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sharing in governance of extractive industries

Self-reliance should dominate African mineral resources appraisal

Progress in most mineral rich African countries is slow because foreign aid and investments in their mineral resources appraisal and exploitation dominate as main source of seed capital for their development. 

By deactivating the important role of self-reliance in the struggle of societies for survival and prosperity in their environments, aid caused most mineral rich African countries to develop chronic dependence on foreign investments in the appraisal and exploitation of their mineral resources. 

Domination of foreign investments earns them very little (mostly in the form of taxes and handouts) of the natural capital extracted from their mineral resources, most of which is exported for investing in foreign countries, making the African countries poorer as their non renewable mineral resources diminish. 

Exportation of natural capital for just a mere fraction of it (mostly in the form of taxes and handouts), stimulates investments and economic growth in the importing countries at the expense of the same in the exporting mineral rich African countries.  

Most of the natural capital generated from the domination of local investments in the appraisal and exploitation of mineral resources in mineral rich African countries would remain for local investing to spur economic growth in African countries instead. 

Future GDP (PPP) per capita for 2013, calculated by the International Monetary Fund in International dollars for some of the mineral rich countries where local investments dominate in the appraisal and exploitation of  mineral prospects are Australia (6,650), Botswana (17,595), Brazil (17,340), Norway (56,663), Russia (18,670), Libya (14,474) and South Africa (11,750), comparatively high. 

For some of the mineral rich countries where foreign investments dominate are Ghana (3,501), Mozambique (1,262), Nigeria (2,883), Tanzania (1,670) and Zambia (1,841), comparatively low. 

Unless reversed, the continuing domination of foreign investments in the appraisal of mineral resources (which has very minimal contribution of economic growth in mineral rich African countries) is going to end up their future generations without much to stand on in their struggle for survival and economic prosperity as their non renewable mineral resources ends up exhausted. 

Mineral rich African countries ought to overcome chronic dependence on foreign aid in favour of the natural capital inherent in their mineral resources as seed capital in their struggle for survival and economic prosperity by ensuring rights for their appraisal are granted to local joint ventures involving private and public sectors in collaboration with employees (through their social security funds) and diasporas, the three main forces behind economic growth in any country. 

The rights would be issued to the local joint ventures on condition that they can only share portion of the same with foreign investors for some of the minority portion of seed capital and expertise involved in the preliminary appraisal to enable attractiveness of the prospects for others to invest in the main portion of the seed capital required to complete their appraisal through Stock markets and banks. 

Mineral rich Brazil, Norway and Australia also created own local joint ventures which involve private and public sectors in collaboration with social security funds and diasporas, and awarded them the rights for major mineral prospects appraisal in the countries. 

This enabled their own world class exploration and mining companies like the Vale of Brazil, Statoil of Norway and BHP of Australia to evolve and commanding major stakes of global mining industries and contributing significantly and on a very sustainable way in the economic development of their countries. 

Starting point in the development of these prosperous mineral rich countries was self-reliance in the appraisal of their mineral resources rather than the foreign aid and investments pursued by most mineral rich African countries in their development Endeavour’s  and appraisal of their mineral resources. 

When African governments grant foreign companies rights of majority ownership in the appraisal and exploitation of their mineral resources, they have enabled them to use some shares of the rights or the natural capital inherent in the mineral resources as main of the seed capital required to carry out their appraisal and initiation of their exploitation.

If African governments would grant  the rights to majority owned local joint ventures involving private and public sectors in collaboration with social security funds and diasporas, they would enabled them to do the same as the foreign companies are doing, but for the sustainable economic growth of the mineral rich African countries instead.

The role of State whole owned national companies involved in the production sharing agreements most mineral rich African countries entered with foreign companies could be enhanced substantially if the companies would be transformed into majority owned local joint ventures involving interested parties in the public and private sectors in collaboration with social security funds plus Tanzanian diasporas. 

Contributions from the local joint venture partners would equip them with a much bigger seed capital to qualify them for a much bigger slice of shares in the production sharing partnerships with foreign companies. 

It would also help to mitigate the deactivating and potentially destructive effect the whole owned State owned companies have on the important role of self-reliance in the struggle of individuals for survival and prosperity has on the optimization and maximization of economic growth in society, when they are denied the opportunity to participate in the production sharing agreements and develop useful skills in  business doing. 

The share of local contribution in the minority portion of seed capital required to enable majority local ownership in the preliminary appraisal to enable prospects attractiveness for others to invest in the majority portion of the seed capital required to complete their appraisal through stock markets and banks is such a small amount the majority involved local joint ventures in big mineral rich African countries like Tanzania, Mozambique, Kenya and Uganda wouldn’t find difficult to mobilize. Regional collaboration could enable majority involved regional joint ventures in the smallest mineral rich countries like Burundi, Rwanda and Malawi. 

For example, local joint ventures involving private and public sectors in collaboration with social security funds in mineral rich African countries wouldn’t counter difficulties in the mobilization of the local contribution of minority portion of seed capital facilitating majority local ownership in the preliminary sinking of one or two boreholes per each oil and natural gas block to enable its attractiveness for the main investing of stock markets and banks to complete its appraisal and initiation of its exploitation.

Majority local ownership of appraised mineral resources enables African mineral rich countries as follows: to establish bankable accounts of the natural capital inherent in them and decide when and how to exploit them in view of maximizing their contribution of economic growth in the countries; to make correct decision not to issue mining licenses or tax exemptions to encourage foreign exploitation of appraised mineral deposits when market demands and prices are not optimal; to retain their appraised mineral resources in-situ till market demands and prices become optimal for their exploitation to deliver optimal benefit to the countries and to exploit the appraised capital of mineral deposits retained in-situ as collateral in the mobilization of loans for investing in other highly profitable businesses instead. 

As the process of loans mobilization and paying back is repeatedly carried out successfully, the countries are enabled to earn total profits which could even exceed the natural capital inherent in their appraised minerals resources retained in-situ, still in their hands.

For example, majority local ownership of the huge uranium resources appraised in some mineral rich African countries would enabled the countries to make correct decision to retain them in-situ for use as collateral in their mobilization of loans for investing in other highly profitable businesses till high levels of efficiency and safety are achieved in the development of technology for uranium mining, processing and nuclear power generation, when African countries would be ready for nuclear power generation and market demand and price are optimal.

Majority local ownership of the gold resources appraised in gold rich African countries enables them to maintain some of their foreign exchange savings in the form gold reserves in-situ rather than in the form of gold bullion held in the strongholds of central banks which costs a lot more.

Majority local ownership of the mineral resources appraised in all mineral rich African countries would facilitate African collaboration and interdependence in the exploitation of their mineral resources to optimize their contribution of seed capital in the development of individual economies which are well interconnected and interdependent to provide for optimization in the economic growth of all on the continent.

Self-reliance can and should be enabled to dominate mineral resources appraisal on the African continent because it contributes sustainable economic development for it when foreign domination does the same for non African economies instead in a process which makes the continent poorer as the extraction of its non renewable mineral resources which contributes little economic development to the continent depletes them.

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