm Herbert Smith Freehills, who presented at the International Bar Association Annual Conference in Rome from October 7-12.
It is a concern for mining investors who are easily spooked when rules change in the middle of long-term investments.
While some examples are more extreme than others, “the general trend is undoubtedly in the direction of greater fiscal control and greater state intervention”, Leon says.
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