[ANALYSIS] African miners get mix of red carpet and red card
Africa is alternating between the red carpet and the red card in its approach to the mining sector. As executives of the biggest firms gathered for last week’s annual industry conference in Cape Town, the continent’s politicians were to be seen quaffing Shiraz in the shadow of Table Mountain to drum up inward investment. At least one major state is taking a different approach, though.
The usual relationship between miner and mined is typified by Ghanaian President and Indaba attendee Nana Akufo-Addo. Last month, he threw a $259 million tax break at AngloGold Ashanti to get it to redevelop its massive Obuasi bullion mine. In return, he hopes for $2.2 billion in duties and 2,500 jobs over the next two decades.
At the other end of the spectrum is Tanzanian President John Magufuli. Two months ago the East African state started to review off-shore natural gas contracts dating back two decades lest they contain provisions harmful to the state, Bloomberg reported on 6 February. Moving the goal posts could hit Royal Dutch Shell, and also Norwegian oil group Equinor. The latter pointedly said in response to Tanzania’s action that it hoped the government would understand the stable conditions required to finance a 30-year project.
It’s pretty clear the socialist Magufuli does not. The president has transformed Africa’s fourth-biggest gold producer from investor darling to pariah: it is now the third-riskiest jurisdiction for miners, having been classed as 73rd in 2016, according to Verisk Maplecroft, a consultant. Only Zimbabwe and Venezuela fare worse. Magufuli has also crippled London-listed Acacia Mining, Tanzania’s largest private employer, with a fantastical $190 billion back-tax bill.
Balancing carrot and stick with miners is tricky.
In Africa only Democratic Republic of Congo and South Africa have real leverage, given they have two-thirds of the world’s cobalt and four-fifths of its platinum respectively. Congo infuriated miners last year by hiking cobalt royalties from 3.5% to 10%.
Magufuli doesn’t have that luxury. Tanzanian foreign direct investment dropped to 2% of GDP in 2017 from 5% three years earlier, according to the World Bank. The Tanzanian shilling hit a record low against the dollar on 10 January after the World Bank cancelled a $300 million loan. If nothing else, miners should appreciate his contribution in showing how not to do it.
one day ago
4 days ago
6 days ago
a week ago
8 days ago
9 days ago