While an increase in commodity prices is good news for mining companies and investors, there is always the risk that favourable market conditions will lead to resource nationalism.
For example, according to a recent Fitch Solutions report on nickel, an upward trend in the metal’s price raises the likelihood of mining royalty increases in order to profit from higher prices.
In recent years, countries such as Tanzania have enacted new mining regulations to ensure that local businesses can reap greater benefits from their mineral resources.
While the intention is noble, such laws have not always been well received by international mining companies. This, in turn, has an impact on a country’s investor friendliness.
Now, Uganda is following the lead of many other countries in East Africa and is set to implement a new law that wi would allow the government to own shares in private mining operations.
According to a report, the new bill will provide for state equity participation in large, medium and small scale mining up to a maximum of 15%. In addition, investors would be required to enter production sharing agreements (PSAs) with the government. Previously, companies could apply and be granted mining licences on their own.
For years, the government of Uganda has been trying to attract investors to exploit it vast natural resources. Will the new law help this cause or will this form of resource nationalism dissuade investors from the country?