Loaded for Bear: Canada is making demands of Anglo that would be disparaged in Africa

Anglo American is moving its HQ to Vancouver because Canadian Prime Minister Mark Carney laid that down as a condition for approval of its merger with Canada’s Teck Resources, according to a report in The Globe and Mail newspaper. 

If this is indeed true, then it is a classic case of “resource nationalism” — a term that is highly contested and more typically applied when a developing country tries to change its mining code or tax policies. 

In such cases, the mining industry typically screams blue murder about shifting goal posts and a deteriorating investment climate. And there are often solid grounds for such complaints. 

The decision to invest capital in a mining jurisdiction is not taken lightly, and if it involves the construction of a new mine, the timelines can stretch into the decades. The mantra from the industry is that it needs policy certainty to make the long-term and large-scale capital commitments that mining requires. 

In South Africa, for example, the mining sector has many issues with the draft Mineral Resource Development Bill, and is in talks with the government about it. 

Read more: SA mining sector burnishes transformation credentials as battle looms over draft bill 

In some situations there have been transparent shakedowns by populist governments. A few years ago, Tanzania slapped Acacia Mining Plc with a $190-billion tax bill — an amount that was more than 2.5 times the size of the East African country’s GDP. Canada’s Barrick Gold, which held a majority stake in Acacia, eventually paid $300-million to reach a settlement with the government. 

But there are times when African governments have also changed tax codes and the like in an understandable bid to extract more revenue from extractive industries. That can impact profits, but many developing economies have seen scant benefit from their natural endowments, giving rise to concepts such as the “Resource Curse”. 

In the 1960s and 1970s, resource nationalism in Africa often led to nationalisation, as was the case in Zambia — with results that were generally seen as disastrous. Zambia launched a second wave of partial nationalisation in recent years amid disputes with companies such as Vedanta Resources. 

Much of the discussion around resource nationalism has focused on developing economies and is almost always portrayed in a negative light. But it is also a “First World Thing”, with Carney’s reported ultimatum to Anglo a prime example. 

“You want to merge with a Canadian copper producer? Then move your HQ to Canada or it’s not going to happen,” is what it boils down to. 

Imagine what would happen if Mineral and Petroleum Resources Minister Gwede Mantashe or the Competition Commission made such a demand from a foreign company that wanted to merge with a South African miner? Or if Zambia made that a condition for a deal? 

There would be an outcry and lots of critical commentary about resource nationalism and heavy-handed state intervention. But I don’t think there will be quite the same reaction to Carney’s reported demand to Anglo — which reeks of a double standard. 

“If an African government did this, people would be saying ‘This is why you can’t invest in these countries.’ It’s a case of our legitimate protection of national interests, on one hand, and your unjust interference with foreign investors on the other,” Duncan Money, a mining historian, told me. 

‘Net benefit’

And Canada’s Industry Minister Mélanie Joly said this week that the two companies would have to show that the deal would deliver “a net benefit” to Canada before it would be approved — citing  “our national security concerns and objectives, including economic security”.

Again, imagine what would happen if an African government imposed such conditions around a mining deal, citing things like national and economic security?  

No one is going to claim that Canada is an economy where you can’t invest. Indeed, it is widely regarded as one of the best mining jurisdictions in the world in which to do business. 

And as a highly advanced economy, some outsiders might ask where this resource nationalism springs from. But it has long been baked into the DNA of Canada’s political economy, which historically was built from natural resources: first from fur, fishing, forestry and farming, and then mining and hydrocarbons.

Canada has natural wealth galore and the government wants to see national benefits from it. And Canadian mining companies have operations around the world, which also raises a question similar to those posed above: How would one react to such demands from an African government? 

Perhaps when the spectre of resource nationalism is raised in boardrooms, in the case of Canadian mining companies, the executives should look in the mirror. DM