Victory for Senegalese government in mine case

The company was awarded the contract for construction in 2007 but after four years the project has yet to be executed. In September 2013, ArcelorMittal issued a statement citing an economic environment and a “less attractive/lower quality” asset as reasons for delays. “The verdict takes substantial pressure off Senegal, which had been facing severe damage to its reputation as one of the more investor-friendly economies in the region,” Ronak Gopaldas, Country Risk Analyst for Rand Merchant Bank in South Africa, told Commercial Risk Africa. “Particularly at a time when the country is drawing up a new mining code.” “Investors should guard against slipping into the narrative which persistently views governments as villains and private companies as victims.”hideOther analysts say the contract appeared to not be good value for money for Senegal. mining reviewed The ArcelorMittal case comes at the same time as that of a similar concern in Guinea, where the licence to develop the Simandou iron ore mine had been up in the air for six years. The licence had initially been awarded to British-Australian mining giant Rio Tinto but had been withdrawn and instead given to BSG Resources (BSGR), owned by Israeli billionaire Beny Steinmetz, and Brazilian company Vale. Some back and forth ensued and eventually, following the advice of a government mining review panel, the contract with BSGR and Vale was cancelled. Government said the licence was obtained fraudulently. In June, the US$20bn permit was reassigned to Rio Tinto, which had previously held the permit to develop the mine as part of a larger infrastructure project since 1997. The concession is one of the most lucrative iron ore deposits in the world. Across in Ghana, things have gone the other way after plans to build a US$1bn fertiliser plant were instead dropped by the company, India’s Rashtriya Chemicals and Fertilizers (RCF), in June. RCF said the Ghanaian government decided to concentrate on using gas for power production as opposed to urea production, though government is yet to confirm this. The company has backed out of the deal at a time when the country faces major economic instability, with budget deficit of 10.5% of gross domestic product (GDP), current account deficit of 13.7% of GDP, 14.8% inflation and a large import bill. A boost in its internally generated funds is also much needed. Mr Gopaldas suggested the government should restore macroeconomic stability and address the short-term economic imbalances in order to maintain an investment climate conducive to sustained long-term projects. The government had, hitherto, proudly lauded Ghana as an attractive investment destination and is still keen to portray it as such, despite the realities. The country’s power supply, crucial to manufacturing, has been erratic for the past year and fuel shortages have ensued across parts of the country. Observing a growing wave of resource nationalism across the continent, Mr Gopaldas said African states are now assuming the global take of passive resource nationalism, where governments aim to hold a greater share of mining company profits by changing regulation, taxation and contractual terms rather than wholesale expropriation. “While governments seek a wider distribution of the benefits derived from their natural resources,” he said, “it seems this is being done with the recognition that it is important to be able to attract and retain investment.” This position appears to ring true at least in the cases in Senegal and Guinea. In relation to Senegal, Mr Gopaldas said: “The ruling does not mark a major change in government policy with regard to the mining sector, nor is it a sign that the legal environment has been compromised. Rather it indicates that government is taking a more aggressive stance with regard to companies that are found to be non-compliant and thereby setting a clear precedent for future dealings.” Speaking in London at the end of June, Ghana’s High Commissioner to the UK, Vincent Smith said the government had just conducted a mid-term review and believe it needed ‘to go back to basics’. He said it was important to attract investment into manufacturing and agriculture but also into the power sector. “Without a reliable power supply, it is very difficult for people to invest long- term in any industry. “We recognise that going back to basics means creating an enabling environment for investment to be more comfortable.” Smith also stressed the need for investors to be able to invest without risk of political instability. He said the government recognised the need for financial stability and a steady foreign exchange. It was time, he said, to arrest the currency depreciation and “to encourage people still looking at Ghana to be positive. We are aware of what we need to do,” he stressed.

Victory for Senegalese government in mine case

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