Africans Demand A Bigger Share Of Their Natural Resources Wealth
MALI, WEST AFRICA (BLOOMBERG) - If you thought the detention and subsequent release of Resolute Mining’s chief executive by the government of Mali last month was a one-off, you would have been wrong.
And as Resolute later paid the second, $50 million tranche (the first was $80 million) of a $160 million settlement to the west African country’s military junta, Canadian mining giant Barrick Gold announced that four of its employees in the country had also been detained. Mali claimed Barrick owed $500 million in back taxes while the company said it had already made an $85 million payment of an undisclosed sum. (Mali had demanded $380 million from Resolute in new tax assessments.)
However deplorable Mali’s actions may seem, companies should expect this kind of pressure in other parts of the African continent over the next few years as the philosophy that underpins what happened in Mali spreads. After decades of largely being sidelined while profits from their mineral resources accrued to foreign firms and kleptocratic local leaders, Africa’s new leaders, both democratic and autocratic, want a greater slice of the pie. Some want to achieve this at the negotiating table while others employ much rougher methods.
The age of super-profits for global companies operating in Africa’s resource sector is coming to an end. Multinational companies should hurry to find sustainable ways in which they can share risk and revenue with governments, as they do in jurisdictions like Norway (where taxes are as high as 78%) and the United Arab Emirates.
Animating Kenya’s anti-tax government shutdown this year, concepts of "decoloniality” now drive youth protests, inspire coup leaders such as those in Mali and drive some policy making in democratic states. It is particularly influential in countries where large oil, gas and mineral finds have been made, from Namibia to Mozambique and South Africa. Its influence has seen old and new mining contracts in Botswana, Senegal, the Democratic Republic of Congo, Zambia and elsewhere being renegotiated.
Whether one wants to call it decoloniality or "resource nationalism,” as it was termed in the past, this movement is worth paying attention to. South Africa’s international relations minister Ronald Lamola told the United Nations in September that SA’s priorities during its Group of 20 presidency would include dealing with "issues of predatory mining by some countries and corporations, especially in the quest for Africa’s raw materials and critical minerals.”
Mali is a military dictatorship, but it’s not just the "coup belt” countries such as Burkina Faso and Niger that are demanding a bigger stake in the shareholding, profits or taxes from their mineral resources. Stable, longstanding democracies like Botswana, Senegal, Zambia and new ones such as the DRC, have all renegotiated mining deals with foreign firms in recent years.
The latest events in Mali serve as a warning of what to expect. The country’s eight years of democracy were brought to an end in August 2020 when Colonel Assimi Goita overthrew the president and installed a new leader. In May 2021, Goita deposed the president and declared himself the new leader. He has extended military rule to 2027.
Now Goita is in a terrible bind. The coups have triggered sanctions and the country, the continent’s No. 3 gold producer, needs cash as it battles rebel groups linked to al-Qaida and ISIL. In 2023, Goita signed into law a new mining code enabling the state and local investors to take stakes of up to 35% in new mining projects compared with 20% previously. The Mali government has consistently refused to comment, but the detention of mining executives is regarded by analysts as a tactic that's part of the government's efforts to shore up its finances.
Other coup belt countries are demanding the same, with Guinea’s military junta demanding increased participation of local citizens in the mining value chain. Niger, also led by a military junta, has revoked the mining licenses of several foreign companies.
And mining agreements are being redrafted elsewhere. In his first speech following his election on Oct. 30, Botswana’s President Duma Boko said he would pursue the renegotiated but stalled diamond deal with De Beers. In July 2023 De Beers and Botswana announced that under a new deal, the country would immediately receive a 30% share of the rough stones extracted from the Debswana joint venture, up from 25%, and that share would increase to 50% within a decade. The deal was never signed, but the two sides are now talking again.
In August, Senegal set up a commission to review oil and gas contracts signed with foreign firms. Last month, President Bassirou Diomaye Faye’s party won an overwhelming victory in parliamentary elections, giving him a powerful mandate to forge ahead with the popular review initiative and other changes.
The Democratic Republic of Congo, which holds the world’s largest cobalt reserves, has renegotiated billion-dollar infrastructure-for-minerals deals signed in 2008 between Chinese miners and the country’s former president to achieve better terms. Zambia, which has over the past four years renegotiated mining contracts with China, says it plans to establish an investment company that will control at least 30% of critical minerals production from future mines. Following offshore discoveries of oil and gas by TotalEnergies and Shell, Namibia has introduced a draft National Upstream Petroleum Local Content Policy to ensure citizens and companies benefit from the new finds.
Are these jurisdictions worried about backlash and investor skittishness? Resource nationalism may work only when commodity markets are booming — and that’s not the case today.
Ironically, Botswana’s new president and his deputy (Harvard Law School and Wharton Business School alumni, respectively) want exactly the same thing as Mali’s military leaders. Botswana’s leaders and De Beers executives are currently renegotiating the decades-old diamond deal with cordiality and a recognition of what’s at stake as partners. Their interactions are an example to governments and businesses across the globe of an attempt to solve the growing crisis around mineral resource exploitation on the continent.
The alternative to what De Beers and Botswana are doing is Mali’s way. That’s the road to nowhere.
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