Mineral wealth success, failure is pegged on transparency

Mining Cabinet Secretary Najib Balala is right to lobby for a uniform legal and fiscal regulatory framework for the eastern Africa region’s mining sector considering that some investors are known to pit one country against another in their efforts to get the best deal for themselves at the expense of local citizens.

This partially explains why some developing countries remain mired in poverty despite having huge mineral deposits whose exploitation turns external investors into overnight millionaires.

The Democratic Republic Congo is Africa’s best example of how foreign investors, aided by their governments, exploit another country’s rich mineral resources at the expense of the local populace.

Of course, corruption in high places plays its part, too.

The only way to defeat the corruption czars is to ensure that bidding for the rights to mine the natural resources is done competitively and in a open and transparent manner.

Addressing the third edition of the Mining Business and Investment conference in Nairobi last week, Mr Balala explained the benefit of having the continent agree to apply a uniform rate for royalties. He said it would prevent mining companies from hopping from one country to the other in search of the lowest rates.

But whatever the regional countries agree to do jointly, it is incumbent upon each country to ensure that its legal and fiscal regulatory framework is clear enough for ordinary people to understand.

The current tendency to hide the terms of contracts signed between the government and mining companies should be discouraged because the public must be kept well informed of everything that is done on its behalf.

An open and transparent process would also reduce the level of suspicion between the local people and the national government.

The countries should also ensure that the rates at which they fix the royalties and licensing fees are competitive globally. Policymakers should not lose sight of the fact that the sector is capital-intensive and that the world has a limited number of companies with the appetite and huge amounts of money needed for investment.

The key is to craft a process that ensures everyone wins — or at least believes so.