Some 13 months ago I sat inside one of the hi-tech seminar rooms at the Kofi Annan Centre of Excellence in ICT in Accra, Ghana listening to an expert on matters extractive: oil, gas, minerals. The guy had worked in government and in industry, holding high-level positions in some of the world’s leading oil and gas companies. He wowed the room, maybe because most of us in there were neither business leaders in the extractive sector nor geoscientists. His message was plain: governments have leverage over companies. It need not matter that some of these companies are worth more than the known wealth of many countries in which they operate, or want to operate.
This is why it was interesting – for someone who has followed the goings-on in the emerging oil and gas sector in this country for the last 18 months – to watch as the Ugandan government went toe-to-toe with the oil companies. Seasoned watchers of this stuff say Uganda won, even if just. Mr Taimour Lay, for one, thinks so.
Mr Lay, by the way, is one man some of the grandees of oil and gas in Uganda would love to bury alive for his constant nosing into the sector here. Following the previous week’s signing of some agreements between the government and Tullow, Mr Lay wrote in the a local newspaper on Thursday thus: “Serious times … and many concerns remain … But amid the anxieties, there is perhaps some small cause for hope. State House and the wider political class asserted themselves over the companies and won some ground, at least when it comes to the question of revenue … First, Museveni fought for, and got, the space to levy a windfall tax on the companies at times of high oil price.” That was not the case in the previous production sharing agreements.
Coincidentally, windfall tax, and other extractive sector taxes, is on the mind of many African governments. That was the message, maybe one of the messages, coming out of a mining kacoke madit in Cape Town this past week.
Reuters captured things neatly. “On top of all of this, a common complaint this week in Cape Town was the surge of resource nationalism across the continent, as governments aim to extract more revenue from an industry that has failed to translate mineral wealth into broad prosperity.
“Africa’s top copper producer Zambia may bring back a mining windfall tax if copper prices hit $10,000 per tonne…
“Zambia also recently doubled its copper royalty to six percent and the mines minister [said] that government would audit all the country’s mining houses as it attempts to claw back as much as $1 billion in back taxes it estimates it is owed.
“Ghana, Africa’s second-largest gold mining state, plans to raise the corporate mining tax to 35 per cent from 25 per cent and introduce a 10 per cent windfall tax as well to boost the state share of revenues…
“Ghana has also set up a committee to review stability investment agreements with mining houses.
“And while South Africa has buried a drive to make nationalisation government policy, a study commissioned by the ruling African National Congress calls for what would effectively amount to a 50 per cent super tax on earnings.”
African governments are asserting themselves, very justifiably so even if only at long last, against the super-oiled multinationals. It is a contest between sovereignty and hard cash.
Sovereignty is just waking up to the fact it has power, but power that must be exercised as to not chase away hard cash. Sovereignty alone does not put food on the table as it were. But all this stuff makes a certain African have hope. Our governments are beginning to have positive influence on one another, a very good thing indeed.
While we are at it, we should note that the next frontier on extractives in Uganda is mining. The results from the recently completed multi-year minerals mapping study of the country are impressive. At this rate, it will become criminal to be poor in this country.
By: Bernard Tabaire
Mr Tabaire is a media consultant with the African Centre for Media Excellence.