*Re: Mining sector needs regulation; deals with investors should be made public*
*…….many African governments do not have the legal know-how to draw up agreements that are beneficial to them.* *Giant corporations which have been in the business for a long time are adept at drawing up agreements that give them undue advantage…..* * * [image: Description: http://www.nation.co.ke/image/view/-/979042/data/43/-/2oq9by/-/shareH.png] Share [image: Description: http://www.nation.co.ke/image/view/-/418/data/40/-/d9x1rw/-/ico_bookmark.png] Bookmark [image: Description: http://www.nation.co.ke/image/view/-/414/data/39/-/clerl0z/-/ico_print.png] Print<http://www.nation.co.ke/oped/Opinion/Mining-sector-needs-regulation/-/440808/1922290/-/view/printVersion/-/b2lp89/-/index.html>Rating [image: Description: http://www.nation.co.ke/image/view/-/1419644/medRes/366978/-/maxw/600/-/15gq0qnz/-/RasnaWarah.jpg] Rasna Warah By RASNA WARAH rasna.wa...@gmail.com Posted Sunday, July 21 2013 at 18:38 In Summary - Sometimes deals are made without proper valuation, such as the one made by the new Chinese President Xi Jinping, who struck a $9 billion infrastructure deal with DR Congo in exchange for natural resources - However, nobody quite knows the size and value of these natural resources as the details have not been made public - The secrecy around ownership has allowed companies to be incorporated in tax havens and even in financial capitals such as London, which allows unscrupulous individuals and companies to remain undetected Last month *Bloomberg Businessweek* reported that Kenya will be repealing the rule that at least 35 per cent of mining projects be locally owned. The report was based on a speech given by Mining Secretary Najib Balala, who stated that the decision was made “to crowd investors in, and not out”. (When I asked for his comment, Balala clarified that the government would own 10 per cent of mining projects, and that the allocation of royalties will vary depending on the mineral.) The evolving mining sector in Kenya calls for regulation of the sector so that decisions regarding ownership and revenue are not made arbitrarily. Although discussions regarding regulation are ongoing, and will be debated soon in Parliament, case studies show that regulation in this sector can be subverted by big mining companies that have been in the business far longer than many of the African countries they mine in, and are therefore cleverer in identifying legal and other loopholes that benefit themselves. A recent BBC documentary titled Stealing Africa shows how privatisation of the copper industry in Zambia in 2001 denied Zambians the right to benefit from their own wealth, with the result that Zambia remains one of the poorest countries in the world with 60 per cent of its population living below the poverty line. Filmmaker Christoffer Guldbrandsen looked at how big multinationals such as Glencore, owner of the Mopani copper mine, used various tactics to make super profits at the expense of the Zambian people, including undervaluing the copper, which allowed the corporation to report losses, and not pay any taxes. In an article published in *The Guardian* newspaper, the filmmaker said that while the decision by the Zambian Government to privatise the mines may have been sound, it was done discriminatively, and without regulation. “It is almost ironic that they sold the Mopani copper mine, which I feature in the film, to a consortium whose founder had to flee the US in what was at the time the biggest tax evasion case in US history.” A similar story published in the *New African* magazine last month showed that Zambia’s 500,000 copper mine workers are paying higher rates of taxation than mining companies. M. J. Morgan, writing for the *New African*, says that many African governments simply do not have the kind of legal know-how and resources to draw up agreements that are beneficial to them. Giant corporations which have been in the business for a long time are adept at drawing up agreements that give them undue advantage, with the result that many African governments end up getting a raw deal. Sometimes deals are made without proper valuation, such as the one made by the new Chinese President Xi Jinping, who struck a $9 billion infrastructure deal with DR Congo in exchange for natural resources. However, nobody quite knows the size and value of these natural resources as the details have not been made public. Another major problem facing African countries is their lack of capacity to add value to their commodities. For example, diamond-exporting countries are losing up to 50 per cent of the value of their stones because they do not cut and polish the diamonds themselves, which is the reason why the global diamond industry is based in Brussels, not in diamond-producing countries like Botswana. Not adding value to commodities means other countries benefit from the continent’s wealth. Tax havens, which have allowed companies to avoid any scrutiny, are also part of the problem. Kofi Annan recently urged G8 countries to establish registries of ownership of companies and to make them public. The secrecy around ownership has allowed companies to be incorporated in tax havens and even in financial capitals such as London, which allows unscrupulous individuals and companies to remain undetected. The mining sector in Kenya should not fall into the trap in which many African countries have fallen. There must be thorough scrutiny of the companies that seek to benefit from our natural resources. Deals struck with such companies should also be made public.
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