Monthly Archives: May 2017

Saskatchewan Premier Brad Wall says any attempt by Ottawa to link transfer money with a province's carbon tax policy would be a serious attack on federal-provincial relations.

Wall says memos obtained by the online publication Blacklock's Reporter show the federal government intends to tie a province's stance on carbon tax to equalization renegotiations.

In a letter to Prime Minister Justin Trudeau, Wall says that would violate the principles of fiscal federalism and he calls the threat unacceptable.

"I'm also asking him ... to release the unredacted version of these internal memos so all the provinces know what we're dealing with here," Wall said Monday at the legislature.

"I think this is very serious. If the federal government is now saying, 'Look, if you don't support us here, you won't get any of this money,' to which all provinces are entitled to on a formula, well that's less like how to run a federation and more like how you run a crime family."

Equalization is a federal program that transfers money to poorer provinces so they can offer government services at similar levels across the country.

Wall argues Saskatchewan's resource-based economy has contributed more than $5 billion to equalization over the last decade, while receiving nothing in payments.

Saskatchewan officials are contacting the federal government to find out what's being considered, he said.

"First of all, the fact that it would be mused about even is a concern to me, that there's someone in the Department of Finance and I have to think it wouldn't be without license from someone very senior who's thinking about, well, should equalization payments be tied to some province's support of a specific federal Liberal policy," said Wall.

"That kind of discussion shouldn't even be happening, never mind in the senior levels at the Department of Finance."

He said he's also concerned about other transfer payments including for health, education and infrastructure funding.

Environment Minister Catherine McKenna's office tried to ease Wall's concerns in a statement on Monday.

"The issue of pricing carbon pollution is unrelated to the federal government's continual engagement with the provinces on the topic of equalization. Linking the two is not a conversation we are having with the provinces," she said in the email.

Wall said he's pleased to hear McKenna's assurances, but her comments don't address other types of federal payments, such as infrastructure funding.

Trudeau has said all provinces must set up a cap-and-trade system or impose a price on carbon of at least $10 per tonne starting next year, which would increase to $50 by 2022, or Ottawa will do it for them.

Eleven provinces and territories agreed to the carbon price plan in December when they signed the Pan-Canadian Framework on Clean Growth and Climate Change. Saskatchewan and Manitoba did not.

McKenna told The Canadian Press last week that negotiations with the two provinces have continued.

Wall said Saskatchewan will continue to oppose any attempt by the federal government to impose a carbon tax on Saskatchewan.

"Meet us in court," said Wall. "My point to the federal government is, if they think they have the constitutional authority to impose a carbon tax on one or a couple of provinces, then go ahead, bring it forward and we will take this to court.

"We're reasonably optimistic about our chances and if they are too, that should be their final vindication."

See more here:

Wall criticizes attempt to link carbon policy with provincial transfer payments - National Observer

HAVE Zimbabweans become so myopic that they expect a miraculous return to economic prosperity in the post-President Robert Mugabe era? There seems to be a common misconception amongst us Zimbabweans that replacing the current government will suddenly turn the country into a bread basket again.

by Hopewell Mauwa

Granted, political instability, corruption and erroneous policy execution by government in recent years have left the country in a ravaged state with poor economic growth prospects. But does the absence of corruption and political instability guarantee a return to the kind of economic prosperity often promised by opposition politicians?

Indeed, a salient fact often muted from national economic debate is how exactly the country would position itself for competitiveness in the global economy post attaining stability. Zimbabwe is endowed with vast natural resources, but so are many other countries in the world. How the country produces, consumes and trades with other nations has important implications on the overall value we ultimately extract from our resources.

It is a fallacy to boast about natural resources in isolation in a globalised world where the factors of production land, labour, capital and entrepreneurship have been internationalised. The often-cited beacons of successful extractive industry based economies Canada, Australia and Norway all have a considerable grip on all factors of production, not just the free resource (land).Good institutions have played a key part, but crucially they have not let resource dependence undermine their long run economic growth.

What is often ignored about these countries are the underlying equally large-sized home grown technology, engineering and financial services sectors, which play an even bigger role in building cross-sector synergies and consequently their national competitive advantage.

One of the reasons why many African countries fail to negotiate better deals for their mining sectors is that they often only bring one component of the four factors of production to the table.That places them in a weak and often exploitative relationship.

Take a simplified case of a copper mine in Zambia, for example.The Zambian government offers the mine (land); Rio Tinto finances the development of the mine (foreign capital) and, of course, runs the project as a multi-national company (foreign entrepreneur).

Now Rio Tintos strategic decisions are run from the headquarters of the Anglo Australian company (skilled labour) relegating Zambia to supplying mainly operational, semi-skilled and unskilled labour.Further, the mine itself is capitalised with property, equipment and technology from foreign firms. Financing facilities are meanwhile arranged by foreign institutions in London or New York.

The major economic benefits therefore come down to royalties and taxes, of-course, but also low value non-sophisticated operational activities.It is a vicious cycle indeed; repeat this process over many years and it is apparent why some resource-rich countries are perennially impoverished.Meanwhile, other countries with no natural resources such as Singapore, Hong Kong, South Korea continue to thrive economically.

In Africa, Botswana is often cited as a perfect template on how natural resources should be managed, but what exactly has driven their success?Under the Debswana model, De Beers and the Botswana government have equal equity in the venture.Careful analysis shows that the successes of the venture have historically hinged on good governance and effective government priorities aided by a small population more than the merits of the deal itself.

Patience has been a key part of Botswanas tactics.It has taken nearly half a century for Botswana to become an equal equity partner in the venture and to bargain for some limited technology transfer and value-added services as well as some human capital development in the form of select higher skilled jobs being domiciled in the country.

Botswanas weak bargaining position emanated from offering just one component of the four factors of production in negotiations.To renegotiate a better deal, Botswana leveraged the fact that their mines are globally among the highest quality and low cost to operate, their long relationship with De Beers and of course their relatively stable political climate.

Similarly, Zimbabwe will need to offer a well-crafted unique value proposition to negotiate favourable deals, otherwise benefits will remain limited. This is not insurmountable, but remains opaque at the moment.

Another hyped policy decision is on beneficiating minerals to manufacture value-added products. It is no coincidence that most of the beneficiation of minerals takes place in the developed world closer to markets where the final products are consumed. The underlying economic principle being that it is more cost efficient to transport low value added products than to transport high value finished goods.

Global supply chain networks have thus been established based on that principle with huge cost implications of tinkering with those mature value chains. To business executives, a decision to establish a refinery in a specific country is seldom political, but justified by commercial viability and pragmatism.

Multi-national mining companies are often faced with making choices on refineries locations. In that respect, Zimbabwe will compete with other industrial hubs in China, India and elsewhere. The infrastructure challenges Africa face such as energy generation capacity, the absence of adequate transport systems and dilapidated rail networks in most cases render such projects uncompetitive, particularly when the final products are intended for export.

In the absence of vibrant domestic or regional consumption, significantly expanding mining value-added manufacturing capacity appears a long-term aspiration rather than something that can be realistically achieved in a few years.

So, what will ensure that Zimbabwe does not fall into recurring strategic pitfalls where resources perpetually benefit foreigners ahead of local communities? Clearly, political stability, curbing corruption and good institutions are crucial initial steps.Beyond that, however, the strategies articulated by most political parties, lack depth and clarity on how they will counter the market forces stacked against our negotiation capabilities in the global context.

It appears constrained capital availability is the easy excuse to accept the status quo and to offer better concessions to foreign firms.That certainly is a recipe for more frustration amongst locals as that will lead to unfulfilled promises.

The nation needs to dig deeper; without carefully thought out structural reforms that tip factors of production in our favour supported by coherent cross-sector long term strategic goals, harnessing the full benefits of our natural resources will remain an unfulfilled dream.

About the Author: Hopewell Mauwa is an economic analyst and global natural resources strategist based in London. He writes in his personal capacity and can be contacted on hopewell.mauwa@cantab.net

See the article here:

[ 9th May 2017 ] To what extent will natural resources contribute to Zimbabwe's economy? Research Papers - The Zimbabwe Mail

HAVE Zimbabweans become so myopic that they expect a miraculous return to economic prosperity in the post-President Robert Mugabe era? There seems to be a common misconception amongst us Zimbabweans that replacing the current government will suddenly turn the country into a bread basket again.

Granted, political instability, corruption and erroneous policy execution by government in recent years have left the country in a ravaged state with poor economic growth prospects. But does the absence of corruption and political instability guarantee a return to the kind of economic prosperity often promised by opposition politicians?

Indeed, a salient fact often muted from national economic debate is how exactly the country would position itself for competitiveness in the global economy post attaining stability. Zimbabwe is endowed with vast natural resources, but so are many other countries in the world. How the country produces, consumes and trades with other nations has important implications on the overall value we ultimately extract from our resources.

It is a fallacy to boast about natural resources in isolation in a globalised world where the factors of production land, labour, capital and entrepreneurship have been internationalised. The often-cited beacons of successful extractive industry based economies Canada, Australia and Norway all have a considerable grip on all factors of production, not just the free resource (land).Good institutions have played a key part, but crucially they have not let resource dependence undermine their long run economic growth.

What is often ignored about these countries are the underlying equally large-sized home grown technology, engineering and financial services sectors, which play an even bigger role in building cross-sector synergies and consequently their national competitive advantage.

One of the reasons why many African countries fail to negotiate better deals for their mining sectors is that they often only bring one component of the four factors of production to the table.That places them in a weak and often exploitative relationship.

Take a simplified case of a copper mine in Zambia, for example.The Zambian government offers the mine (land); Rio Tinto finances the development of the mine (foreign capital) and, of course, runs the project as a multi-national company (foreign entrepreneur).

Now Rio Tintos strategic decisions are run from the headquarters of the Anglo Australian company (skilled labour) relegating Zambia to supplying mainly operational, semi-skilled and unskilled labour.Further, the mine itself is capitalised with property, equipment and technology from foreign firms. Financing facilities are meanwhile arranged by foreign institutions in London or New York.

The major economic benefits therefore come down to royalties and taxes, of-course, but also low value non-sophisticated operational activities.It is a vicious cycle indeed; repeat this process over many years and it is apparent why some resource-rich countries are perennially impoverished.Meanwhile, other countries with no natural resources such as Singapore, Hong Kong, South Korea continue to thrive economically.

In Africa, Botswana is often cited as a perfect template on how natural resources should be managed, but what exactly has driven their success?Under the Debswana model, De Beers and the Botswana government have equal equity in the venture.Careful analysis shows that the successes of the venture have historically hinged on good governance and effective government priorities aided by a small population more than the merits of the deal itself.

Patience has been a key part of Botswanas tactics.It has taken nearly half a century for Botswana to become an equal equity partner in the venture and to bargain for some limited technology transfer and value-added services as well as some human capital development in the form of select higher skilled jobs being domiciled in the country.

Botswanas weak bargaining position emanated from offering just one component of the four factors of production in negotiations.To renegotiate a better deal, Botswana leveraged the fact that their mines are globally among the highest quality and low cost to operate, their long relationship with De Beers and of course their relatively stable political climate.

Similarly, Zimbabwe will need to offer a well-crafted unique value proposition to negotiate favourable deals, otherwise benefits will remain limited. This is not insurmountable, but remains opaque at the moment.

Another hyped policy decision is on beneficiating minerals to manufacture value-added products. It is no coincidence that most of the beneficiation of minerals takes place in the developed world closer to markets where the final products are consumed. The underlying economic principle being that it is more cost efficient to transport low value added products than to transport high value finished goods.

Global supply chain networks have thus been established based on that principle with huge cost implications of tinkering with those mature value chains. To business executives, a decision to establish a refinery in a specific country is seldom political, but justified by commercial viability and pragmatism.

Multi-national mining companies are often faced with making choices on refineries locations. In that respect, Zimbabwe will compete with other industrial hubs in China, India and elsewhere. The infrastructure challenges Africa face such as energy generation capacity, the absence of adequate transport systems and dilapidated rail networks in most cases render such projects uncompetitive, particularly when the final products are intended for export.

In the absence of vibrant domestic or regional consumption, significantly expanding mining value-added manufacturing capacity appears a long-term aspiration rather than something that can be realistically achieved in a few years.

So, what will ensure that Zimbabwe does not fall into recurring strategic pitfalls where resources perpetually benefit foreigners ahead of local communities? Clearly, political stability, curbing corruption and good institutions are crucial initial steps.Beyond that, however, the strategies articulated by most political parties, lack depth and clarity on how they will counter the market forces stacked against our negotiation capabilities in the global context.

It appears constrained capital availability is the easy excuse to accept the status quo and to offer better concessions to foreign firms.That certainly is a recipe for more frustration amongst locals as that will lead to unfulfilled promises.

The nation needs to dig deeper; without carefully thought out structural reforms that tip factors of production in our favour supported by coherent cross-sector long term strategic goals, harnessing the full benefits of our natural resources will remain an unfulfilled dream.

About the Author: Hopewell Mauwa is an economic analyst and global natural resources strategist based in London. He writes in his personal capacity and can be contacted on hopewell.mauwa@cantab.net

View original post here:

Can resources lift Zimbabwe's economy? - New Zimbabwe.com