China Molybdenum finding against the Democratic Republic of the Congo’s Mining Code, South Africa discerning prescribing pension assets for government-priority development projects, and the South Gauteng High Court effectively finding against the Lusaka High Court are actions from August 23 that may emerge to become significant factors impacting geomarket developments in Africa.
Democratic Republic of the Congo: China Molybdenum cited the government’s Mining Code as a significant contributor to the underperformance of its Tenke Fungurume operations.
Significance: Adverse fiscal and regulatory concerns described by China Molybdenum are the second finding in recent weeks by significant foreign mining operators in the Congo, following Glencore’s decision to place its Mutanda mine on care and maintenance from the end of 2019. To be sure there are additional factors undermining the economic viability of copper and cobalt mining in the Congo, notably including the steep fall in global pricing for these commodities. Reducing mining output is one bid to boost prices. As for the Congo government amending its Mining Code legislation, that President Félix Tshisekedi has yet to form a government – six months following his inauguration – and when he does it will be heavily influenced by members of the Joseph Kabila-allied Common Front for Congo who revised the current Mining Code in 2018, the outlook for a significant adjustment to the country’s legislative and regulatory requirements is less than positive.
South Africa: President Cyril Ramaphosa called for discernment to prescribe the financing of government-priority development and infrastructure projects through public sector pension fund assets.
Significance: The South African president is trying to balance several imperatives at once. The South African economy is experiencing worriedly low rates of growth (annual growth for 2019 will likely fall under 1%) and high unemployment (29%), which are politically untenable not only for the first-term president but for the ruling African National Congress. The Ramaphosa-led government is also under fiscal duress with public debt levels approaching 60% of gross domestic product while also facing very significant liability obligations for state-owned companies such as Eskom and new spending initiatives such as the National Health Insurance program. Requiring that the Public Investment Corporation set aside a specified portion of its pension assets would satisfy a political requirement of funding national priority economic development projects while at the same time avoiding incurring additional debt. The political risk includes the perception of a steady expansion of government interference in economic policymaking (and follows efforts to nationalize the South African Reserve Bank, and the expropriation of land without compensation) in addition to the economic risk of achieving underperforming returns on invested assets.
Zambia: South Africa’s South Gauteng High Court ruled it holds jurisdiction for arbitration to resolve the Konkola Copper Mines partnership the Zambian government wants to dissolve.
Significance: The ruling is a setback for the Zambian government whose judiciary on August 7 had ruled the petition to dissolve Konkola Copper Mines was not appropriate for arbitration. The Lusaka High Court is still scheduled to hear from August 27 the petition brought by Zambia Consolidated Copper Mines-Investment Holdings to effectively remove Vedanta Resources from operating Konkola Copper Mines. The legal entanglement is a diplomatic challenge for the Zambian government of President Edgar Lungu. It is one thing for the Zambian president, who holds an undeclared interest in running for reelection in 2021, to politicize his nation’s economic imperatives when non-African foreign economic actors are perceived to be compromising the government’s fiscal or regulatory requirements. But the South African government is a crucial stakeholder the Zambian government cannot breach relations with.
Other items of note:
-The Mauritanian government thanked the Burkina Faso government for releasing from Burkinabé prison three Mauritanian nationals.
-The board of directors of the U.S. Export Import Bank will vote to approve $5 billion in credit guarantees for the engineering, development, and construction of the Anadarko-led liquified natural gas plant in northern Mozambique.
-Ossufo Momade of the Mozambique National Resistance opposition party is leading several days of political rallies in the country’s Cabo Delgado and Niassa provinces.
-Zimbabwean President Emmerson Mnangagwa met with a delegation from the Development Research Center of the Chinese State Advisory Council.