Items of Interest: June 4

The following items from June 4 may emerge to become significant factors impacting geomarket developments in Africa:

Democratic Republic of the Congo: Albert Yuma was reappointed chairman of the board of the state-owned Gecamines mining company.

Significance: Yuma, who is also the chief executive of the Federation of Enterprises of the Congo, is an architect and advocate of the country’s Mining Code that was revised in 2018 by the Joseph Kabila administration. The reappointment of Yuma to Gecamines means that the Tshisekedi administration intends to assert the state-owned mining enterprise as a principal stakeholder alongside foreign mining companies in the country’s copper and cobalt mining sectors. The Tshisekedi administration will remain open to dialogue with foreign mining companies active in the Congo, to include Glencore, Barrick Gold, and Ivanhoe Mines, but there will not likely be a significant amendment to the Mining Code of 2018 that introduced higher tax and royalty rates in addition to removing contractual provisions seen as disproportionally favoring mining interests at the expense of the Congo state.   

South Africa: The economy contracted 3.2% in the first quarter, and the national executive committee of the ruling African National Congress called for decisive action on unemployment, poverty, and inequality to include expanding the mandate of the South African Reserve Bank beyond concerns for inflation stability. 

Significance: The contraction in gross domestic product was informed by nation-wide power outages that occurred during the first quarter by the state-owned power utility company Eskom, contributing to declines in agriculture, construction, manufacturing, and mining sectors. Restructuring Eskom so as to restore the utility company to dependable power generation is a critical task of the recently-reelected Cyril Ramaphosa-led African National Congress, and competing demands on scarce treasury resources will mean the South African government will have to implement structural reforms at other state-owned enterprises such as that seen at South African Airways. Adjusting the mandate of the South African Reserve Bank may require its nationalization, but given concerns for politically unacceptable high levels of unemployment (measuring 27% on a narrow definition basis), the Ramaphosa administration must also yield to broader socio-political imperatives of the ruling party that by convention has asserted a greater role for the state in the national economy.

Zambia: President Edgar Lungu reiterated the government’s resolve and determination to effect the liquidation of the Vedanta Resources-operated Konkola Copper Mines.

Significance: The court hearing into the provisional liquidation of Konkola Copper Mines that was scheduled for June 4 was adjourned to June 11. Vedanta Resources has argued that its concerns for a lawful handling of the Konkola Copper Mines liquidation have not been heard at all, setting the stage for a lengthy legal case to resolve the copper mining dispute. The Lungu administration is not likely to back down on the original legislative trigger to the dispute, that being the introduction of a new minerals tax regime. Despite the tenuous macroeconomic position of the Zambian government, which include concerns for high debt levels, low sovereign reserves, and lowered copper mining output, the Lungu-led Patriotic Front enjoys domestic political support to confront Vedanta Resources over its operations in the country. While other foreign mining companies in Zambia, to include Barrick Gold and First Quantum Minerals, have expressed concerns for the government’s new minerals tax regime, these concerns have not led to any suspension of copper mining operations.   

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