Africa: new legislation, same trend

Wednesday, 9 April, 2014

One of the clearest trends of 2014 – based on the frequency with which we’ve written on the matter - is Africa’s newfound robustness towards its mining industry. We’re beginning to lose track of the new codes, taxes and licensing laws being writ into existence by the continent's leaders.

Today’s news that Zambia has ramped up its electricity tariffs for mining companies, coupled with Tanzania’s cancelling of 174 mining licenses sharply affirms this trend.

The rising tide of legislative tussles has not been a random wash of events, and the current zeal has its roots in a bizarrely under recognized initiative known as the Africa Mining Vision, launched by the African Union in 2009.

Perhaps encouraged by the growth in legislation and renegotiations, the UN's Africa Renewal programme wrote an optimistic extended piece this month suggesting that the African Mining Vision (AMV) might overcome the notorious resource curse. The article highlights how the AMV makes several recommendations “including better negotiations of mining deals, more attention to the environment, value addition to natural resources and capacity training for Africans”.

Acolytes of the AMV such as Alpha Conde, president of Guinea, and Nkosazana Dlamini-Zuma, chief of the Africa Union have been the main orators of this movement, but their continent’s actions have spoken louder than their words, and they've been following the AMVs recommendations closely.

Ghana, Ivory Coast, Tanzania, South Africa and Zambia have all made high profile changes to their mining laws in recent years, with higher national stakes in the mineral reserves under their feet the common denominator between them.

Tanzania have demonstrated they are tightening up on licensing laws, by cancelling 174 contracts on Monday, whilst Zambia have made a big step by making a 28.8 percent tariff increase for mining companies; the discount rates they charged mining companies has been the subject of much scrutiny, comprising a chapter in a recent Christian Aid report. Last month we wrote about Ghana legislating for further value addition by mandating oil companies use local suppliers too, as well skills training; a clear product of the AMV.

With EITI annoucing in February that Zambia's mining revenue doubled between 2010 and 2011, the country made it as a case study in the Africa Renewal piece:

“[Previously] facing pressure of legal threats from foreign investors for breaching agreements, former President Rupiah Banda decided against a review of existing contracts, to the disappointment of Zambians.

Current President Michael Sata appears to be taking a different approach. Since 2011, his government has been charging a 30% corporate tax on mining companies, up from 20%. This had the effect of doubling Zambia’s mining receipts to $1.36 billion in 2011 compared with 2010.”

The emerging climate of participation rather than alienation from their own resources is something that - as Zambia’s example shows - is being met with varying responses from the mining industry and investors. Some see it as a threat, others welcome it as part of the times, and as an opportunity to demonstrate their operating credentials, thus giving them a competitive edge.

The current climate of renegotiation received its best articulation in Nkosazana Dlamini-Zuma's article for a Tanzanian paper, and deserves the final word in claiming that

“The mining sector, rather than seeing this as risk and insecurity, should see it as an opportunity to help shape shared prosperity, a growing African middle class and industry, and therefore greater demand for their goods.”