The commodities industry endured a raft of tax increases between 2003 and 2008 as governments of natural resources-rich countries sought a larger share of the profits of the commodities price boom. The ?resource nationalism? wave ended abruptly after prices collapsed following the global financial crisis. But now is back.
Australia and the UK have announced tax increases and the new left-wing president of Peru, a top producer of copper, silver and tin, has also vowed to raise taxes. And crucially Africa is about to see a resurgence of resource nationalism too.
The threat of tax increases, renegotiation of terms, larger participation of state-owned companies and, ultimately, nationalisation, comes as Africa becomes more important for the natural resources industry.
The continent already saw its fair amount of tax increases and renegotiations in the 2003-2008 boom period, particularly on the oil and natural gas industries.
Nigeria, Libya and Algeria imposed new terms to oil companies and some minerals-rich countries, such as the Democratic Republic of Congo and South Africa, did the same through licensing reviews or, in the case of Pretoria, via a change in royalties and the impact in the mining industry of the so-called Black Economic Empowerment policies. Bostwana also successfully demanded that De Beers do more value-added diamond-processing in the country, boosting the local economy.
Other African countries look set to join the trend. Last week I was invited by the World Bank to moderate a conference about natural resources in Johannesburg which brought together officials and civil society to share experiences between Latin America and Africa.
The overall sentiment is that African countries are not profiting enough from the surge in prices, while oil and mining companies make windfalls. Activists and non-governmental organisation are demanding better terms. Officials largely agree.
Alexandre Chambrier, Gabon?s minister of mining, summarised the sentiment of many saying: ?Taxes of the 1980s and the 1990s? Who is going to defend that??
Zambia and Namibia are mulling tax changes. Others could follow soon as prices for metals such as copper and minerals such as coking coal remain extremely high.
Africa has an advantage to push ahead for what officials and activist describe as ?fairer? tax regimes.
Natural resources groups know the continent is where the growth in production would be in the future. The few high quality ore reserves left untapped in the world are largely located in Africa. As such, companies are unlikely to leave even in the face of higher taxes and tougher economic terms.
? The Financial Times Limited 2011