June 9, 2013 4:22 pm
African countries are increasingly assertive about wanting more of the wealth being extracted from their natural resources and Gabon is no exception. Gabon’s demand that foreign investors accept new terms for the exploitation of its oil and mineral wealth is legitimate. But it will only succeed if investors are confident that this assertiveness is not translated into arbitrary action.
The FT reported last week that the government planned to take back assets from three oil companies for alleged breaches of contract. It is right that offenders should be sanctioned if a case is proven and standard procedures are followed. But seizure of assets is normally a last resort.
Gabon is rightly trying to tackle the corruption and complacency that for decades plagued its relationship with the oil industry. It has a chance to make a fresh start with the auction of licences for the deep waters off its coastline. But there has been too much secrecy surrounding the external audits used to justify the asset reclamation, as well as recent claims to unpaid customs duties and back taxes. Despite promises to make the audits public, they remain under lock and key.
Moreover the hydrocarbon code, which will set the terms and conditions of investment, is still not published after more than two years of discussion, though the oil ministry has begun negotiations with individual companies on the deep water blocks. Even more confusion has been created by the government’s recent attempts to impose new terms during contract renewals.
Governments need to be sure that in allowing foreign investors to extract mineral resources, the state receives the tax revenues to which it is entitled. Too many African states are losing billions every year, either to corruption or to accounting schemes which facilitate tax avoidance and illegitimate transfer pricing. In today’s world of globally mobile profits, this is a challenge even for the developed economies of the west. The fight against such avoidance is much more difficult for a state on its own. Africa’s resource-rich nations will have a better chance if they join forces to set the framework for mineral extraction.
But in the meantime, inconsistent behaviour and a lack of transparency threaten the investment needed to deliver that wealth. Investors have the right to demand good governance and stability from government as much as the state has the right to require the same of them.
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