tag:theconversation.com,2011:/ca/topics/resource-nationalism-4892/articlesResource nationalism – The Conversation2017-12-10T11:27:10Ztag:theconversation.com,2011:article/888122017-12-10T11:27:10Z2017-12-10T11:27:10ZTanzania at 56: echoes of the best and worst of Nyerere under Magufuli<figure><img src="https://images.theconversation.com/files/198290/original/file-20171208-27677-lh0kxh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Julius Nyerere (second right), his successor Ali Hassan Mwinyi (right) and Mwinyi's successor Benjamin Mkapa (left) host South Africa's Walter Sisulu in January 1990. </span> <span class="attribution"><span class="source">Reuters/File</span></span></figcaption></figure><p>The Tanzanian mainland is marking the 56th anniversary of independence from British rule. The mainland unified with Zanzibar in 1964 to create the current nation-state under Mwalimu Julius Nyerere who is often invoked as <a href="https://www.reuters.com/article/us-tanzania-nyerere-factbox/factbox-facts-on-tanzanias-father-of-nation-nyerere-idUSL0245500920070302">“the father of the nation”</a>. </p>
<p>The new nation-state’s economic, social and political path was paved in 1967, when Nyerere proclaimed the <a href="https://www.marxists.org/subject/africa/nyerere/1967/arusha-declaration.htm">Arusha Declaration</a>. This led to the nationalisation of key industries and the total reorganisation of rural life. Communal farming and forced resettlement were applied, justified on the basis of attempting to bring about self-reliance.</p>
<p>Referred to as <em>ujamaa</em>, the socialist-inspired policies dominated the politics, society, and economy of Tanzania until Nyerere’s retirement in 1985. </p>
<p>Ujamaa policies are much debated. Generally, they are seen as something of a <a href="http://www.jstor.org/stable/162030?casa_token=uQZJYRqt6XMAAAAA:duwdyhJrm6qORVJ-E4jX0hhqEHvHPR4Q0gF1qUbFwpXftproRXdG1SITpo-KgRlY4UxSdjCKv0NCYwDhJxHIjnQY7Aqu5H8MvXAsi7VQyI3Je3kp44NT">social success but as economically ruinous</a>. By emphasising <a href="https://www.cambridge.org/core/books/race-nation-and-citizenship-in-postcolonial-africa/5DC910F8042E6AC41BAD0726563A7409">Tanzanian citizenship</a>, ujamaa created a sense of unity and effectively <a href="https://www.abebooks.com/book-search/isbn/1555875300/">removed the kind of ethnic politics</a> that dominates Kenya, for example. But it short-circuited the economy and saw <a href="http://onlinelibrary.wiley.com/doi/10.1111/j.1467-7679.1975.tb00439.x/pdf">food production collapse</a>.</p>
<p>Nyerere’s handpicked successor Ali Hassan Mwinyi Tanzania practically reversed all the <a href="li%20Hassan%20Mwinyi%20Tanzania%20practically%20reversed%20all%20the%20earlier%20policies">earlier policies</a>. His government moved from one of the most influential and vehement defenders of African Socialism to one of the most neoliberal regimes on the continent. As Pitcher and Askew thoughtfully assert, this really put the <a href="http://www.jstor.org/stable/40026154?casa_token=Rvqwjbb0vegAAAAA:odeFh-CEYl9OC_sHgndal1IkKwjqmFDGLlf83aAOGVW3Y9g5n9E3vtmziLyPoDpZPBvKm7o7tTT62tKswbrVYbLCxSfHoiar1ziq0Ypu4bImIcZcj85L">“self” in “self-reliance”</a>.</p>
<p>This openness to investment and trade was further enhanced with the introduction of multipartyism in 1995. Under both Presidents Mkapa and Kikwete, the country generally remained economically liberal. It also remained investment friendly with significant levels of foreign investment when compared to the socialist period.</p>
<p>But sweeping change has come under the current President John Pombe Magufuli, who has just entered the third year of a five-year term. Magufuli has taken a different approach to that of his recent predecessors and is harking back to policies advocated by Nyerere. Comparisons between the two are commonplace, both <a href="http://africanarguments.org/2017/07/17/tanzania-magufulis-mining-reforms-are-a-masterclass-in-political-manoeuvring/">positive</a> and <a href="https://www.economist.com/news/middle-east-and-africa/21730424-african-socialism-did-not-work-tanzania-last-time-either-john-magufuli">negative</a>. This is particularly so when it comes to natural resources.</p>
<p>Perhaps the most contentious area today is the mining sector and the role of the contemporary government in seeking better returns from mining companies. This move has the hallmarks of a policy of <a href="https://theconversation.com/is-africas-resource-nationalism-just-big-business-as-usual-41647">resource nationalism</a>. This is a sign of a shift in policy as well as rhetoric. </p>
<h2>Opening a closed economy</h2>
<p>Tanzania was close to bankrupt after the economic collapse of the 1970s and the conflict with Idi Amin’s Uganda in the late-1970s. The latter years of Nyerere’s presidency were marked by his <a href="http://www.tandfonline.com/doi/abs/10.1080/03056240500467054?journalCode=crea20">continual attempts to resist IMF assistance</a> which involved signing up to a structural adjustment package. This was mainly down to his concerns over dramatic cuts to social provision.</p>
<p>The first programme was finally <a href="http://documents.worldbank.org/curated/en/111081468778229178/pdf/multi0page.pdf">implemented in 1986</a> under Mwinyi whose presidency was marked by Tanzania’s economy opening up and dramatic reductions in social expenditure.</p>
<p>Multi partyism also arrived in Tanzania. The first multiparty elections in 1995 were won by Benjamin Mkapa who remained in power for the next 10 years. Another 10 years followed under Jakaya Kikwete until 2015.</p>
<p>During this period foreign investment has come in many sectors, but especially in tourism and mining. A significant part of the <a href="http://www.iupress.indiana.edu/product_info.php?products_id=806480">financial inflows came from post-apartheid South Africa</a>. </p>
<h2>“The Bulldozer” approach</h2>
<p>“The Bulldozer” Magufuli is Tanzania’s fifth president, and the fourth since multiparty elections. As he enters his third year,
there are strains of <a href="https://theconversation.com/the-legacy-of-autocratic-rule-in-tanzania-from-nyerere-to-life-under-magufuli-73881">authoritarianism</a> in Magufuli’s approach which bear the hallmarks of Nyerere. For example, he seems to have centralised power within the executive branch of government.</p>
<p>At the same time, <a href="https://muse.jhu.edu/article/543426">he seems to be placing himself</a> more closely to the socialist era of Tanzanian politics than anything since Nyerere. </p>
<p>Both approaches seem politically acceptable to Tanzanians – as long as they generate results. Nevertheless, Magufuli’s approval <a href="https://www.twaweza.org/uploads/files/PeoplesPresident-EN-FINAL-A4.pdf">ratings fell to 71% in June</a> from a high of 96% last year.</p>
<p>It’s still unclear what effect his recent attempts to claw back revenues from multinational mining giants will have on his rating. </p>
<h2>New regime for mining</h2>
<p>In the Arusha Declaration, Nyerere describes natural resources as <a href="http://allafrica.com/stories/201710130100.html">owned by all citizens and held in trust for their descendants</a>. When the new mining laws were passed in July, <a href="https://uk.reuters.com/article/us-tanzania-mining/tanzanias-president-signs-new-mining-bills-into-law-idUSKBN19V23P">Magufuli said</a>: </p>
<blockquote>
<p>We [Tanzanians] must benefit from our God given minerals and that is why we must safeguard our natural resource wealth to ensure we do not end up with empty mining pits.</p>
</blockquote>
<p>The new laws raise royalties on tax for gold, copper, silver and platinum exports from 4% to 6%. This is a nominal increase perhaps but an indication of a different direction of travel. Expectations are that such changes will soon be introduced for <a href="http://allafrica.com/stories/201710230184.html">tanzanite and diamonds</a>.</p>
<p>Following the new laws the government agreed a 50-50 profit sharing arrangement with Barrack Gold as well as a minimum government of stake 16% in all mining activities. Gold generates around <a href="https://atlas.media.mit.edu/en/profile/country/tza/#Exports">a third of the country’s export revenues</a>.</p>
<p>The new mining laws aren’t <a href="http://www.thecitizen.co.tz/News/Govt--No-plan-to-nationalise-mines/1840340-4126130-8d98lw/index.html">akin to the nationalisation of 50 years ago</a>. But Magufuli has described the agreement with foreign investors as groundbreaking and a <a href="http://allafrica.com/stories/201710230183.html">model to be adopted elsewhere across the continent</a>.</p>
<p>The long term impact of mining reforms are yet to be felt. Claims from multinational corporations that the new laws <a href="https://www.reuters.com/article/us-tanzania-mining/investors-wary-as-tanzania-moves-to-assert-more-control-over-mines-idUSKCN1BZ066">threaten future investment</a> may well prove to be overblown. As might the opinion pieces in <a href="https://www.economist.com/news/middle-east-and-africa/21730424-african-socialism-did-not-work-tanzania-last-time-either-john-magufuli">The Economist</a> suggesting Armageddon for the sector in Tanzania. But, certainly from some quarters, the view is that Magufuli <a href="http://africanarguments.org/2017/07/17/tanzania-magufulis-mining-reforms-are-a-masterclass-in-political-manoeuvring/">has managed the process well</a>.</p>
<p>On the other hand, his bulldozing style has seen his popularity decrease. It has also seen critics <a href="http://allafrica.com/stories/201712050224.html">express their views</a> over his presidency more forcefully. </p>
<p>A balance sheet of positives and negatives is perhaps the most striking similarity with the legacy of Nyerere as Tanzania marks yet another independence anniversary.</p>
<p><em>I would like to thank Alessia De Vito for her blog as part of our African Politics course at the University of East London. It certainly informed my ideas for this article.</em></p><img src="https://counter.theconversation.com/content/88812/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Rob Ahearne does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A balance sheet of positives and negatives for Tanzania’s president Magufuli is perhaps the most striking similarity with the legacy of Nyerere as the country marks another independence anniversary.Rob Ahearne, Senior Lecturer in International Development, University of East LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/816322017-07-27T14:39:32Z2017-07-27T14:39:32ZAll bets are off as Magufuli’s resource nationalism moves up a gear in Tanzania<figure><img src="https://images.theconversation.com/files/179812/original/file-20170726-27705-ixjq27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Tanzanian President John Magufuli has threatened to close all mines and give them to Tanzanians.</span> <span class="attribution"><span class="source">EPA/Daniel Irungu</span></span></figcaption></figure><p>The Tanzanian government has <a href="http://www.acaciamining.com/media/press-releases/2017/2017-07-24.aspx">asked</a> Acacia Mining, a subsidiary of the world’s largest gold mining company Barrick Gold, to pay approximately USD$190 billion in revised taxes, interest and fines. This latest development is a game changer in a <a href="http://www.theeastafrican.co.ke/news/Acacia-mining-arbitration-on-Tanzanian-contracts/2558-4000144-h13hjt/index.html">dispute</a> that pits mining companies against President John Magufuli’s government. It makes both nationalisation and mine closures more likely.</p>
<p>Until this revised tax notice was served, the overhaul of Tanzania’s mining regime had a great deal going for it. <a href="http://curtisresearch.org/wp-content/uploads/GoldenOpportunity2ndEd.pdf">Previous policy</a> had given miners an easy ride. Low taxes and generous license terms were sweetened by further <a href="https://www.theguardian.com/global-development-professionals-network/2017/jul/06/a-brutal-lesson-for-multinationals-golden-tax-deals-can-come-back-and-bite-you">tax breaks and exemptions</a>. </p>
<p>Tanzania’s <a href="http://www.tcme.or.tz/mining-in-tanzania/industry-overview/">mining sector</a> contributes nearly 3% to GDP annually. Tanzanite and diamond mines are scheduled to be joined by large uranium, coal and iron projects which are under development, but the largest operational mines produce gold. Acacia and AngloGold Ashanti run 4 large gold mines between them that extracted 37 tonnes of gold last year. According to the <a href="http://www.gold.org/about-gold/gold-supply/gold-mining/gold-mining-map">World Gold Council</a>, Tanzania is the fourth largest gold producer in Africa.</p>
<p>Recently three laws were <a href="http://africanarguments.org/2017/07/17/tanzania-magufulis-mining-reforms-are-a-masterclass-in-political-manoeuvring/">passed</a> that squeeze the mining companies for revenue. They include shareholding entitlements, higher royalty rates and further tax rises.</p>
<p>The new legislation introduced sweeping new requirements intended to support the country’s <a href="http://www.mof.go.tz/mofdocs/msemaji/Five%202016_17_2020_21.pdf">industrial goals</a>. Mining companies are now required to train Tanzanians, give preference to local suppliers and to source from joint ventures between domestic and foreign firms if domestic suppliers cannot be found. These rules mean additional costs for miners, but a boost for Tanzanian employees and firms that could become nascent industries.</p>
<p>While the new requirements were all painful for mining companies, they promised significant benefits for Tanzania and merited a try. Ultimately, engineers and economists will have to calculate whether mining companies can make those concessions without operating at a loss.</p>
<p>But the questions are technical and the answers are not well established. It’s possible that the mines could still be economically viable even after this policy overhaul.</p>
<p>Whether its tactics were good or not, the Tanzanian government had reasons for adopting a brazen approach to negotiations with the mining companies too. After it announced a series of changes in 2016, it was confronted by mining company intransigence. Their development agreements enshrined protections against all manner of intrusions and impositions. They seemed resolved to impede changes by resorting to delaying tactics, legal obstacles and arbitration.</p>
<p>But Magufuli’s decision to scrap development agreements between the government and mining companies and to prohibit international <a href="http://parliament.go.tz/polis/uploads/bills/1498722623-PERMANENT%20SOVEREIGNTY.pdf">arbitration</a> sent a clear message: companies didn’t have a lot of choice. </p>
<p>His unilateral and combative approach <a href="http://africanarguments.org/2017/07/17/tanzania-magufulis-mining-reforms-are-a-masterclass-in-political-manoeuvring/">smacks</a> of domestic politics. But it could also serve to dissuade the mining companies from a course of resistance.</p>
<p>It showed mining companies how far the Tanzanian government was willing to go and how much they wanted. It quickly provoked concessions. Acacia <a href="http://www.acaciamining.com/media/press-releases/2017/2017-07-14.aspx">agreed</a> to some of the terms two weeks ago. But if it hoped these would placate Magufuli, they were wrong. </p>
<h2>Counting to $190 billion</h2>
<p>Until the tax bill was tabled, it seemed as though Magufuli wanted a new settlement with the mining companies. Now it looks as though he wants new mining companies.</p>
<p>To put the USD$190 billion figure in context, all the proven and probable gold in Acacia’s mines is <a href="http://www.acaciamining.com/%7E/media/Files/A/Acacia/documents/aca-reserves-resources-statement-2016.pdf">worth</a> just over USD$10 billion at today’s prices. Including sites under exploration and the further inferred and estimated deposits, there is a further USD$24 billion worth of gold, and further deposits of silver and copper.</p>
<p>After these minerals are mined and processed, profits will be just a fraction of that. And even if there is as much gold as guessed, it will take decades to liberate it. In short, Acacia can never make enough to pay USD$190 billion in taxes. It would close the mines before they paid a sum that tall.</p>
<p>The sum of USD$190 billion was reached in fines, interest and backdated tax revisions in light of two presidential committees. The first reported that Acacia had grossly under reported the amount of gold in containers of copper-gold concentrate bound for export. The second <a href="https://www.cgdev.org/blog/inflated-expectations-about-mineral-export-misinvoicing-are-having-real-consequences-tanzania">estimated</a> the revenue that the government had lost over the years, and the tax demand takes that into account.</p>
<p>If the committee findings were correct, Acacia might be sitting on enough gold to pay up, but this is not likely. If the committee’s conclusions were true, Buzwagi and Bulyanhulu mines would be the second and third largest in the <a href="http://www.mining.com/the-worlds-top-10-gold-mines/">world</a>. Tanzania would have <a href="http://www.theeastafrican.co.ke/business/How-much-gold-does-Tanzania-have-/2560-3956294-11li4jt/index.html">produced</a> not 55 tonnes of gold last year, but 154 tonnes. That would <a href="http://www.gold.org/about-gold/gold-supply/gold-mining/gold-mining-map">represent</a> approximately 5% of world gold mine production. Sums of that scale affect shares, currency appreciation and even the world gold price, and that makes it <a href="https://www.cgdev.org/blog/inflated-expectations-about-mineral-export-misinvoicing-are-having-real-consequences-tanzania">unlikely</a> that past production was kept secret as the committee suggests.</p>
<h2>What next?</h2>
<p>There are any number of reasons for the Tanzanian government’s decision to submit the tax demand – even if it doesn’t think that Acacia will ever pay. It could be a further bargaining ploy, a plea for attention, a failure of coordination or a strategic miscalculation. </p>
<p>But the most likely explanation is that this is part of a mounting campaign to drive the miners out of Tanzania altogether. Last week, Magufuli <a href="http://www.businessdailyafrica.com/news/Magufuli-threatens-to-close-mines-if-owners-delay-negotiations/539546-4027128-j1i6wd/index.html">announced</a> that if the mining companies continued to delay negotiations, </p>
<blockquote>
<p>I will close all mines and give them to Tanzanians. </p>
</blockquote>
<p>With every new development, this threat seems less and less an idle boast.</p><img src="https://counter.theconversation.com/content/81632/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dan Paget does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Until Acacia was served with $190 billion tax bill, it seemed as though Tanzania’s president wanted a new settlement with the mining companies. Now it looks as though he wants new mining companies.Dan Paget, DPhil Politics (African electoral politics), University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/732142017-02-28T14:53:07Z2017-02-28T14:53:07ZHow South Africa’s mining industry can change its ways<figure><img src="https://images.theconversation.com/files/158519/original/image-20170227-26322-rkwkuj.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Workers walk past a Lonmin Marikana platinum mine, a site that represents industrial strife in South Africa. </span> <span class="attribution"><span class="source">Reuters/Skyler Reid </span></span></figcaption></figure><p>South Africa’s mining industry is increasingly cited as one of the key sectors that must yield “<a href="http://www.ujuh.co.za/zuma-what-do-we-mean-by-radical-socio-economic-transformation/">radical economic transformation</a>” and help the country heal a deeply divided and unequal society. </p>
<p>President Jacob Zuma set out what he meant by radical economic transformation in his 2017 <a href="http://www.gov.za/SONA2017">state of the nation address</a>, describing it as:</p>
<blockquote>
<p>a fundamental change in the structure, systems, institutions and patterns of ownership, management and control of the economy in favour of all South Africans, especially the poor, the majority of whom are African and female…</p>
</blockquote>
<p>The country’s finance minister Pravin Gordhan also touched on the subject in his recent <a href="http://www.treasury.gov.za/documents/national%20budget/2017/default.aspx">budget speech</a>.</p>
<p>So what can the mining industry bring to the party? The <a href="http://altminingindaba.co.za">Alternative Mining Indaba</a> recently provided some answers to this question. It’s a dialogue that runs parallel to the annual private sector convened <a href="https://www.miningindaba.com/ehome/index.php?eventid=174097&">Mining Indaba</a> in Cape Town. The 350 organisations attending the civil society indaba reached some critical conclusions.</p>
<p>The unanimous view was that the trajectory of South Africa’s mining industry is unsustainable and that a radical shift is needed if the country is going to maximise the benefits of resource extraction – for communities and for the country.</p>
<p>The way in which mining is carried out has caused immeasurable socio-economic and environmental <a href="http://cer.org.za/news/harvard-report-highlights-human-rights-costs-of-south-african-gold-mining">destruction</a>. But this needn’t be so. Two critical interventions could make a dramatic difference: meaningful community participation and private sector accountability. </p>
<p>If South Africa acted to put these in place it would be in line with the principle of free, prior and informed consent as widely recognised in various international experiences and <a href="https://www.wits.ac.za/media/wits-university/faculties-and-schools/commerce-law-and-management/research-entities/mandela-institute/documents/research-publications/Public%20Regulation%20and%20Corporate%20Practices%20in%20the%20Extractive%20Industry,%20a%20Mandela%20Institute%20report.pdf">adopted</a> by a number of Latin American countries. </p>
<h2>Opportune moment</h2>
<p>The time is opportune to reconsider the direction of the country’s mining industry. The Mining Charter is currently <a href="http://www.politicsweb.co.za/documents/how-the-mines-must-racially-transform--mining-char">under review</a>. This is the regulatory framework designed to guide the sector’s transformation. The aim of the review is to make the industry representative of the country’s demographics and follow sustainable practices. </p>
<p>The Minerals and Petroleum Resources Development Amendment Bill is also <a href="http://www.miningweekly.com/article/mprda-amendment-bill-in-limbo-but-processes-crucial-2017-02-03">under review</a>. There’s also been progress in getting a <a href="http://citizen.co.za/business/1423588/government-continues-pursue-state-owned-mining-company-zuma/">state owned mining company</a> off the ground.</p>
<p><a href="http://www.bench-marks.org.za">Debates</a> about the benefits and harmful consequences of mining are common across the world. At the heart of the contestation are concerns about the irreversible damage that mining causes to the environment as well as the <a href="http://www.ujuh.co.za/communities-lose-confidence-in-mining-industry/">destabilisation</a> it causes to host communities.</p>
<p>Mining continues to be associated with harm all over the world. Over the past 60 years, 40% of <a href="https://www.wits.ac.za/media/wits-university/faculties-and-schools/commerce-law-and-management/research-entities/mandela-institute/documents/research-publications/Public%20Regulation%20and%20Corporate%20Practices%20in%20the%20Extractive%20Industry,%20a%20Mandela%20Institute%20report.pdf">civil wars</a> can be associated with natural resources. The reason for this includes lack of equitable sharing of benefits and costs of extraction, lack of engagement with communities, and the diversion of revenue to financing conflicts. </p>
<p>South Africa’s mining industry is no exception. For more than a century it has produced <a href="https://www.wits.ac.za/media/news-migration/files/Platinum%20Report%20.pdf">obscene profits</a> for the few – mainly investors and captains of industry – while leaving a trail of socio-economic and environmental <a href="http://www.ujuh.co.za/communities-lose-confidence-in-mining-industry/">disasters</a> across the country.</p>
<p>One report that captures <a href="http://cer.org.za/wp-content/uploads/2016/10/Cost-of-Gold-South-Africa-Report-Exec-Summary-Oct-2016.pdf">the cost of gold</a> found that:</p>
<blockquote>
<p>contaminated dust and soil from omnipresent hills of mine waste have interfered with the enjoyment of the rights to health, a healthy environment, and housing. </p>
</blockquote>
<p>The report identified more than 200 waste dumps in the Johannesburg area, which contain concentrations of heavy metals and radioactive uranium. These have led to complaints of asthma and other breathing difficulties. </p>
<h2>The future must be inclusive</h2>
<p>One important way of promoting the sustainability of mining is through community engagement. More often than not this is ignored. For example, the President in his recent <a href="http://www.gov.za/SONA2017">comments</a> only emphasised the importance of discussions between government and business on the new mining charter. This is symptomatic of the country’s failure to give marginalised communities a meaningful voice.</p>
<p>A <a href="https://www.wits.ac.za/media/wits-university/faculties-and-schools/commerce-law-and-management/research-entities/cals/documents/programmes/environment/resources/Social%20and%20Labour%20Plans%20First%20Report%20Trends%20and%20Analysis%2030%20March%202016.pdf">report</a> by the Centre for Applied Legal Studies highlights this. It notes that there is no:</p>
<blockquote>
<p>legislative clarity regarding the role of communities in the implementation, compliance monitoring and amendment of social and labour plans. Communities have no role in the decommissioning, downscaling and closure of mines.</p>
</blockquote>
<p>This gap can only be closed if trust and partnership become the hallmark of relations between government, communities and business. But to be meaningful community engagement must <a href="https://www.wits.ac.za/media/wits-university/faculties-and-schools/commerce-law-and-management/research-entities/mandela-institute/documents/research-publications/Public%20Regulation%20and%20Corporate%20Practices%20in%20the%20Extractive%20Industry,%20a%20Mandela%20Institute%20report.pdf">involve</a>: </p>
<ul>
<li><p>the building of sustained relationship between communities, the state and extractive companies </p></li>
<li><p>the cultivation of a long-term relationship that develops mutual trust and respect </p></li>
<li><p>adequate representation on the part of communities </p></li>
<li><p>informed participation in the decision-making process</p></li>
<li><p>easy access to timely, relevant and complete information, and</p></li>
<li><p>communities must have access to a mechanism that adopts rule of law principles when they have grievances.</p></li>
</ul>
<h2>Holding miners accountable</h2>
<p>Another important piece of the puzzle is transparency. Mining companies must be required to provide proper financial disclosure. Just as important is that they must be required to comprehensively list the beneficiaries of mining project - what’s known as <a href="http://www.osf.org.za/wp-content/uploads/2017/01/OSF-Extractives-Working-Paper_Beneficial-Ownership-and-Tax-Benefit-Disclosures.pdf">beneficial ownership transparency</a>. Many investors who make money from harmful mining by hiding behind complicated financial and legal structures. It then becomes impossible to hold them accountable. </p>
<p>Also the lack of knowledge about the ultimate beneficiaries of a global corporation means tax avoidance and illicit financial flows can thrive. This deprives countries of revenue to fund social welfare programmes.</p>
<p>Knowing who the beneficiaries are should also highlight “skewed ownership patterns”. This would be the first step to de-racialising the extractive industry to favour historically disadvantaged South Africans as intended by government.</p>
<p>It would also help detect corruption or inappropriate levels of political involvement.</p>
<p>Some progress has been made, on paper at least. The government has committed to implementing a plan based on a set of principles drawn up by the <a href="https://www.ag.gov.au/CrimeAndCorruption/AntiCorruption/Documents/G20High-LevelPrinciplesOnBeneficialOwnershipTransparency.pdf">G-20</a>. On top of this, <a href="http://probonomatters.co.za/key-provisions-financial-intelligence-centre-amendment-bill/">amendments</a> to the Financial Centre Intelligence Acts are being processed. The aim is to beef up the capability and responsibility of financial institutions to properly identify their clients and alert relevant authorities.</p>
<p>It’s <a href="http://probonomatters.co.za/south-africa-risks-becoming-a-pariah-in-financial-intelligence-scales/">important</a> that Parliament passes this Bill quickly and the government honours its commitment to greater transparency. This should also include the development of a beneficial ownership register. </p>
<p>For South Africa to derive the intended socio-economic benefits from the mining industry the government needs to take deliberate and proactive steps. Only then will communities and civil society organisations become an integral part of the oversight and monitoring of the industry’s commitments.</p><img src="https://counter.theconversation.com/content/73214/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Fola Adeleke received funding from the Open Society Foundation in some of the reports that were mentioned in this article.He is currently head of research of the South African Human Rights Commission but writes in his personal capacity.</span></em></p>South Africa’s mining industry is on an unsustainable trajectory and needs to undergo fundamental transformation that emphasises transparency, equity, and community participation.Fola Adeleke, Fellow, University of the WitwatersrandLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/416472015-05-14T05:07:47Z2015-05-14T05:07:47ZIs Africa’s ‘resource nationalism’ just big business as usual?<figure><img src="https://images.theconversation.com/files/81415/original/image-20150512-25041-16tjsxt.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Plenty of gold - but who gets to keep it?</span> <span class="attribution"><a class="source" href="https://www.flickr.com/photos/cifor/8632865647">CIFOR</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc/4.0/">CC BY-NC</a></span></figcaption></figure><p>Big mining firms in the Democratic Republic of Congo are worried. For the past decade they’ve made good money from the country’s huge reserves of cobalt, diamonds, gold and copper, and now the government wants to grab more of the action: a <a href="http://www.bloomberg.com/news/articles/2015-04-14/congo-said-to-plan-boosting-mine-royalties-increase-stakes">document leaked to Bloomberg</a> reveals plans to raise royalties and profit taxes, and increase the state’s share in any new ventures.</p>
<p>This is so-called “resource nationalism” in action, and the DRC is far from alone in seeking greater economic control of its natural resources. The state is back, the theory goes, and it’s taking on the multinational. From Scotland to Namibia, Zambia to Ecuador, resource rich nations throughout the world are rhetorically reclaiming gas, oil and minerals as their own.</p>
<p>The trend is widely reported as the enemy of trade, investment and energy security alike. In the UK, for example, the Telegraph called it a “<a href="http://www.telegraph.co.uk/finance/commodities/9639184/Canadas-veto-of-Petronas-deal-raises-spectre-of-resource-nationalism.html">spectre</a>” and government economists have <a href="https://quarterly.blog.gov.uk/2014/07/15/resource-nationalism/">labelled it</a> as both a “threat” and “anti-competitive”.</p>
<p>On the other side of the coin, governments argue they are simply ensuring foreign businesses don’t unfairly benefit from resource extraction. Take Zambia, for instance. The landlocked African nation is a major copper exporter yet most of the population still lives below the poverty line. After the government looked to crack down on tax avoidance by multinational mining firms, one senior politician <a href="http://www.ft.com/cms/s/0/5bfbd716-afe0-11e2-acf9-00144feabdc0.html#axzz3ZYPduE5B">defended the move</a>: “The situation is win on one side – only the shareholders are winning; the people of Zambia are still in abject poverty”. </p>
<p>The question of whether resource nationalism really is something to be feared is therefore a whole lot more complicated than it would first seem, for the three following reasons.</p>
<h2>It isn’t really nationalism at all</h2>
<p>Governments, most prominently those of Sub-Saharan countries like Ghana, Sierra Leone, Guinea or Tanzania, have argued for huge tax hikes on mining, oil and gas contracts in the name of the “national interest”. However, move beyond the rhetorical strength of such statements and resource nationalism is less the enemy of big business than a cover for a business-as-usual bias towards the interests of neo-liberal, foreign investment. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=450&fit=crop&dpr=1 600w, https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=450&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=450&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=566&fit=crop&dpr=1 754w, https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=566&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/81576/original/image-20150513-2479-9x25il.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=566&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">West Africa’s first oil well, drilled by Shell in 1956.</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/-rhys-/70767735">Rhys Thom</a>, <a class="license" href="http://creativecommons.org/licenses/by-nc-nd/4.0/">CC BY-NC-ND</a></span>
</figcaption>
</figure>
<p>In Tanzania for example, recent discoveries off the coast of East Africa have led to predictions that the region will become <a href="http://www.ft.com/cms/s/0/8b3bd3e8-8fc2-11e2-9239-00144feabdc0.html#axzz3ZqoRPq9q">one of the world’s biggest exporters</a> of natural gas. As a result, <a href="https://mem.go.tz/wp-content/uploads/2014/05/07.05.2014local-content-policy-of-tanzania-for-oil-gas-industry.pdf">“nationalist” laws</a> are currently being drafted which begin: “Natural resources found in Tanzania belong to the [Tanzanian] people”. </p>
<p>At the same time, however, a recently signed <a href="https://www.gov.uk/government/news/foreign-secretary-meets-president-kikwete-of-tanzania">memorandum of understanding</a> between the UK and Tanzania promises, according to former foreign secretary William Hague, to “offer significant opportunities for British businesses in the energy sector”. Indeed, <a href="http://www.bloomberg.com/news/articles/2014-10-02/bg-group-discovery-in-tanzania-adds-fuel-for-lng-export-plant">BG Group</a>, as well as Norway’s Statoil and other big players have already been granted licences. The state is striking back in rhetoric only; it is business that still holds the real power.</p>
<h2>It doesn’t end at national borders</h2>
<p>Like a game of Risk, our idea of national control tends to be fixated on owning resources found within neatly defined borders. In today’s world however, this doesn’t make sense. </p>
<p>Better technology, modelling and visualisation techniques means extraction frontiers are constantly being moved further afield and deeper underground. Mines such as one in <a href="http://www.911metallurgist.com/blog/top-10-deepest-mines-on-the-planet">Mponeng, South Africa</a>, can reach nearly 4km deep and have more than 230 miles of tunnels, all to mine a 30 inch wide seam of ore. This should complicate our understanding of the idea of resource nationalism. How, for example, do we make sense of competing, contemporary claims to the deep sea off Namibia or Papua New Guinea? Similarly, questions over resources and sovereignty might even make us ask <a href="http://theconversation.com/who-owns-the-moon-32721">who owns the moon?</a></p>
<p>Finally, geopolitical debates over <a href="http://www.ibtimes.com/arctic-oil-who-owns-it-china-russia-other-nations-debate-1790160">extraction rights in the Arctic</a> provide further worrying evidence of the ways in which national and private interests are always in competition. In all cases, the physical and metaphorical boundaries of the nation state have to be questioned as law tries to keep pace with technological advancement.</p>
<h2>It isn’t fair for everyone within a nation</h2>
<p>Whatever the context, resource nationalism makes its claims by promising a country’s citizens “fair” and equally-distributed access to its resources. However this fails to account for politics. Mining and oil contracts are often negotiated in secret. Protests against these deals can be suppressed through state sanctioned force, and “national” policies often marginalise groups based on account of gender, race or sexuality. It is precisely this sort of identity politics which <a href="http://www.bbc.co.uk/news/world-africa-22652809">sparked violence</a> over sovereignty in Mtwara, Tanzania, where the region’s population claims that they are marginalised from a policy that favours the urban elite hundreds of miles away. </p>
<p>The “national interest” never means the same thing to everyone within a nation: different people place different values on nature and its resources. <a href="http://www.independent.co.uk/news/world/americas/brazil-plans-to-nationalise-rainforest-in-pioneering-plan-to-protect-amazon-10239908.html">Brazil’s recent draft bill</a> aiming to “nationalise” the Amazon is a good example – made at a governmental level, it doesn’t necessarily consider the views of indigenous communities.</p>
<p>And the idea of the “national interest” can’t adequately describe this complexity. From “African” oil to “Scottish” gas, those that fear “resource nationalism” would do well to remember this and not overly simplify the debate.</p><img src="https://counter.theconversation.com/content/41647/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Childs receives funding from various research council grants.</span></em></p>The DRC is far from alone in seeking greater economic control of its natural resources.John Childs, Lecturer in International Development and Natural Resources, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/311292014-09-04T10:39:12Z2014-09-04T10:39:12ZMexican energy reform may be a bridge to a low carbon economy – or a fossil fuel past<p>Following President Lázaro Cárdenas’ expropriation of foreign oil company assets in 1938, the oil industry has been a symbol of Mexican sovereignty. This made the state oil firm Petróleos Mexicanos (Pemex) politically untouchable. That is until now. <a href="http://www.reuters.com/article/2014/08/11/us-mexico-reforms-idUSKBN0GB26R20140811">Game-changing laws have recently been approved</a> that open deep-water oil and shale fields to foreign investment, as well as liberalising Mexico’s electricity industry. </p>
<p>According to president Peña Nieto the energy reforms will increase oil production from the current <a href="http://online.wsj.com/articles/mexicos-pemex-lowers-expected-oil-output-for-2014-1408745146">2.3m barrels a day</a> to <a href="http://elpais.com/elpais/2014/08/20/opinion/1408541903_825803.html">3m in 2018 and 3.5m in 2025</a>. Natural gas production will also increase dramatically from 5,700 million cubic feet a day to 8,000 million in 2018 and to 10,400 million in 2025. Consequently he believes that GDP will grow by an additional 1% by 2018 and by an extra 2% by 2025. </p>
<p>These official projections are no doubt optimistic and imbued with populist promises such as <a href="http://www.oxfordenergy.org/wpcms/wp-content/uploads/2014/05/In-Search-of-the-Mexican-Way.pdf">cheaper household electricity prices</a>. Indeed, they may not happen as quickly or exactly as promised (electricity tariffs paid by household consumers are already among the lowest of the OECD countries thanks to subsidies). But the reforms are still an important step in the right direction – and a good cause for optimism.</p>
<h2>Political meddling</h2>
<p>For decades Mexico has missed out on productive investment in its energy industry. Instead, politicians set up a system that allowed them to use the fiscal cash cow to support their political interests, rather than enhance the competitiveness of the national oil company. </p>
<p>The latest example of this was the official PRI party’s taking of a 20% cut from Pemex donations intended to fund public works, <a href="http://www.reforma.com/aplicacioneslibre/preacceso/articulo/default.aspx?id=322361&urlredirect=http://www.reforma.com/aplicaciones/articulo/default.aspx?id=322361">appropriating them for electoral ends</a>. Political meddling has resulted in a corrupt workers’ union, an unsustainable system of pensions and benefits, and an over-taxed national oil company struggling to invest in new fields, maintain current ageing assets or decrease the rate of a declining production. </p>
<p>As a consequence, Mexico currently has limited gas production, inadequate midstream capacity and insufficient transport and distribution infrastructure. This means that, despite its huge resources, Mexico is currently a net importer of gasoline, natural gas, diesel and other oil products, as the domestic processing capacity is insufficient to cover the increasing demand of its emerging economy.</p>
<h2>Shale gas potential</h2>
<p>The prospect of tapping into Mexico’s vast shale gas reserves after the energy reforms has contributed to the Federal Electricity Commission’s decision to increase additional power generation capacity to 2027 largely using <a href="http://sener.gob.mx/res/PE_y_DT/pub/2013/Prospectiva_del_Sector_Electrico_2013-2027.pdf">combined-cycle gas turbine plants</a>. But these grand prospects for increasing fossil fuel production and consumption do not square with the global push to reduce greenhouse gas emissions. </p>
<p>While Juan José Guerra Abud, Secretary of Environment and Natural Resources, has indicated that the switch to gas in electricity generation will have a real benefit in terms of <a href="http://noticieros.televisa.com/economia/1408/designan-titular-proteccion-ambiente-energeticos/">reducing greenhouse gas emissions</a>, this is only true in the short-term, insofar as combined-cycle gas plants replace the older fuel oil-fired plants. </p>
<p>But the carbon emissions of these plants are still around 350-400 grams of CO2 per kWh generated. This can be contrasted with the 2050 target required to decarbonise Mexico’s energy system, which is about <a href="http://unsdsn.org/wp-content/uploads/2014/02/DDPP_interim_2014_report_Mexico_chapter1.pdf">20 grams of CO2 per kWh</a>.</p>
<h2>Gas as transition fuel or carbon lock-in?</h2>
<p>This does not mean to say a low carbon future is not possible, however. Mexico is aiming to cut its greenhouse gas emissions by 30% by 2020 and by 50% by 2050. To meet their target, the <a href="http://www.encc.gob.mx/en/documentos/general-climate-change-law.pdf">government has mandated</a> that it must generate at least 35% of its electricity from renewable resources by 2024. </p>
<p>Given the large amount of gas-fired generation that is planned in the next two decades, achieving these targets would potentially involve stranding combined-cycle gas power plants mid-life and replacing them with lower-carbon sources – at a significant economic cost. Plus, delaying action to decarbonise Mexico’s energy system until after the 2020s, but still striving for the same cumulative emissions reduction, would be very technically challenging and expensive. </p>
<p>Natural gas has been <a href="http://geography.exeter.ac.uk/catherinemitchell/The_Key_Energy_Policy_Issues_for_Energy_Security_in_the_UK_-_Summary_Report.pdf">described as a “transition fuel”</a> in the power sector, but there are <a href="http://www.ukerc.ac.uk/support/UK+Energy+in+a+Global+Context+Ext">strict caveats</a>. The increase in gas production must replace more carbon-intensive fuels (particularly coal), the transition period must be strictly time limited and carbon capture and storage needs to be deployed on a wide scale. </p>
<p><a href="http://unsdsn.org/wp-content/uploads/2014/02/DDPP_interim_2014_report_Mexico_chapter1.pdf">UN backed research</a> suggests that a low-carbon electricity sector in Mexico by 2050 will largely consist of renewables (especially solar) and natural gas with carbon capture and storage. However, there is <a href="http://www.ukerc.ac.uk/support/ES_RP_SystemsCCS">considerable uncertainty</a> in the successful commercial deployment of this technology. </p>
<p>While gas-fired generation has a clear role to play in Mexico’s electricity generation mix in the period to 2030, over-investment in new capacity in the coming years can cause <a href="https://workspace.imperial.ac.uk/icept/Public/A%20case%20study%20of%20lock-in%20to%20new%20CCGT%20in%20the%20UK.pdf">investment lock-in</a>. Once these plants are in place, the inertia to continue generating from these assets could make future decarbonisation more difficult to achieve. </p>
<p>Before investing heavily in the new energy supply system, policy-makers should consider the incentives and disincentives that must be implemented to avoid <a href="http://www.sciencedirect.com/science/article/pii/S0301421501000982">carbon lock-in constraints</a> to long-term policy aims.</p>
<h2>Forward thinking</h2>
<p>The scope and range of the energy reforms may provide Mexico with the tools needed to work toward being both competitive and sustainable. This is an opportunity to think systematically about the energy supply system but also about the relationship between patterns of energy demand, technology and policy. </p>
<p>For instance, as public policies incentivised travel by car, the number of cars doubled and 68% of oil products in 2011 went to road transport. This <a href="http://www.iea.org/Sankey/index.html#?c=Mexico&s=Final">compares with 55% in 2000</a> and is part of the reason that costly gasoline and diesel imports have increased in the last decade.</p>
<p>Optimising the entire energy system, thinking forward in time, can unlock greater energy efficiency <a href="http://www.iea.org/Textbase/npsum/ETP2014SUM.pdf">as well as economic benefits</a>. The renewable energy laws to be announced this month must include long-term solutions and provide a pathway towards a future low-carbon economy. Policy must be developed to enable a volume of investment in new gas-powered electricity generation capacity and associated infrastructure that is compatible with a sustainable future.</p>
<p>According to the Mario Molina Centre, for gas to truly become a transition fuel, the income it brings <a href="http://centromariomolina.org/produccion-de-gas-y-aceite-de-lutitas-en-mexico/">must be invested in the non-fossil fuel transition</a>. This requires politicians keeping their hands off the new state-owned energy companies, unions and regulatory institutions. </p>
<p>Should there be a correct and transparent execution of the energy reforms, Mexico will be on its way to become not only one of the world’s ten largest economies by 2050, but a more sustainable and competitive economy too.</p><img src="https://counter.theconversation.com/content/31129/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Baltazar Solano Rodriguez does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Following President Lázaro Cárdenas’ expropriation of foreign oil company assets in 1938, the oil industry has been a symbol of Mexican sovereignty. This made the state oil firm Petróleos Mexicanos (Pemex…Baltazar Solano Rodriguez, Research Associate in Energy Systems at the UCL Energy Institute, UCLLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/306442014-08-20T05:20:36Z2014-08-20T05:20:36ZIslamic State only the latest group to fill vacuum left by long Ba'athist retreat in Syria<p>Black-clad fighters, suffering refugees and Western warplanes overhead – these <a href="https://theconversation.com/what-obama-is-telling-the-world-by-bombing-islamic-state-in-iraq-30386">are the mainstays of Iraq and Syria coverage</a> as the Islamic State (IS) continues its campaign. Notably absent from debates is how today’s Iraq and Syria emerged from their own national histories, and not just out of foreign meddling – from <a href="https://theconversation.com/explainer-why-a-century-old-deal-between-britain-and-france-got-isis-jihadis-excited-28643">Sykes-Picot</a> to Bush and Blair. </p>
<p>In Syria, a critical aspect of that national history was the 1960s rise of statist policies of land and wealth redistribution, and then their gradual rollback in the 1980s and 1990s. And as the Syrian state preferred to serve a small elite in the 2000s, Islamist actors – not IS-style extremists, but respectable middle class <em>ulema</em> (clerics), alongside their allies and relatives in small business – rose in importance, influencing much of Syrian society. </p>
<p>As the <a href="http://www.jadaliyya.com/pages/index/18199/deciphering-the-escalation-of-sectarian-violence-i">savvier commentators</a> on the IS have pointed out, despite its murderous excesses, the organisation’s appeal for the Sunni populations living under it is based on stability and the <a href="http://www.theguardian.com/world/2014/aug/16/isis-salafi-menace-jihadist-homeland-syria">provision of public services</a>. In that respect the IS fits into a longer history of increasing Islamist service provision dating back to the 1990s, as the Ba'athist state retreated.</p>
<h2>From colonialism to socialism</h2>
<p>Syria emerged into national independence in 1946 following three decades of French Mandate rule. The French era <a href="http://www.bostonglobe.com/ideas/2013/08/17/the-secret-history-democratic-thought-middle-east/dgy8n0Ode8Xk8AVoZLziXK/story.html">had been characterised</a> by military intervention, constitutional manipulation and the co-option of landowning social elites.</p>
<p>Those same elites, as in many former colonial territories, then inherited the colonial government’s system, adapting it for their own purposes. They ran Syria in the first few years of independence. Subsequently, a series of coups from 1949 until the early 1960s brought to power administrations that were steadily more socialist and more committed to land redistribution and nationalisation.</p>
<p>Notable reforms in 1958 and especially 1965 saw landless rural labourers become the owners of their own small farms, at the expense of the landowning classes for whom they had previously worked. </p>
<p>The impact of these changes on Syrian society cannot be overstated. In the 15 years after 1960, millions of Syrians who drove state buses, worked in state factories or sat at desks in the state bureaucracy all discovered a previously unknown economic security. In return, many of them gave their support to a secular Ba'athist regime. It was a government increasingly dominated by members of the once poor, rural Alawi minority who had built careers in the military. Hafez al-Assad, Syrian president from 1971 to 2000 and father of current president Bashar al-Assad, came from this Alawite community. </p>
<h2>Privatisation increased inequality</h2>
<p>That authoritarian balance began to change in the 1980s, in the context of the international debt crisis and domestic budget cuts. Internally, the infamous regime crackdowns against provincial Islamists in <a href="http://www.theguardian.com/theguardian/from-the-archive-blog/2011/aug/01/hama-syria-massacre-1982-archive">the Syrian town of Hama</a> – whose activists were more critical of the government than their Damascene colleagues – left a deep chill on Syrian society. </p>
<p>As <a href="http://www.jstor.org/stable/195533">German economist Hans Hopfinger</a> and others have documented, an <em>infitāh</em> (opening) of the economy meant that by 1990 private investment exceeded its declining public rival. In the 1990s, the Syrian state further cut its budgets and privatised the economy, weakening the public sector and monopoly industries. </p>
<p>As political economist <a href="http://www.sup.org/pages.cgi?isbn=0804773327&item=Excerpt_from_the_Introduction_pages&page=1">Bassam Haddad has shown</a>, the result was that Syrian society became more fragile. Jobs, particularly in the civil service, became scarcer and futures more uncertain. It was harder for young people to get married or start a family in decent conditions, even as the population increased. Inequality rose. Wealth was increasingly concentrated in select networks of state officials, the security service and big businessmen. So were state contracts.</p>
<h2>Charities step into the void</h2>
<p>As a result, private providers, notably Islamic charities, stepped into the hole left by the state’s new focus on the elite. They provided education and healthcare to the middle and lower middle classes, and, importantly, offered dowries for young people to get married. </p>
<p>Researchers Thomas Pierret and Kjetil Selvik <a href="http://journals.cambridge.org/action/displayAbstract?fromPage=online&aid=6417236&fileId=S0020743809990080">have brilliantly shown</a> how such charities, rooted in the social tissue of the Sunni business classes, retained a real measure of independence from the government, rather than becoming its instrument. </p>
<p>As a result, Islamism, which in the late 1970s and early 1980s in Syria had been ferociously crushed by the government in Hama and Aleppo, returned to the political scene and rebuilt its social strength. It did so at the most basic level by partnering with business to organise the charitable support of education, marriage and health. These services were needed. As Pierret and Selvik note, by 2004, 10.36% of the population (almost two million Syrians) were living on less than $2 a day.
As political scientists Laura Ruiz de Elvira and Tina Zintl have argued, it was partly due to <a href="http://dx.doi.org/10.1017/S0020743814000130">this context</a> of increasingly privatised and Islamised service provision that the revolt against the Assad regime occurred in 2011, leading on to the horrific civil war. </p>
<p>The subsequent dynamics of the war, with its <a href="https://theconversation.com/from-arab-spring-to-regional-sectarian-war-15009">sectarian radicalisation</a> and external actors, are well known. But the craving for a state that is able to provide effective public services – as the Syrian state of the 1960s and 1970s did, despite its authoritarianism – is a long-term legacy of Syria’s contemporary, national history, not just a result of the current, ruinous war. </p><img src="https://counter.theconversation.com/content/30644/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Simon Jackson does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Black-clad fighters, suffering refugees and Western warplanes overhead – these are the mainstays of Iraq and Syria coverage as the Islamic State (IS) continues its campaign. Notably absent from debates…Simon Jackson, Assistant Professor (Lecturer) in Modern Middle Eastern History, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/122902013-02-28T03:18:20Z2013-02-28T03:18:20ZDuelling dynasties: Nat Rothschild is no king coal in the boardroom battle for Bumi<figure><img src="https://images.theconversation.com/files/20751/original/krj8ty38-1362016761.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Aburizal Bakrie and Nathaniel Rothschild have been engaged in a protracted battle for control over Indonesian mining giant Bumi plc.</span> <span class="attribution"><span class="source">Flickr\I am Rudy</span></span></figcaption></figure><p>Last week saw a <a href="http://www.ft.com/intl/cms/s/0/546175f4-7c25-11e2-bf52-00144feabdc0.html">shareholders’ meeting of the mining company Bumi plc</a> in London.</p>
<p>Shareholders meetings are hardly unusual events. But this was no ordinary shareholders meeting. It involved a major Indonesian coal mining concession, and pitted two powerful businesspeople against each other.</p>
<p>One was <a href="http://www.forbes.com/profile/nathaniel-rothschild/">Nathaniel Rothschild,</a> a member of the Rothschild dynasty, well-established in the commercial worlds of Europe and North America, where the very name Rothschild stirs up images of wealth and power.</p>
<p>The other player is less well-known internationally: the Indonesian businessman <a href="http://www.forbes.com/sites/laurahe/2012/11/28/presidential-contender-aburizal-bakrie-drops-off/">Aburizal Bakrie.</a></p>
<p>Bakrie is one of Indonesia’s most powerful men. He is a major shareholder in (and former chair of) the Bakrie Group, a massive family conglomerate with interests in mining, plantations, education and the media, amongst others. He is also the chair of <a href="http://www.golkar.or.id/">Golkar</a>, the political party founded during the Suharto regime and for many years the electoral flagbearer for the former president. He is currently Golkar’s candidate for the presidential elections due next year, and already running hard in campaign ads on television.</p>
<p>He is a controversial figure for many Indonesians, and the combination of his political and business interests frequently draw adverse comment. Two years ago, for instance, he effectively brought down the best finance minister Indonesia had seen for decades, Sri Mulyani, in what was widely seen as a dispute over his payment – more accurately, non-payment – of taxes. Not a man you should lightly cross.</p>
<p>How did Bakrie and Rothschild get into business together?</p>
<p>In 2011, Bakrie moved his shareholding of the Indonesian-registered company Bumi Resources, owners of a major coal mining concession, into an investment vehicle set up by Nathaniel Rothschild, and subsequently renamed Bumi plc. Bakrie’s idea was to tap European sources of capital for Bumi Resources, without having to go though the difficult process of listing on the London Stock Exchange. Rothschild would gain access to a valuable coal mining concession in Indonesia, the world’s largest exporter of thermal coal.</p>
<p>Initially, the partnership seems to have worked well. But within a year of its establishment, tension between Bakrie and Rothschild over control of the enterprise became public.</p>
<p>Eventually, Rothschild moved to dismiss the Bakrie-appointed directors from the Bumi board, and Bakrie declared that he had had enough of the whole affair, and had decided to pull out, and to buy back Bumi Resources from Bumi plc.</p>
<p>This conflict was further fuelled when the British Takeovers Panel ruled that Bakrie and two other Indonesian corporate shareholders in Bumi plc were <a href="http://www.thetakeoverpanel.org.uk/wp-content/uploads/2012/01/2012-9.pdf%5D">acting in concert,</a> and therefore in violation of the Takeovers Act. </p>
<p>The shareholders meeting in London last week came out in favour of Bakrie: only two of Rothschild’s resolutions were passed, and Bakrie remained in control of the majority of directorships of the company. His <a href="http://online.wsj.com/article/SB10001424127887324503204578318121438857926.html%5D">divestment plan is moving ahead.</a></p>
<p>Is the conflict fundamentally about corporate governance and “emblematic of institutional investors’ worries about governance of foreign resources firms listed in London” as at least <a href="http://www.cnbc.com/100454787">one commentator has suggested</a>– as if only “foreigners” (presumably, non-Brits) are ever guilty of dubious business practices? Or is it really simply a clash between two very wealthy, very strong-willed businessmen over control of a valuable mining asset? </p>
<p>A bit of both, probably, but I suspect primarily the latter.</p>
<p>Any businessperson worth their salt knows that investing in Indonesia is a risky business. Relying on the courts to enforce contract conditions is foolhardy. Contracts stand and fall on the basis of the personal relationships the parties have, with each other and with other business and political players.</p>
<p>Rothschild is an experienced businessman. It is possible that he went in to the deal with Bakrie without knowing the nature of the person he was dealing with. Possible – but unlikely. In any case, it would have taken only a few minutes research to find out that Bakrie has a reputation for being a very canny operator.</p>
<p>Ironically, Rothschild demonstrated he is perfectly well aware of the links between business and politics in Indonesia when he proposed replacing Bakrie in Bumi plc with fellow Indonesian businessman <a href="http://www.forbes.com/profile/hashim-djojohadikusumo/">Hashim Djojohadikusumo.</a></p>
<p>Hashim has business interests <a href="http://www.thejakartaglobe.com/coverstory/hashims-new-horizons/495099">ranging from mining to agriculture to nature conservation</a>, and a net worth reputedly just shy of $1 billion.</p>
<p>But he also just happens to be the brother of Prabowo Subianto, former son-in-law of the late President Suharto and currently leader of the Gerindra party and its <a href="http://www.thejakartaglobe.com/business/hashim-talks-business-politics-and-crisis/300649">declared candidate for the 2014 presidential election</a>. Hashim was a co-founder of Gerindra, and still sits on its Board of Trustees.</p>
<p>Perhaps Rothschild simply wanted to bring Hashim’s business experience to Bumi plc.</p>
<p>Perhaps he gave no thought to Hashim’s political connections.</p>
<p>Perhaps.</p>
<p>But Rothschild might actually have faced an even bigger problem had he won control of Bumi. There is <a href="http://theconversation.com/challenges-for-investors-amid-indonesias-foreign-ownership-regulations-5882">growing economic nationalism in Indonesia,</a> directed largely at the mining industry. How long a foreign-registered company such as Bumi plc could have continued to mine Indonesian coal is a moot point.</p>
<p>Possibly, in the long term, Rothschild may benefit financially from his loss of control of Bumi.</p>
<p>Coal’d comfort?</p><img src="https://counter.theconversation.com/content/12290/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Colin Brown does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Last week saw a shareholders’ meeting of the mining company Bumi plc in London. Shareholders meetings are hardly unusual events. But this was no ordinary shareholders meeting. It involved a major Indonesian…Colin Brown, Adjunct Professor, Griffith Asia Institute, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.