Colloquium on collapse in commodity prices and Africa's response

The African Minerals Development Centre (AMDC) in partnership with the Tax Justice Network – Africa (TJN-A) hosted a colloquium on the 8^th of March 2017 in Addis Ababa, Ethiopia entitled “Collapse in commodity prices and Africa’s response”. Many African economies are dependent on commodities and are therefore sensitive to changes in commodity prices. The colloquium, therefore, provided an opportunity for different stakeholders in the mining industries of African countries to share experiences and best practices for managing commodity cycles. Members of civil society, academics, key policy makers, government officials and dignitaries representing African countries attended and contributed to the colloquium.

In his opening remarks the Executive Director of TJN-A, Alvin Mosioma, highlighted that the good policies that exist at regional level need to be translated to positive change on the ground. These policies include the African Mining Vision, SADC’s Harmonisation of Mining Policies, Standards, Legislative and Regulatory Frameworks in Southern Africa and the ECOWAS’s Directive on the Harmonisation of Guiding Principles and Policies in the Mining Sector. Mosioma furthermore argued that African countries must to be made less susceptible to volatile commodity prices by establishing sufficient linkages with other industries outside the mining sector.

The first session provided for discussions on the impact of falling commodity prices on commodity-dependent economies in Africa. For some African countries, falling commodity prices translated into a drop in the value of their currencies. Nigeria’s naira fell from 150 to 450 to the US Dollar and Sierra Leone’s leones weakened from 5000 to 6500 against the US Dollar. The fall in the value of currencies caused an increase in the price of goods and services for citizens. African governments have responded in various ways. Nigeria is in the process of changing its tax regime in order to increase its revenues whereas Zambia, Angola and Ghana approached the IMF for bailout loans.

The various fiscal regimes governing commodities in Africa were considered in the second session. It was proposed that a regional minimum standard for fiscal regimes in Africa should be implemented to prevent a “race to the bottom” in terms of commodity prices.[1] A regional minimum standard would safeguard against governments weakening regulation in the commodities sector in order to retain or attract multinational corporations. Setting a regional standard, however, should not be a one-size-fits-all or uniform model. It has to be suitable for each country-specific context.

The adoption of a regional approach to the socio-economic development was furthermore proposed. Commodity dependent African governments enter into aid agreements with the IMF when the commodities sector experiences a downturn. These agreements tend to be counter-productive because African countries generally enter these agreements from a position of weakness and are thus unable to negotiate for favourable terms. A regional approach will advance regional development, as it will guide African countries in making the most of the benefits derived from the extraction of natural resources. Unfortunately, details were not provided as to how this regional approach will avoid the situation where African governments have to enter into agreements with the IMF.

As acknowledged in the opening remarks of Mosioma and of the coordinator of AMDC, Kojo Busia, it is also significant that the colloquium was held on International Women’s Day. Both speakers emphasised that more should be done to ensure gender equality and representation at discussions pertaining to responses to commodity cycles, such as the colloquium.

The colloquium ended with a session on the way forward and various actionable suggestions were made that were collected by AMDC and TJN-A. How the actionable suggestions are going to be advanced, and what exactly these advancements will entail, is yet to be seen. It was suggested that more representatives from African governments should be encouraged to attend future colloquiums. If government officials take part in discussions on the problems and possible solutions, it will be easier to give effect to these solutions in domestic legislation. Until such time, however, it is uncertain to which extent the relevant governments will support and promote suggestions made at the colloquium.

It is hoped that this colloquium will amount to more than just another talk-shop and that it will signify the beginning of a shift in the mind-sets of African countries, resulting in them becoming less susceptible to volatile commodity prices.

Written by Vuyisile H Ncube.