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Region moves towards harmonising mining policies
Seven nations from south and east Africa are moving towards adopting a uniform set of mining policies that would harmonise royalty charges on their minerals.
Kenya, Tanzania, Uganda, Mozambique, Ethiopia, Sudan and Angola, on Wednesday accepted a proposal which provides for a common model in the management of their mineral wealth to avert exploitation by mining firms and boost returns to their economies.
The countries are members of the Southern and Eastern Africa Mineral Centre (Seamic) – a United Nations-backed agency that provides information, research, training and technical assistance to the region’s mining sector.
Najib Balala, Kenya’s Mining secretary and Seamic’s chairman said that if the proposal is ratified, member states would domesticate a shared code that will guide the setting of royalties and fees paid by mining companies.
“We have today (Wednesday) forwarded the agenda that African nations need to harmonise their mining policies and royalties,” said Mr Balala during the 35th edition of Seamic governing council meeting in Nairobi.
“It has been accepted in principle as (Seamic) member states.” This, he said, paves the way for future discussions on the issue.
Only Comoros was not represented during the governing council meeting held in Kenya’s capital. Seamic consists of eight nations.
If the plan goes through, charges on minerals extracted in the region largely by foreign firms would be similar across the economies.
A harmonised legal and fiscal regulatory framework, the agency reckons, would help contain incessant switching of investors from African nations in search for markets that offer lowest royalties, which often results in unfair competition and less returns to home economies.
The move follows reports of several nations in the continent whose economies still lag behind despite having active multi-billion dollar extractive industries.
Uniformity in mining practices means investors would be guided by other factors such as the performance of the economy and investment climate as opposed to the rates of royalties and mining fees by nations as is currently the case.
This is especially so with precious minerals such as diamond and gold whose royalty rates and free-carried interest vary significantly in different nations.
It remains to be seen how the nations would integrate their different mining laws and practices.
“The bottom line is that we want to make the sector conducive enough for investors but at the same time ensure that the benefits are felt across the chain,” said the Mr Balala whose term as Seamic head was renewed on Wednesday for the second year.
The African Union Commission estimates that natural resources account for 33 per cent of sub-Saharan Africa's Sh148.75 trillion ($1.7 trillion) gross domestic product.
However, growth in earnings from the sector has been slowed down by lack of proper infrastructure to boost value addition in the industry. This is because setting up processing plants for minerals is a capital-intensive venture, which most African nations cannot afford.
The Seamic bloc is endowed with diamond and gold largely in Angola and Tanzania, copper in Uganda, rare earth, niobium and titanium in Kenya and base and precious metals in Mozambique.
“We need to have structures and policies that will ensure that investors support our local industries to develop and offer capacity building and technology transfer to local players for industrialisation,” said Frank Dixon Mugyenyi, a senior industry adviser at the African Union Commission.
The mining agency said that it would marshal the support of the African Union towards adoption of a common regime under Africa Mining Vision.
Mr Balala noted that Egypt, Zambia and Morocco have expressed interest in being part of Seamic, a move that would prompt rebranding of the outfit.
Seamic is established under the United Nations Economic Commission for Africa and has a research and training laboratory in Dar es Salaam, Tanzania.
