As storm clouds gather over South Africa’s mining industry amid controversy over the Mining Charter, mining houses in the rest of Africa are between a rock and a hard place.
Tanzania, Africa’s fourth-largest gold producer, after South Africa, Ghana and Mali, is the latest country on the continent to read the riot act to mining companies.
A similar trend of confrontation between mining companies and governments is playing out in the Democratic Republic of Congo, Zambia and Zimbabwe.
The DRC is mulling an amendment of its mining code to reflect an increase in taxes on profits from 30% to 35%, an increase in the government’s stake in new mining projects from 5% to 10%, and an increase in royalties from 2% to 3.5% for copper and cobalt. – Advertisement –
In 2015, Zambia had myriad challenges to its mining sector, among these threats of closure by copper producers after it increased mineral royalty taxation from 6% to 20%. The government has since reduced the tax threshold to 9% for opencast mines and 6% for underground mining operations.
In Zimbabwe, the government is forging ahead with a “use-it-or-lose-it” policy for land claims.
The policy allows the state to repossess idle claims and give these to other foreign investors. South Africa’s Impala Platinum unit in Zimbabwe, Zimplats, has been in a fight with the government over the takeover of 28,000ha of land – which constitutes half of its total in Zimbabwe.
Two other operators, ZimAlloys and Zimasco, have already had to cede half of their idle land claims to the state.
Tanzania this month introduced three new laws which allow the government to re-negotiate mine development agreements, control up to 16% free carried interest in all mining projects and increase royalties from 4% to 6%.
The Tanzanian government also wants to compel mining companies to increase local beneficiation of mineral resources.
At the heart of the issue are allegations by the Tanzanian government that London-listed Acacia Mining had underreported its gold production figures – thereby prejudicing the state of tax revenue.
Andrew Lane, the energy and resources leader for Africa at Deloitte, said the equitable split of the returns from resources between the investor, the government and the community remained difficult.
“These stakeholders all have conflicting needs and priorities, which make it very difficult to find the right balance.
“In Africa, the situation is exacerbated by our colonial history and the perception that our mineral resources have been plundered by foreign-owned companies over the years,” he said.
Tanzania’s Chamber of Minerals and Energy has been critical of the laws, which it said would have “material impact” and had been introduced at “short notice”.
The legislation, industry experts suggest, would put mining companies on the back foot — amid subdued global commodity prices and the possibility of Tanzania being perceived a risky investment destination.
“With such huge investments and long lead times before any revenue is seen from a mine, policy instability and uncertainty about how policy decisions are made worries investors,” said Tom Butler, the CEO of the International Council on Mining and Metals this week.
“The pathway out of poverty for many countries in Africa will depend on mining. But if these countries cannot attract investment, new mines will not be developed.”
Policy instability is also evident at home.
Last week, Minster of Mineral Resources Mosebenzi Zwane agreed to suspend implementing the Mining Charter pending a judgment on an urgent interdict. However, this week he gazetted a proposal to impose a moratorium on the granting of new mining and prospecting rights, a move which the mining industry is challenging.
But any hope of catching a breather away from domestic challenges has been dashed.
JSE-listed AngloGold Ashanti and its two subsidiary units, Samax Resources and Geita Gold Mining, have been caught up in the showdown in Tanzania.
AngloGold Ashanti has turned to the UN Commission on International Trade Law for arbitration proceedings against the Tanzanian government, as it claims that Tanzanian authorities are in breach of the mining development agreement signed 20 years ago.