In a span of just two weeks, both Kenya and Tanzania made radical policy decisions that baffled investors in East Africa’s nascent mining sector.
Firstly, Kenya’s Parliament passed new operating rules that require all mining companies licensed in the past year to cede a portion of their business to the government for free. Companies awarded the mining licences much earlier, however, were exempted from the rules that handed the government the right to a 10% stake in all mining operations licenced after May 2016.
“The State right to a free equity participation shall not apply to any right that has been granted to a holder to mine or exploit a mineral before the coming into force of the Mining Act,” the Mining (State Participation) Regulations 2017 reads in part.
Furthermore, the law gives the Kenyan government the option of purchasing additional interest or share capital in the holder of the licence but only with the agreement of the licensee.
“Any additional interest that the State may acquire shall be agreed with the holder of the mining licence and the purchase shall be at a fair market value,” the rules further state.
Separately, in neighboring Tanzania, the National Assembly unanimously passed amended mining and tax laws to make it mandatory for the state to own at least 16% of mining projects, while also raising export royalties.
This came back-to-back with the passage of two other laws allowing Tanzania to cancel and renegotiate contracts for natural resources like gas or minerals, and removing the right to international arbitration.
“In addition to the free carried interest shares, the government shall be entitled to acquire, in total, up to 50 percent of the shares of the mining company commensurate with the total tax expenditures incurred by the government in favour of the mining company,” the new law stated in part.
The law also raises Tanzania’s royalties from gold, copper, silver and platinum exports to 6% from 4%. It further raises the royalty on uranium exports from 5% to 6%. The law also gives sweeping powers to the government to reject a company’s valuation in instances where it feels that the price is too low.
These radical decisions by Kenya and Tanzania have triggered anxiety among investors in the region’s mining industry amid fear of the unknown.
“Although they may be targeted at maximizing returns from the sector, the policy decisions have no doubt caused concern for many investors, both existing and potential new ones. Every investor out there is certainly asking what next,” says Peterson Njom, an investment analyst.
“Mining is a long-term venture that needs predictability in both the part of the government and the investor. If things suddenly change then the relationship will hurt one party,” he adds.
In Tanzania, the impact of the policy change has already borne full-blown anxiety among mining companies, especially given the ongoing feud between the government and the country’s largest miner Acacia.
Australia’s OreCorp Limited, which has operations in Tanzania’s Nyanzaga project, says it will review the subsidiary part of the regulations once they are published to gauge the impact they would have on the firm’s operations.
“The regulations, which will assist the implementation of the proposed legislation, are not yet available. The company will review the regulations once they are available,” says Matthew Yates, Managing Director of OreCorp.
The feud between Tanzania and Acacia has caught the world’s attention, rekindling debate on the frosty relation between governments and mining firms in Africa. The firm, majority owned by Barrick Gold, is now pushing for arbitration on behalf of companies that own its Bulyanhulu and Buzwagi mines, which have been hit by an export ban.
In an ongoing court case, Tanzania accuses Acacia of tax evasion in 2016 and operating illegally – accusations the miner has denied.
Analysts say the policy decisions by Kenya and Tanzania, and the feud between Acacia and President John Magufuli’s government, could shape the region’s long-term mining investment profile.
“Both Kenya and Tanzania should work to reassure investors that their respective policy changes are well meaning. Investors need predictability so that they can plan their operations and financing,” says Njom. – Written by Allan Akombo
Cryptocurrency for Africans
George Gordon is on a quest to revolutionize the financial system. The director of Africa Master Blockchain Company talks digital currencies, blind risks and board games.
What is this new African cryptocurrency you are offering?
Where the majority of current digital currencies are based on speculative models, AfriUnion Coin (AUC) and the AfriNational Tokens (ANT)are designed for a transactional purpose allowing international payments, remittances, foreign direct investment as well as day-to-day transactions at local retail stores and other outlets. While the option for speculative trade is available with AUC, the focus is not around that.
Each African country will have a specially-designed ANT which will allow users to pay for goods and services and bills easily through completely digital means without requiring any bank account. AUC and ANT will be fully interchangeable to one another and there will be no fees for the user.
It’s the natural next step for digital finance from mobile banking which most Africans are accustomed to. The ability to freely have the power to send and receive money locally and internationally will allow the freedom of choice and spending power many Africans don’t have currently.
What is your own investment philosophy?
I am a gambler! I believe in taking risks and putting things on the line. That being said, blind risk or whimsical guesses don’t get you very far. Always acquire enough information to understand to a reasonable level what the thing you are planning on investing is or how it works and then trust your instinct and gut feel.
What advice would you give entrepreneurs wanting to invest in blockchain?
First, do some research in terms of what the blockchain technology is being applied for or created in terms of its application to an industry or project. Thereafter, check the white paper for the design of the platform as well as its functionality and applicability to what it is trying to achieve. If it aligns with your personal investment rules, then go for it,however, remember that blockchain is continuously evolving and thus you need to explore outside the usual and standard.
First cash-less, now card-less. What is the future of online banking?
If we are looking into what is currently science fiction, I would say the future is digital contact lenses that will be able to connect you to all your social media accounts, internet, news as well as make payments by just looking at QR codes or specialized barcodes to approve and accept payments.
Now, realistically we are not far off from such innovation and technology, but for the time being, I think the next step is scanning of QR codes at retailers and having the transaction automated from your wallet to the retailers digitally.
What is your most prized investment and why?
My mind. I believe that the work I have put into developing my mind, and continue to do so every day, is the number one investment that I have ever done. It allows me to look at things in a unique perspective as well as provides me with the tools to push boundaries and create new opportunities.
Money, success, fame? Which is most important to you?
I would have to say success… because it is most likely going to bring the other two as well, right? But success in the form of starting something and letting it grow and succeed and knowing that something new exists because of your efforts.
What do you spend your money on mostly?
Board games. I love board games and believe it’s a fantastic way to expand your mind as well as have fun with friends.
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Offering The American Dream
Gar Lippincott and Daniel Ryan of Atlantic American Partners were in South Africa recently looking for high-net-worth individuals wanting to invest in the US.
It’s a warm spring day in September, and Gar Lippincott and Daniel Ryan have just arrived in South Africa. It is Lippincott’s first time in the country, and he is jet-lagged.
A little over two months ago, he was booked to fly here from the United States (US) but was turned back at immigration.
“At Atlanta airport, the lady looked at Daniel’s visa and let him through and she looked at my visa and she said ‘I am afraid you can’t get on the plane because you have to have a blank page on your passport’. I said ‘I have three blank pages’ and she said ‘no, it’s supposed to be the one that says visa on it’. She said it’s the rules in South Africa so I had to sadly go back home… now when I was coming, I was told that’s not an issue anymore so I am happy they have made traveling into the country easier,” says Lippincott.
With a brand-new passport, he’s here with Ryan looking for people who want to invest in the US in exchange for a green card.
Lippincott, the Managing Partner of Atlantic American Partners, says he has always been keen on South Africa for its growth opportunities and prospects.
“From what I understand, the things that are causing short-term decline in the economy in South Africa are set up to provide long-term growth and hopefully people will understand this,” he says. Ryan, the company’s Managing Director of Emerging Markets – Africa, agrees: “I lived in Malawi for 12 years and South Africa is still considered the shining one throughout the continent. Even with all the problems, everyone still wants to come here because of the opportunities.”
According to an AfrAsia Bank report, South Africa comes second to Mauritius in boasting the highest number of high-net-worth individuals.
These are the kind of people Ryan and Lippincott target through their work at Atlantic American Partners. The company has real estate investors and professional private equity fund managers that manage money for banks, insurance companies, and pension funds. In addition, they help people get US green cards and ultimately US citizenship through the US government’s EB-5 Immigrant Investor Visa Program.
“Basically we look for people who want to move to the United States and we help them do so legally by investing and the nice thing is, with our program, they are also able to get a nice return on investment,” he says.
According to Lippincott, for a $500,000 investment that creates 10 jobs for American workers, you could get a green card in about two years and be a US citizen in about six or seven years. “Twenty seven countries have an investor visa program but with most of them, it’s essentially a fee you pay, or you need to be actively engaged in the day-to-day operation of a business. For example, you invest $1.5 million in Australia, but you need to hire employees and generate a certain amount of revenue. One of the biggest advantages with our program is you actually invest the $500,000 into a fund. We act as a trustee of that money and within five to seven years, they get that money back with a bit of return on investment and you are a permanent citizen in the US.”
Atlantic American Partners invests the money in real estate developments like hotels, apartments and student accommodation.
“What’s nice about the program is it doesn’t only cover the investor; it covers the spouse and children under 21. Our biggest family was a Hungarian family with seven children so they got nine green cards for $500,000,” says Lippincott.
The company says it has had positive response in South Africa. “Two months ago, we were here and we had scheduled six presentations for 100 people and we ended up speaking to 450 people. Most were business people, people worried about the economy, people worried about the political future of South Africa and people concerned about the education future of their children,” says Ryan.
According to Lippincott, despite the news of the clampdown on immigration, the US economy is booming and will perish without immigration. In the era of Donald Trump and his anti-immigrant views, that’s heartening news indeed.
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