The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™
The politics of resources redefined™

Centamin Egypt: on shifting political sands

The remarkable ousting of Mubarak is only the first step towards a new order in Egypt. For foreign investors such as Centamin, much will depend on the direction that the revolution now takes

The next step could be a tricky one

This is the fifth article in our ‘Snapshot’ series, designed to provide a rapid view of socio-political risks facing resource projects based on the LicenseSecure framework. Here we look at Centamin’s Sukari project in Egypt (please note that Centamin is not a client of Critical Resource – the Snapshot series is based on rapid ‘outside-in’ analysis and provides a provisional, rather than formal, LicenseSecure rating).

Explanation: For foreign investors in Egypt, as for the country itself, the future is uncertain. Centamin Egypt, an Australian firm which runs the country’s only major gold mine at Sukari, may be right to remain upbeat about its post-revolutionary prospects. Beyond a brief sit-in by workers, operations have so far been unaffected by the recent turmoil; the interim military government does not currently appear inclined to revoke licenses (though gold exports face some restrictions); and over the longer term, a new government could provide much-needed focus on investment and broad-based growth, making Egypt an easier place to do business.

But experience elsewhere suggests less happy scenarios are equally possible. A populist government riding anti-Mubarak sentiment, for example, may take a tough line with companies linked (even tenuously) to the former regime – as Indonesia’s authorities did after Suharto’s ouster. A nationalist or anti-Western dimension may grow in Egypt’s politics, impacting foreign-owned firms: according to state media, the workers rrecently protesting at Sukari were demanding a shift to Egyptian ownership (Centamin denies this, saying the sit-in was over working conditions). Equally, many fear an extended period of political instability will follow, undermining the operating environment – as happened in the Philippines and the DRC once initial optimism at the fall of autocratic leaders gave way to turmoil and ongoing corruption.

Given these uncertainties, Sukari’s provisional BB LicenseSecure rating has a ‘LicenseWatch’ designation, indicating that we expect the rating to shift within the next year. Which direction it goes will depend in part on Centamin’s ability to navigate the coming changes in the political landscape and to demonstrate the local and national benefits that its project delivers. But to a significant degree the strength of its socio-political license to operate will depend on how recent events in Egypt ultimately play out – questions beyond Centamin’s control.

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Background on LicenseSecure: The LicenseSecure™ framework assesses the health of the ‘socio-political license to operate’ for resource projects. A decision tool for resource firms and their financiers, it aims to support far-sighted, responsible management of sustainability and stakeholder issues around these often critical investments. LicenseSecure has been developed by Critical Resource over a number of years, based on an analysis of 60+ projects which have suffered challenges to the license to operate (for example where the host government has toughened fiscal terms or communities have impeded operations). The model assesses a project’s socio-political context and the quality of its management of these issues across six key categories, drawing on some 150 indicators. It is supported by an extensive database of projects which allows benchmarking and rapid assimilation of lessons from parallel projects.

* NB this brief provisional analysis is based on desktop research and does not constitute a formal LicenseSecure rating.

† Extensive information on Centamin’s management approach is not publicly available.

Photo: (c) iStock/ramihalim