Question 15
- What is a cartel
- Highlight four objectives of cartels in mineral industry
- Write explanatory notes on any two forms of mining business
This is a straightforward question but the candidates who attempted it performed fairly good, particularly on 15 (b) “highlight four objectives of cartels in mineral industry”. The question requested the candidates to give the following points:
(a) Definition of a Cartel
A cartel is an organization created from a formal agreement between a group of producers of a good or service to regulate supply in order to regulate or manipulate prices. In other words, a cartel is a collection of otherwise independent businesses or countries that act together as if they were a single producer and thus can fix prices for the goods they produce and the services they render, without competition.
(b) Objectives of Cartels
- to stabilize markets
- to obtain a larger share of mining profiles
- to promote domestic mineral processing
- to ensure better planning
- to help conserve resource by prudent use or extraction
- to use minerals for political advantage.
(c) Forms of Mining Business
- Sole proprietorship: This is the form of mining business that an individual owns. The individual makes his own decisions and is responsible for all debts and payment of taxes. The challenge in this kind of mining business is that the individual owner may not be able to generate the capital required to start and run a mine. He shares the profits from the mining business with no one and also bears the full responsibility for loss. Example of this can be artisanal mining business or buying and selling gemstone.
- Partnership: A partnership is formed when two or more people (partners) come together to run a mining business. Partners make decisions together and as co-owners, they share the financial risks and debts. Partners can bring money, skills and experience to the mining business. In order to avoid future misunderstanding, it is good to enter a partnership agreement. A partnership agreement should define: the type of business, how profit and loss will be shared and duties of each partner.
- Limited liability company: A limited liability mining company may be defined as a legal entity created through state approval and treated as separate from its owners. A limited liability mining company is owned by two or more owners called shareholders. The owner can be investor(s) in the in the business and may or may not be active in the mining business. This kind of business can be private or public. The limited liability company is a separate entity from the individuals who contributed the capital. In case of failure, the individuals cannot be called upon to pay any of the company’s liabilities. Individual’s contribution to capital is usually quoted in shares.
A private limited liability company is one which is registered as such and bears a name which could be any name or family name with the word “Limited” attached to it. It cannot offer shares to the public for subscription.
A public Limited Liability Company is one in which contribution to the capital is open to the generality of the public-foreigners and nationals. Nigerians must own at least 60% of the capital. A public limited company can bear any name with “Public Liability Company” or “Plc” attached to it. Buyers of the shares are called shareholders and their rewards come as dividends usually paid yearly.
- Cooperative Society: A Cooperative Society is an association of individuals with common interest who come together to promote the welfare of members. In the case of mining business, small scale operators such as artisanal miners may come together to form cooperative society. This may help them obtain assistance from government, donor agency or obtain loan from banks to purchase mining equipment such as excavators, bulldozers etc. In Nigeria, mining cooperatives are registered with the Ministry of Mines and Steel Development (Ministry of Solid Minerals Development). Cooperatives are beneficial to small scale operators because operators bring their skills and experience to the group and as mentioned before, it is usually easier to get outside support (training, funding, etc) as a cooperative than as individual operator.