Looking in a bit more detail at the Nevsun “mislead” cable #Eritrea

The statement that both the World Bank and officials from the European Commission believed that Nevsun was misleading potential investors was the immediate headline, but there were a series of other points from the Wikileaks cable which will be of interest to those following Eritrea’s progress/plight.

Both the French and the European Investment Bank were duped very effectively. 

The latter’s report stated: “The Bisha Project itself, which can expect to become a highly profitable operation does not feature any serious technical or market difficulties.  Environmental and social issues are being adequately addressed.” 

NB.  The Visit Eritrea team suspect that the mine uses conscripted labour supplied by the Isaias regime.  To us that’s a social issue which isn’t being addressed.

The report also accepted at face value the Isaias regime’s explanation why they shouldn’t join the Extractive Industries Transparency Initiative.  The Ambassador summaries Isaias’ position, replicated faithfully and unquestioningly by the EIB in their report: 

“[Eritrea] would have to accept that the international community did not trust them, and when according to the EIB report given Eritrea’s history of abandonment by the international community, it is they, the GSE, who have reasons to mistrust the international community.  Thus, insistence by development partners to the conditionalities of the EITI questions the sincerity of Eritrea’s commitment to just and fair development and as such is unacceptable.  Second, efforts to address the ‘resource curse’ and the risks associated with large financial windfalls for poor countries insult the GSE’s capabilities, intelligence and its sovereignty over the use of its own resources.”

Meanwhile, miners working in Eritrea are nervous.  Demetrius Pohl, the Director of Sanu Resouces (another Canadian company) shared with an Embassy official his “major concerns”:

  1. the Isaias regime’s history of taking over profitable businesses
  2. under the current mining law the GSE could potentially reap up to 48% of the mining profits; complicating raising funds or securing buyers for the mining rights. 
  3. the potential under the existing law for the GSE to have nearly 30% ownership in a mining extraction company is inconsistent with the 10% ownership that has become the standard in other parts of Africa

From my perspective, Point 1 is the most important one for those who care about Eritrea and its people.    Foreign companies won’t invest in Eritrea as long as they understand that the Isaias regime is likely to steal all their profits, confiscate their capital investment and conscript their workforce.

However, As long as investors have certainty about the percentage of profits they will receive, I don’t think that Eritrea should worry at all about taking 48% (point 2) in tax.  Also ownership by the government (point 3) is not too much of a problem per se,  as long as that government is honest, well-intentioned and reliable – which the Isaias regime is most certainly not.

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