It’s no secret, that African countries have been getting stiffened when it comes to their resources, this is much evident when it comes to the extractive industry, from independence, most countries have been in constant legal battles with multinational miners trying to negotiate favorable terms that would see them benefit from the wealth extracted from beneath their feet, two main routes have been used, such as the nationalization of major mining companies (majority of which ended being unprofitable and only to find their way back to the former owners sold at give away prices) or forming Joint ventures with the government, turning the state into shareholder (most times a silent partner) in the hopes of gaining profit from dividends, In Tanzania we have seen the formation of Twiga Minerals Corporation (a joint venture of BARRICK and Tanzania), However recently there has been a move by states who have been moving out from the traditional JV agreements and are now more interested to be paid their share in terms of mined resources rather than waiting on dividends, Botswana is now collecting rough cut diamonds, Zambia is looking to be paid in copper mined in hopes of gaining more from the trade of said minerals rather than waiting on dividends.
This article delves into some of the reasons behind this strategic shift and explores the potential impacts on national economies and the mining industry.
Resource Ownership and Sovereignty:
The decision to opt for a share of mined resources is often grounded in the pursuit of greater resource ownership and sovereignty. African nations are reevaluating the terms of their engagement with mining companies to assert more control over their natural wealth. By directly holding a share of the mined resources, countries aim to strengthen their economic independence and reduce reliance on external entities.
Enhancing Revenue Streams:
Unlike fixed royalties and dividends, a share in mined resources provides countries with a more dynamic revenue stream. As commodity prices fluctuate, so does the value of the resources extracted. This model allows African nations to benefit directly from market upswings, potentially leading to increased revenues during periods of high demand and prices.
Investment in Infrastructure and Development:
Choosing a share of mined resources aligns with broader national development goals. Governments can leverage their resource ownership to secure financing for critical infrastructure projects. Instead of waiting for dividends, countries can use the actual resources to attract investment, catalyzing economic development and fostering local industry growth.
Risk Mitigation:
A share in mined resources offers a certain level of risk mitigation for African countries. In traditional royalty and dividend models, governments bear the risk of market fluctuations impacting revenue streams. However, by holding a direct share in the resources, nations become active participants in the market, potentially offsetting some of the risks associated with volatile commodity prices.
Promoting Local Industry and Employment:
Direct ownership of resources provides an opportunity to bolster local industries. African countries are increasingly focusing on downstream processing and refining within their borders. By owning a share of mined resources, nations can incentivize mining companies to contribute to local value addition, generating employment opportunities and fostering a more diversified and resilient economy.
Conclusion:
The choice by some African countries to opt for a share of mined resources marks a pivotal moment in the evolution of resource management strategies. It reflects a commitment to economic sovereignty, diversified revenue streams, and strategic risk mitigation. As this trend continues to unfold, it will be crucial to monitor the impacts on national economies, local communities, and the mining industry as a whole. The journey from royalties to direct resource ownership is a testament to Africa’s determination to harness its wealth for sustainable development and prosperity.
