Africa’s Resource nationalism

By Isaac Twumasi-Quantus in Accra.
Resource nationalism has become an increasingly pressing issue for mining companies in the last year with an Ernst & Young report naming it the leading global business risks for mining and metals business.

A number of African countries, including Ghana and Zambia, have recently moved to increase taxes on mining operations, and other governments, such as Guinea, have proposed new legislation to increase state ownership in mining operations.

There is a premise that mining companies risk jeopardizing their future growth if they fail to work with governments towards their mutual best interests.

 If mining companies succumb to their natural instincts to rigidly resist any increased state intervention, they will be inviting enforced value transfers that will prove much more costly, than if they engage with genuinely open minds.

To an extent higher metal prices become a two-edged sword for the mining companies as they tend to highlight to politicians, keen to demonstrate their need to improve the lot of their populations, the assumed profits many companies are thought to be making as a result which they feel might be ploughed back for the benefit of the nation.

While the risk is always that if they tax too high, investment will dissipate the governments have to try and find a path that would ultimately be beneficial to all parties and sometimes they get it wrong!

The single most important thing that companies and senior executives need to do in order to manage their resource nationalism game is to act with respect. If they drop in on flying visits, and act like they have all the answers, and act like they don't think that they need to bother to show an understanding of local historical, cultural and political dynamics, they will fail, and end up as targets for endless value extraction until they eventually run away.

The current trend of resource nationalism in Africa was being driven by a "growing democratization, and an increasing sensitivity, even amongst autocratic regimes, to populist and media sentiments. While many resources companies may be tempted to resists state intervention, they would do more to preserve their long term interests by engaging with governments, to ensure that national mining companies are structured according to the principles of value for value and long-term sustainability.