Business

Increasing uncertainty drives away investors

Mail & Guardian Correspondent

Resource nationalism is having a direct effect on commodity prices, making them more volatile and threatening global security.

Resource nationalism is having a direct effect on commodity prices, making them more volatile and threatening global security.

The increased fluctuation in prices increases risk and raises the cost of capital for companies.

Governments can also be penalised. If resource nationalism is pursued too vigorously, investors are discouraged and companies become reluctant to pursue long-term projects with high capital outlay. This is aggravated when governments seem likely to disregard existing agreements.

It was clear at the recent Mining Indaba in Cape Town that investors have taken note of countries that are increasing taxation or looking at holding back a portion of their resources for domestic use, influencing supply. – Mail & Guardian reporter


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