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Page 1 of 9 22Nd May 2020 VALLIS REPORT RESOURCE NATIONALISM in AFRICA CASE STUDY EXAMPLES: DEMOCRATIC REPUBLIC of CONGO, ZAMBIA

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Page 1 of 9 22Nd May 2020 VALLIS REPORT RESOURCE NATIONALISM in AFRICA CASE STUDY EXAMPLES: DEMOCRATIC REPUBLIC of CONGO, ZAMBIA 22nd May 2020 VALLIS REPORT RESOURCE NATIONALISM IN AFRICA CASE STUDY EXAMPLES: DEMOCRATIC REPUBLIC OF CONGO, ZAMBIA AND TANZANIA Page 1 of 9 Vallis Group Limited, Vallis House, 57 Vallis Road, Frome, Somerset, BA11 3EG, England +44-(0)-1373-453-970 Incorporated in England: Company Registration No. 04524501 | www.vallis-group.com | [email protected] WHAT IS RESOURCE NATIONALISM? The previous errors made by some governments is that they have continued to offer excessively “Resource nationalism is the tendency of people generous terms to companies believing that such and governments to assert control over natural incentives are necessary to attract Foreign Direct resources located on their territory.”1 Investments (FDI). It is an economic policy that relies on state Therefore when governments abruptly or ownership or control of natural resources located unilaterally revise existing agreements or break on national territory to advance political, social or with established conventions, complaints by industrial objectives. affected foreign companies will be inevitable and legitimate. This policy states that resources belong to the people and that state employment are the best TRANSPARENCY WITHIN RESOURCE managers of resources against privatization. NATIONALISM Consequently, resource nationalism conflicts with the interests of multinational corporations. The Extractive Industries Transparency Initiative (EITI) is the global standard to promote WHY WOULD COUNTRIES TURN TO the open and accountable management of oil, gas RESOURCE NATIONALISM? and mineral resources. “Resource nationalism tends to peak exceptionally The initiative is guided by the belief that a country’s when there is a perception that commodity prices natural resources belong to its citizens and they are high and countries feel they are not getting the have established a global standard to promote the benefit,” said Claude Baissac, the head of open and accountable management of oil, gas and Johannesburg-based risk consultancy Eunomix mineral resources. Business & Economics Ltd.2 The EITI Standard requires information along The term has generally described initiatives by host the extractive industry value chain from the point of governments to secure greater financial, extraction, to how the revenue makes its way regulatory, and sometimes operational control over through the government, to how it benefits the extractive activities. public. Some may argue that governments often use the discourse of resource nationalism to conceal their This includes how licenses and contracts are failures. Nationalisation policies are portrayed as allocated and registered, who are the beneficial benefitting the masses when, in reality, the wealth owners of those operations, what are the fiscal and accrued continues to be concentrated in the hands legal arrangements, how much is produced, how of elites. much is paid, where are those revenues allocated, and what is the contribution to the economy, To ensure this does not happen, interests should including employment. be balanced with risk-sharing requires sacrifices from multiple stakeholders. In cases where THE DEMOCRATIC REPUBLIC OF CONGO corporate and state interests diverge, more (DRC) practical approaches can provide solutions. Félix Antoine Tshisekedi HOW ARE RELATIONSHIPS WITH FOREIGN Tshilombo (born 13th COMPANIES BEING AFFECTED? June 1963) is the President of the Democratic Republic In the mining industry for example, capacity deficit of the Congo since 25th among African mineral producers has complicated January 2019. relations with foreign companies. Resolving tensions created by resource nationalism can only He is the leader of the Union be achieved by understanding how these elements for Democracy and Social are interlinked. Progress (UDPS), the 1 “Is Resource Nationalism on the Rise:Evidence from Service 2 “A Copper Mining Lesson from Zambia: History Repeats Itself” Contracts in Eight Countries” – Abbas Ghandi and CY Cynthia – Antony Sguazzin and Matthew Hill, 23rd May 2019, Lin, University of California, September 3rd 2014. https://www.bloomberg.com/news/articles/2019-05-23/a- copper-mining-lesson-from-zambia-history-repeats-itself Page 2 of 9 Vallis Group Limited, Vallis House, 57 Vallis Road, Frome, Somerset, BA11 3EG, England +44-(0)-1373-453-970 Incorporated in England: Company Registration No. 04524501 | www.vallis-group.com | [email protected] oldest and largest party of the Democratic Republic programmes are expected to support communities of Congo, succeeding his late father Étienne that live around strictly protected areas. Sadly few Tshisekedi in that role, a three-time Prime Minister of these programmes have had success so far. of Zaire and opposition leader during the reign of Figure 1 below shows deforestation for rice Mobutu Sese Seko. planting. WHAT ARE THE DRC’S PRINCIPAL NATURAL RESOURCES? The Democratic Republic of the Congo is one of the richest countries in the world in terms of natural resources. It sits on an estimated $24 trillion worth of natural resources, including 3.2 trillion cubic feet of natural gas, large deposits of iron ore, platinum, diamonds, gold and uranium, as well as 106,270 square kilometers of arable land. Real GDP growth dropped to 4.3% in 2019 from 5.8% in 2018 due to a slowdown in extractives, the economy’s main driver despite a fall in the price of some raw materials (copper and cobalt). Agriculture has suffered from low productivity Figure 1: Forest cleared for rice planting in central DRC. while energy shortages have hindered Photo by John. C. Cannon. industrialization efforts. Growth has been driven The Mining Code establishes that the state owns by domestic demand, particularly private these assets. Due to the potential high revenue investment and public consumption. generated from licensing, exploitation and taxation, the exploration of mineral resources supersedes The expected adoption of the 2019–23 Strategic any other land use. Development Plan aims to give national priorities more visibility. Thanks to the country’s low debt A growing population coupled with intense (13.7% of GDP for external debt and 6.5% for international competition for natural assets to fuel domestic debt in 2018), new external concessional domestic and foreign economic growth is putting loans can be secured. pressure on forests in the DRC. The economy remains dependent on mining WHAT ARE THE DANGERS TO THE DRC’S products, which makes it vulnerable to global price RESOURCES? fluctuations. The DRC has introduced policy and legislation to strengthen governance, use and Future deforestation may be driven largely by the control of forestry, mining and agriculture. expansion of palm oil plantations into forest regions. Virtually all of the dense humid (high The country also contains the world’s second carbon) forests of the DRC are on soils and in largest tropical forest, which can make a significant climatic conditions that are suitable for palm oil contribution to the mitigation of climate change, production. Many agriculture investment therefore adds another dimension of challenge to companies from Asia, including Chinese firms, pay government, civil society and development about $300 per ha for forest lands that will be agencies alike. transformed into palm plantations. Access and distribution of benefits from Other activities such as industrial mining continue investments in land, forests and other key natural to threaten the DRC’s forests and biodiversity, due assets are fundamental for growing the wealth and to the overlap between the mineral resources, stability of the population of the DRC. tropical forests, protected areas and a lack of adequate environmental and social safeguards. WHAT HAVE BEEN THE INITIATIVES TAKEN Figure 2 is the largest copper mine in the DRC. TO PROTECT ITS RESOURCES? A number of codes have been put in place to protect and control resources from over exploitation. The Forest Code provides for benefit sharing with communities living around logging (and conservation) concessions, alternative livelihoods Page 3 of 9 market in the world. Figure 3 is an example of the presence of Chinese future investment in the DRC. Figure 2: An open pit at the Tenke Fungurume mine. Freeport-McMoRan Inc. The largest copper mine in the Democratic Republic of Congo. (Photo: Johnny Hogg / Reuters) Figure 3: Chinese state-owned enterprises are making deep, long-term investments in Congo's extractive industries. Image Poor governance of natural resources means that by Jacob Kushner. Congo, 2013. the DRC exports its riches thereby aiding the growth of economies elsewhere while its own WHAT DOES THE FUTURE LOOK LIKE FOR natural resources dependent population continue THE DRC? to experience high levels of poverty and internal conflict. In his first address to the UN General Assembly, in September 2019, Félix Tshisekedi underlined the The DRC is short of qualified evaluators despite its need to reform the primary body charged with immense mineral wealth. As such, administrative maintaining international peace and security. He fiat and misguided legislations integrated in the added the DRC’s commitment towards the SDGs language of resource nationalism become the in achieving a more just and equitable world. norm as national regulators attempt to rescue back the initiative. Mr. Tshisekedi emphasised that, while African countries are the “pivot of sustainability”, they also China primarily wants more access to the long for development that protects the natural enormous copper and cobalt
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