Governments of resource-rich countries have to take care in pursuing higher taxes and rents on mining companies as they risk flouting international trade rules, the Mining Indaba in Cape Town heard on Tuesday.

In South Africa, amendments to the Mineral and Petroleum Resources Development Act mean mining companies would have to supply a percentage of their production of minerals, if they were considered strategic, and discount the prices to the government. If a designated mineral was exported without meeting the domestic quota for local beneficiation, or without the written consent of the minister, it would be an offence that could result in imprisonment or a penalty of 10% of annual turnover.

Peter Leon, a partner at law firm Webber Wentzel, said a number of countries were implementing resource nationalism policies, but it was important to avoid flouting World Trade Organisation (WTO) rules, which could violate international trade law. He believes the supply requirement in the draft South African law amounts to export licensing and may be illegal in terms of WTO rules.

Sheila Khama, director of the African Development Bank’s African Natural Resources Centre, said the rise of resource nationalism within African countries was due to a change in what governments saw as fairness, heightened expectations from mining and the high visibility of the company brands themselves.

She said media headlines saying how a mining company’s share had surged on a foreign stock exchange because it was mining a mineral in a certain country also gave the impression that the mining company was “flush with cash”.

“However, the local communities do not realise that there is a major difference between the shares of the company, which may have been talked up so they can be traded, and the value of the asset on the ground,” she said.

Lord Peter Mandelson, chairman of the Global Counsel, said consumers of products in countries outside those that produced the mineral resources would also demand sustainable practices were used, “otherwise they won’t buy them”.

He said: “I believe that miners (including the governments of mineral-rich countries) see the profound sustainability attack which is coming their way. They will have to embrace rather than repel it as it is not ‘repellable’.”

Ms Khama said governments were under increasing pressure to improve the lives of their citizens.

World Bank senior manager Paulo de Sa said the term “resource nationalisation” implied a conflict of some kind between governments and the mining companies, but that “this was not necessarily the case”.

Ghana Chamber of Mines CEO Toni Aubynn said that country’s donor aid had dried up after it was reclassified as a lower-middle-income country, and this forced the government to impose higher taxes on mining companies.

See also: SA ‘could fall foul of World Trade Organisation’ (BDlive, 14 February 2014)
Source: http://www.bdlive.co.za/business/mining/2014/02/04/resource-nationalisation-risks-breaking-global-trade-rules