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Thursday, November 20, 2008

Pambazuka News 407: Canada in Africa: the mining superpower

PAMBAZUKA NEWS 407: CANADA IN AFRICA: THE MINING SUPERPOWER

The authoritative electronic weekly newsletter and platform for social
justice in Africa

Pambazuka News (English edition): ISSN 1753-6839

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CONTENTS: 1. Features, 2. Comment & analysis

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Highlights from this issue

SPECIAL ISSUE ON CANADIAN ROLE IN MINING IN AFRICA

Canada's engagement with Africa is frequently seen as 'progressive' or
perhaps anodyne. But the reality is murkier. Published jointly by
Pambazuka News ( http://www.pambazuka.og/ ) and Africafiles ( http://africafiles.org/
) , this special issue features: an overview on why Canada became a
super power in mining investments, why Canadian Stock Exchanges are a
global centre for risky investments, the extent of Canadian
involvement, and an examination of a new, adapted diplomacy for new
situations. The issue includes case studies from the DR Congo, Ghana,
Tanzania, as well as a report on Canadian civil society efforts to get
regulations passed by the government to make company activities more
favourable to African peoples' interests. This issue will also be
published in the French edition of Pambazuka News.

Editors: For Pambazuka: Firoze Manji; For Africafiles : Craig Dowler

Other sections of Pambazuka News that normally appear in the Thursday
edition will appear in the Links and Resources section published on
Friday.


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1 Features
CANADA IN AFRICA: THE MINING SUPERPOWER
Denis Tougas

The time when Canada's presence on the African continent was primarily
characterised by numerous missionaries and food donations is well and
truly over! In countries such as Congo, Mali and Tanzania, when it is
learned that you are from Canada, you are immediately asked if you
work for the 'mining', a perception entirely consistent with reality.
Canada is now a superpower in the African mining sector, a position
the country intends to maintain and develop using all means at its
disposal.

The salient presence of Canadian mining is relatively new in Africa
and is rooted principally in the programmes of liberalisation of the
sector from the early 1990s. These programmes have been driven by the
World Bank, which from 1992(1) had begun defining the extractive
sector as the main engine of development for many countries.(2) The
privatisation of state enterprise – promoted as a means of encouraging
the entry of foreign investment – has opened the door to foreign
companies. At the head of this development, especially with regard to
the smaller exploration companies known as 'juniors', are Canadian
companies. These companies have an immense commercial presence in
Canada: of the 1,223 mining companies listed on the Toronto Stock
Exchange, the largest in the country, more than 1,000 are juniors!(3)

A HUGE EXPANSION

Currently, according to the Ministry of Natural Resources Canada
(NRC), only the Republic of South Africa, with over 35% of assets and
investments, is just ahead of Canada in the African mining industry.
But with South Africa's assets concentrated on its own territory,
Canada dominates the rest of the continent.

The data compiled by the NRC demonstrates the speed with which the
value of Canadian mining assets in Africa has grown over the last
twenty years: at US$ 233 million in 1989, this figure grew to $635
million in 1995, and $2.8 billion in 2001, growing further to $6.08
billion in 2005, and $14.7 billion in 2007.(4) This total value is
estimated to reach $21 billion by 2010. Figure 1 ( http://www.pambazuka.org/images/articles/407/image1_a_l.jpg
) In 2001, Canadian companies had operations in 24 African
countries, a figure that had risen to 35 by 2007. Figure 2 ( http://www.pambazuka.org/images/articles/407/image2_l.jpg
)
And 91% of Canadian investments were concentrated in eight countries,
with the order of countries' importance being the following: South
Africa (25.6%), DR Congo (17.8%), Madagascar (13.8%), Zambia (9.9%),
Tanzania (9.5%), Ghana (6.5%), Burkina Faso (4.7%) and Mauritania
(3%). Figure 3 ( http://www.pambazuka.org/images/articles/407/image3_l.jpg
)

It remains to be seen whether Chinese investment projects in the
region will threaten Canada's position of overall dominance.

BENEFITS FOR CANADA

The development of the Canadian mining sector and its expansion has
affected all continents. Africa represented 11% of Canada's US$25.8
billion in cumulative mining assets in 2001, a proportion which had
risen to 17% of the total $85.9 billion in the same assets by 2007.
Figure 4 ( http://www.pambazuka.org/images/articles/407/image4_l.jpg )

This growth has generated substantial profits for companies in the
country: in 2001 the sector accounted for 4% of Canada's Gross
Domestic Product (GDP), with $64 billion in exports and $30 billion in
capital expenditure, while employing a total of 400,000 people. In
addition, activities related to exploration and mining led to the
development of a large number of economic activities affiliated with
mining and covering a wide range of goods and services: providing
equipment, training, legal and financial advice, along with other
types of expertise. In 2000, there were at least 2,200 Canadian
companies related to the mining industry.

This data helps us better understand the reasons behind the Canadian
government's strong support for a sector that has become crucial for
the growth in an ever globalising and competitive world economy.

POLITICAL INCENTIVES

This global increase is the result of political decisions of a
government under considerable pressure from powerful mining
associations, most notably the aforementioned juniors.

Canada, rich in minerals, has a long tradition in the mining sector.
Over the course of its history, the state has regularly passed laws to
promote the development of the country and mitigate the impact of
sporadic crises in the sector. And since the 1990s, under the
influence of industry associations, the Canadian state has implemented
a comprehensive strategy to support the expansion of investments and
activities abroad, one including measures targeting businesses and
investors.

On the corporate side, Canada has been quicker than other countries in
its adoption of fiscal measures designed to be attractive to mining
interests, some examples of which include:
• Tax deductions for expenditure incurred abroad
• Deductions for debt (and interest) accrued abroad
• Tax exemptions for profits repatriated to Canada
• Deductions of up to 100% for investments in exploration and
development projects when undertaken by companies themselves
• Opportunities for companies with several projects abroad
(exploration and exploitation) to deposit their respective finances in
a single account when calculating taxes due in Canada, enabling larger
profits accrued in more profitable ventures to be combined with less
profitable exploration projects, thus reducing the overall tax paid
• Deductions for depreciation and accelerated depreciation.

All these measures mean that in Canada 'the average tax rate on large
corporations, including on capital, is below the US rate and will be
so by more than 6% in 2008.'(5)

And this doesn't take into account the programmes offered by different
ministries looking to further aid mining businesses, such as for
example helping enterprises to improve their technical capabilities in
relation to exploration. Nor does it take into account the financial
support granted by Export Development Canada (EDC) to facilitate
Canadian investment abroad. According to its 2007 annual report, the
EDC has supported projects totalling $22 billion worth of exports and
investments in Canadian companies in the extractive sector!

From an investment point of view, special tax measures will promote
the expansion of 'junior' exploration registering on the stock
exchange: thus, the Investment Tax Credit for Exploration (ITCEE)
allows the deduction of 15% for 3 years for buyers of 'accredited'
shares issued by exploration companies with the backing of the
government.

According to the Prospectors and Developers Association of Canada
(PDAC), this programme of accredited shares allowed Canada to maintain
its comparative advantage in this area on the world stage, making it
the envy of other competitors such as Australia, South Africa, Brazil,
Chile and Peru.(6)

A MADE-TO-MEASURE GRANT

Finding financial support for mining operations is especially crucial
at the exploration stage. Here too has Canada taken the lead by
developing special place for on the stock exchange for those companies
deemed to be undertaking risky operations. Greater risk must lead to
greater reward! The Vancouver Stock Exchange (VSE) has for a long been
the point of reference for this type of transaction and a centre of
attraction for the smaller mining companies involved in exploration.
The numerous associated scandals that have come to light, that of Bre-
X notably, have ended up ruining operations.

The Toronto Stock Exchange (TSX) had however already restructured its
activities in the 1960s in order to facilitate juniors' entry and
accommodate this type of risky capital (TSX Venture). The advantages
are many: financing for initial stages, the conversion of debt,
private placements, debt balance while projects are developed, etc. In
short, the Toronto exchange dominates the global market for financing.
In 2007 in Canada, there was a rise of $4.2 billion in the share value
of mining companies collectively. Australian stock exchanges, in the
meantime, occupied second position with $1.3 billion in shares, while
their American counterparts occupied fifth position with $500 million.
Thanks to its mining expertise, the TSX is now in seventh position for
values traded globally.

ASSAULT ON AFRICA

These rigorous policies of support go some way to explaining the rapid
ascent of Canadian mining companies across the African continent in
countries open to foreign investment, as much in countries with a
strong mining tradition such as Ghana and Tanzania as in those just
discovering their mining potential like Mali, as well as in countries
experiencing conflict where the risks are great, like the DR Congo.
These businesses have found in Canada the support, backing, and
finance necessary for all these mining ventures.

In much the same vein, Canadian diplomacy is very much at the service
of business interests and the general extension of Canadian influence
within this domain. In this regard, the country at times pursues
objectives seemingly at odds with its development agenda, some
examples of which include:

- In 1996, the Canadian High Commissioner in Tanzania intervened on
several occasions to influence revisions to mining legislation as a
means of promoting Canadian business interests. And, specifically, in
order to counter the legal claims of local miners questioning the
legitimacy of the mining company Sutton and designs on Bulyanhulu
deposits(7)
- In June 2008, the staff of the very same High Commission
energetically intervened in Tanzanian parliamentary affairs to ensure
that the country's politicians rejected the conclusions of the
Presidential Mining Sector Review Committee on revisions of the mining
sector. The Committee had recommended a greater proportion of profits
generated by higher prices be kept for the country itself(8)
- In 2004, Canada's ambassador to the United Nations had criticised a
part of a report produced by the Panel of Experts on the Illegal
Exploitation of Natural Resources in the DR Congo, in which nine
Canadian companies were accused of violating OECD (Organisation for
Economic Co-operation and Development) guidelines during the country's
protracted war.

And now, in order to ensure formalise the sector's acquisitions over
the last decade, Canada has signed its first Foreign Investment
Protection Agreement (FIPA) plan with mining countries, with Tanzania
and Madagascar in first place. This FIPA, already established within
many Latin American countries, has among its aims the removal of
current agreements through placing them under international
arbitration.(9) New legislation on the issue by host countries could
not be applied without significant compensation. Supposedly of high
importance to Canada, the principles of 'good governance' could hardly
apply.

It's a safe bet that Canada's image as a moderate country and
disinterested development partner in Africa is now thoroughly outdated.

* Denis Tougas is the director of the L'Entraide missionnaire (L'EMI)
in Montréal, Canada, an inter-agency supported by religious and
secular institutes of francophone Canada. L'EMI responds to training
needs, along with consultation and mobilisation. Tougas has worked in
solidarity with the Congolese people over the last 18 years.
* Please send comments to editor@pambazuka.org or comment online at http://www.pambazuka.org/

(1) World Bank, Strategy for African Mining, World Bank Technical
Paper no. 181, Africa Technical Department Series, Mining Unit,
Industry ands Energy Division, Washington D.C., World Bank, 1992
(2) For a deeper analysis of the World Bank's political orientation,
please consult the work of the Groupe de recherche sur les activités
minières en Afrique (GRAMA) ( http://www.unites.uqam.ca/grama/ ) at
the University of Québec in Montréal (UQAM).
(3) Without exception, the majority of the statistics mentioned in
this article come from the Ministry of Natural Resources Canada (NRC)
and have been taken from Fode-Moussa Keita, 'Les sociétés minières
canadiennes d'exploration et de développement du secteur de l'or; les
impacts de leurs activités en Afrique de l'Ouest', political science
thesis at the University of Québec in Montréal (UQAM).
(4) September 2008 estimate.
(5) Fode-Moussa Keita, op. cit. p. 123.
(6) Ibid., p. 125.
(7) Paula Butler, 'Canada's 21st Century Colonial Interests in the
"Good Governance" of African Minerals', 2003, pp 24-30.
(8) http://tinyurl.com/6mwhxu
******


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2 Comment & analysis
WHEN SILENCE IS GOLDEN
Alexandra Sicotte-Lévesque

Taking up the example of the small village of Dumasi in Ghana's
Western Region and drawing upon her experience of filming a
documentary entitled When Silence is Golden ( http://www.when-silence-is-golden.org/
) , Alexandra Sicotte-Lévesque discusses the destructive action of
the Canadian Golden Star Resources mining company and its pressure on
local people for forcible resettlement. While Canada's anti-poverty
agenda cancelled some CAD$18 million of Ghana's debt in 2004, the
author highlights the core contradictions of a Western nation that is
conversely unwilling to accept any extraterritorial responsibilities
in conflict with the needs of its own domestic economy. As Sicotte-
Lévesque underlines, the principal poverty faced by local Ghanaian
communities is above all one rooted in a lack of information, a lack
underpinning a vicious cycle characterised by poor communities getting
poorer as mining companies get richer.
http://www.pambazuka.org/en/category/comment/52091
******


FOOTPRINTS AND PARADOXES OF CANADIAN MINING IN THE DRC
Mikhael Missakabo

Mikhael Missakabo reveals the extent to which Canadian mining
companies are benefiting from instability and weak institutions in the
Democratic Republic of Congo to reap huge profits while paying little
attention to the ecological and human cost of their actions. These
companies have become adept at hedging their bets in the ongoing
conflict and negotiating contracts that literally impoverish the host
country. All that remains in their wake is environmental and economic
and social ruin.
http://www.pambazuka.org/en/category/comment/52092
******


MINING AND COLONIAL PRACTICES IN TANZANIA
The return of Victorian era exploitation?
Evans Rubara

With vivid examples of the unapologetically exploitative approach of
multinational mining corporations in Tanzania, Evans Rubara highlights
some of the glaring malpractice of rapacious foreign companies
operating on Tanzanian soil. In a sector supported by lax tax
collection by the country's government and whose only concern is for
profit, companies such as Barrick Gold Corporation have much to answer
for in the face of widespread environmental degradation, the
displacement and forcible removal of local people, and criminalisation
of local mining activities. Drawing on the information collected
within damning reports such as A Golden Opportunity?, Rubara documents
the extent to which mining companies operate with impunity in
Tanzania, an impunity giving rise to sustained abuse of local people's
rights and wholesale stealing of national resources.
http://www.pambazuka.org/en/category/comment/52093
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MANDATORY, NOT VOLUNTARY: HOLDING CANADIAN COMPANIES ACCOUNTABLE
Ian Thomson

Highlighting the slow progress around the implementation of greater
Corporate and Social Responsibility (CSR) by the Canadian government
and Canadian mining companies, Ian Thomson describes the efforts of
diverse groups of civil society organisations to hold mining companies
to account for their actions in African countries. In the face of
these broad struggles, the author argues that lasting progress will
derive principally from the ability of African and Canadian civil
society organisations to work in solidarity against the negative
environmental and human rights concerns associated with the mining
sector.
http://www.pambazuka.org/en/category/comment/52094
******


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ISSN 1753-6839

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