Build, pillage, then privatise: a short history of mine nationalisation in Africa.

With the ANC Youth league not particularly happy with comments by SA mines minister Susan Shabangu that the nationalisation of South Africa's mines will not happen "in her lifetime" a look at some of the other attempts at such policies is probably overdue

JOHANNESBURG - 

A good number of enquiries have landed up in my bunker, mainly from offshore, about why the ANC Youth League continues to crank out loose gimcrack talk about nationalising South Africa's mines. This week, the mines minister, Susan Shabangu, said that nationalisation of mines would "not happen in her lifetime".

This generated foul responses from the ANC Youth League, which called her a liar, and the Young Communist League, which likened her remarks to "a declaration of war". These are peaceful times, all right; note that Shabangu ranks as a fairly senior minister within the structures of the ANC, in power in South Africa since 1994.

A recent detailed statement from the ANC Youth League on its intentions around nationalisation is packed with schlock-meister gobbledygook; one choice example is that the policy "will involve expropriation with or without compensation". If anyone alive, or dead, can translate that into simple English, please be in touch. All this naturally raises questions about what history has taught, if anything, about nationalisation of mines.

It would be a luxury to extend such an enquiry globally; a focus on Africa may stem the appetite for now. One of the high points of the policy followed the independence on 30 June 1960 of what is now known as the Democratic Republic of the Congo, a country the size of Western Europe. After five years of extreme instability, a new president that would reign for nearly 32 years emerged in the form of Mobutu Sese Seko Koko Ngbendu wa za Banga (the all-powerful warrior who, because of his endurance and inflexible will to win, will go from conquest to conquest, leaving fire in his wake).

Around sixty years ago, this was the richest country in Africa, reflecting its nominal status as the world's "Saudi Arabia of mining". In no time at all, Mobutu set about looting the country's mines; his main targets were the copper-cobalt mines down in Katanga Province, which borders on Zambia. The mines, and infrastructure - including railway lines running in many directions, and hydroelectric facilities - were built by Belgian colonizers, who were world class engineers and managers, and appalling in most other areas.

The mines were well capitalised and took a long time to kill off. The country's copper output peaked at more than 500,000 tons in 1975, before starting its precipitous fall to 200,000 tons at the beginning of the 1990s, and less than 40,000 tons a year by the end of Mobutu's reign in 1997. Two civil wars followed, where an estimated 5m people lost their lives. Across the border, Zambia had gained independence on 24 October 1964; it nationalised its mines, but with some compensation. Copper output started an immediate decline in another African country, rich and prosperous at independence.

Signs of privatisation were seen in the late 1990s, when in 1996 Canada- and London-listed First Quantum acquired Zambia's ruined Bwana Mkubwa, worked on and off since discovery in 1902, as an operation that would exhaust its own ore reserves by mid-2002.

With the possible title of new era leading African copperbelt pioneer, First Quantum started mining at Lonshi, just over the DRC border, in August 2001; a 36km laterite road was built to haul ore from Lonshi to Bwana Mkubwa, near Ndola. The Lonshi orebody was mined out during 2008, by which time First Quantum had graduated into a serious miner.

First Quantum's group copper production has grown from 29,500 tonnes in 2003, all from Bwana/Lonshi, to 2009's expected 380,000 tonnes. Group gold production, which started out at a modest 14,300 ounces in 2005, is set to top 200,000 ounces for 2009. The group owns and operates 80% of the Kansanshi copper-gold mine in Zambia ("a foundation asset"), 95% of Frontier in the DRC, and 80% of the Guelb Moghrein gold-copper mine in Mauritania. From the wreckage of nationalisation in DRC and Zambia, the scents of success and prosperity are creeping back.

The re-privatisation of the African copperbelt has seen billions of dollars of private sector investment pour in. Freeport-McMoRan, the world's biggest publicly traded copper digger, early last year commissioned the first phase of the Tenke Fungurume mine in the DRC at a cost of USD 1.8bn. Another listed company, Lundin, holds 24.8% of the mine, and DRC parastatal Gécamines (La Générale des Carrières et des Mines) the balance of 17.5%. If the mine proceeds through its planned phases, it would one day be producing more than 500,000 tonnes a year of copper; it already also ranks as one of the world's biggest cobalt producers.

But this is not as easy as it sounds. This week First Quantum announced commencement of international arbitration by First Quantum and its partners in Kolwezi Tailings, under the facilities of the International Chamber of Commerce, International Court of Arbitration, in Paris, against the government of the DRC, and Gécamines.

First Quantum, a global Top 10 copper miner, may be the biggest miner on the central African copperbelt, and insistent that it is compliant with the DRC's Mining Code, but in a September 2009 announcement, it confirmed suspension of work at the 65%-complete USD 600m Kolwezi tailings project, after it was shuttered by government agents. Without going into the grimy details of what's behind this, suffice to say that the DRC government is not anywhere near playing its part.

Back in the public domain, Katanga Province's de-industrialisation remains in place. Decades ago, the Belgians built a vast, nearly unimaginable, network of railroads from Katanga junction, fanning out to ports at Lobito (Angola) (also known as the Benguela line), Dar es Salaam (Tanzania), Beira (Mozambique), and south to Johannesburg and its ports. Today, the lines, which would cost billions upon billions of dollars to build anew, remain inoperable.

Devastation is a light word. Anyone who visits, as a sampling, the brownfields Kamoto and KOV pits, under refurbishment by Katanga Mining, knows the feeling of astonishment as to how atavistic policies of looting, conducted for decades, can produce one of the world's biggest junkyards. The men and their machines were consigned to the sewage seas of history, but now the men, showered and fresh and in crisp overalls, are back, along with their shiny new machines. The sewage is where it belongs.

With the private sector serially back to what it does best, the DRC practices democracy, nominally at least, but even so, "vast humanitarian problems remain", according to MONUC, the UN mission in the country. Perhaps the most alarming statement is that 45,000 people die monthly, "1,500 each day, half of them under the age of five - mostly from preventable diseases and dirty water". That's about half a million dead people a year, in a country where Mobutu used to fly in from Europe jetliners filled with his favourite soda pops.

In Zambia, the experience of privatisation has fared quite well. The policy notched up exceptional results in Ghana, which for some years has ranked as the No 2 gold producer on the continent. In 1994, Ashanti Goldfields (which subsequently merged with AngloGold Ashanti) went public by way of an IPO, listing its stock on the London Stock Exchange, as well as in Ghana.

There was a measure of déjà vu: Ashanti Goldfields had first been listed on the London Stock Exchange in 1897. In 1968, Lonrho, listed in London and Johannesburg, acquired Ashanti Goldfields and took the entity private. In 1972, the government of Ghana seized a 55% stake in the main Ashanti Goldfields asset, Obuasi, when a coup d'état led by Colonel Ignatius Acheampong toppled KA Busia's democratically elected regime.

The state nationalised 55% of all mining companies, but Lonrho retained an equity stake in Obuasi and remained, by and large, in control of day-to-day operations. At the time of the 1994 re-listing in London, the government privatised Ashanti Goldfields by selling 25% cent of its holding, reducing its equity stake to 30%. By the early 1990s, all other gold mines in Ghana had been comprehensively run into the ground. Abject ruin littered the landscape; even the rubber plantations stood like tall, sad tombstones under empty skies.

In 1993, Gold Fields, one of the world's major gold diggers, became the new Tarkwa operator. For a relative pittance - less than USD 10m - the Johannesburg-based company acquired 71.1% in Tarkwa, which was producing mere handfuls of gold a year. Today, the mine, one of the world's biggest open cut gold ventures, produces a sustainable 750,000 ounces of gold a year, generating more than USD 800m revenues at current gold prices. And so it goes.

Today, focusing on gold alone, there are nearly 100 listed gold companies with operations, ranging from early exploration to full production, scattered across Africa. Those focused heavily, or solely, on South Africa, where gold has been in commercial production since 1884, now attract the least interest among investors. South African miners will literally take any chance available to diversify outside the country.

Some mining companies that have done well elsewhere on the continent continue to rewrite history. First Quantum, which also produces gold, as noted, has just acquired London-listed Kiwara for USD 260m, for its prospecting licences in Zambia. But First Quantum is also going offshore. On 30 November, it announced the go ahead for its Kevitsa, Finland project, with a capital cost of USD 400m. On 8 December First Quantum announced the USD 340m acquisition of Ravensthorpe, Australia from BHP Billiton.

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Nationalisation of Mines in Africa Congratulations to Mineweb and especially Barry Sergeant on an excellent and well-written article. I would have loved to read more about this, especially his take on the nationalisation of other mines, apart from the gold ones mentioned. Well . .more researched and very informative. Could you consider doing a sequel to this please? . .less by Heather on February 04 2010, 07:16 Find this comment inappropriate? Report it

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