Africa: China mining firms are not too different from U.S. and European ones

Yao Graham, from TWN-A. (Photo: Reflection Group)

Sources: Third World Network, Newsday, Zimbabwe Broadcasting Corporation

African governments should be wary of the mining contracts they sign, as those agreements might not help them to get rid of Occidental powers but facilitate the Chinese exploitation, experts said this week at a conference organised by Third World Network-Africa (TWN-A, focal point of Social Watch) and the Zimbabwe Environmental Law Association (ZELA) in Harare.

The continent must also harmonise its tax regimes, so that the countries can benefit from their mineral wealth, said participants at the annual strategy meeting of the African Initiative on Mining, Environment and Society.

“We need a complete overhaul of the whole fiscal regime for the continent,” said Yao Graham, from TWN-A. China had become not only a workshop of the world, but because of the size of its economy and population it’s also a huge consumer of minerals, he added.

“These Chinese investors represent both an opportunity and a threat in the sense that their monopoly cannot be challenged. If African countries organise themselves, they can get maximum benefit from their minerals,” said Graham. 

Zimbabwe Environmental Lawyers Association Director, Mthuso Dhliwayo, stressed the need to harmonise Africa’s tax regimes to ward off unnecessary competition for foreign direct investment.

“There is an unhealthy competition and it results in crazy incentives. There is a need for a uniform regime,” he said. In the 2011 budget, the government of Zimbabwe increased royalties for gold from 4% to 4,5% while diamonds royalties went up from 10 to 15% figures, which experts say are too low.

“The Chinese are known as the new entrants in the extractive sector, but traditionally we had Europeans and Americans playing a critical role in mining sectors in Africa,” said Dliwayo. “The entry by the Chinese should be seen as an advantage that we should use to negotiate better deals and come up with fiscal regimes that will enable us to derive benefits,” he added.

“The Chinese are taking raw materials from our contries, the same model that used U.S. and European ones. China might not really be different from Europe and African countries need to come up with new developmental methods that will get value for the minerals,” Dliwayo said.

Parliamentary Portfolio Committee on Mines and Energy Chairman, Cde Edward Chindori-Chininga, said tax incentives is one major problem facing African countries as governments give the companies special dispensations and subsidies, which narrow the revenue base.

“We have governments that are too lenient and give incentives, which are sometimes too high,” said Cde Chindori-Chininga.