Resource Nationalism: It’s About People Too

In their “Mining Risk Review” for 2014, The Mining Practice Group of Willis identify “resource nationalism” as a significant risk faced by resource companies during the year ahead.

Resource nationalism continues apace, made worse by the yawning gap between public perception and commercial realities. Generally local populations are unaware of the falling commodity prices and believe mining companies are continuing to make huge profits. In a tough economic climate, governments are under increased pressure and mining companies can become convenient scapegoats in the run-up to elections. (p.3)

An increasing global demand for resources means that more mining companies are venturing into previously unchartered and often politically unstable spaces where they can secure and extract minerals. Even if these ventures are carried out openly, legally, and with full commitment from the ruling political party at the time, the review suggests that a political decision to nationalize (or re-nationalize) a country’s resources can seriously impact on established contracts and operations. The movie Big Men (2013, dir. Rachel Boynton) offers a good example of what this can mean for a resource company. The Willis review therefore recommends that mining companies pay close attention to the political situation in the areas in which they operate, and engage in transparent business to help keep local communities on side.

However if the capital is exhausted and promises are not delivered, the operation may face an entirely new challenge. A convergence could emerge: At the point where the local community is dissatisfied, management time is being taken up, productivity starts to drop, the government (be it local or central) could casts a critical eye over the project. The same government, which increased royalties, is likely to have made election promises, often bankrolled by the anticipated revenues. As the revenue stream dries up, the government may be under pressure to ‘review’ or even reallocate the license. The firm may then be faced with significant exit costs to unwind hedge agreements, close bank accounts and lay off staff. (p. 25)

But the warnings in this review do not go far enough. There is a focus only on the economic risks to resource companies, to the exclusion of any concern for the wellbeing and safety of their employees. Political instability or a change in a national government can have a very sudden and serious impact on the lives of foreign workers. In some cases, the mere presence of foreigners can become undesirable to those who hold political power and to the local people, particularly if rising nationalistic sentiment is combined with xenophobia. Local people who work for foreign mining companies can also be seen to be traitors and are therefore also often at risk of being attacked.

The nationalization of a country’s resources is one way that a national government can act out its political ideology. It can be a visible part of a political party’s platform prior to an election or it can be introduced suddenly as the result of a revolution. Either way, resource companies working in unstable political environments need to prepare for the impacts of this kind of activity on their employees. They need to assess the risks their employees might face in the event there is a change in attitude towards ownership of resources which form part of their otherwise legal operations. The nationalization of resources is also only one of the many ways that a change in the political environment can introduce a serious threat to workers and the workplace.

Leave a Reply

Your email address will not be published. Required fields are marked *