New Caledonia represents one of France’s last holdings in the South Pacific, an island territory whose population is half composed of Melanesians and half of those of European descent with a mix of those of mixed heritage. France has given New Caledonia an increasing degree of sovereignty, after the Ouvéa cave terrorism incident in 1988 and the Nouméa Accord in 1998, leading up to a series of binding referenda.
New Caledonia, whose main island is about the same size as Taiwan, has become the latest battleground in global separatist politics as they face their second independence referendum in just a matter of weeks. This is being held in the shadow of the 2018 referendum, a narrower than expected vote, when most prior polling put the outcome as 60+ rejecting independence, the narrow 56.4 to 43.6 defeat left many French Unionists uncomfortable. A third referendum can be held in 2022 if this one is defeated as well.
Analysis has shown that there is a link between ethnicity and voting patterns, in terms of support for independence, with the ethnic Melanesian Kanak group more likely to vote for independence, and Wallis and Futuna group members and those of European descent more likely to vote to remain in France. Because of differences in the legal residence for Europeans, they will not be automatically registered to vote in this election, and this additional burden may cause a change in their turnout in 2020.
However, 2020 may differ markedly from 2018 in more than this regard. New Caledonia has little arable land and is largely reliant on food imports, and on the processing and export of its large deposits of nickel and cobalt, with about 15% of its GDP reliant on the metals industry. New Caledonia is also home to between 11 (New Century Resources) and 25 (Yahoo) percent of the world’s known nickel reserves, a resource crucial for the production of certain electrical batteries and whose demand should only increase in pace with the growth in EV markets. As of 2020, though, nickel prices are highly volatile, and prices while high for the year, remain at a decade low, making operations difficult in the short term for many producers.
With such a large dependence and bright prospects for the future of the nickel extraction industry, the announcement that Brazilian owned Vale would shutter its Goro mine after a deal for the sale of their fell through was shocking, and raised speculation by some that the threat of mass layoffs would influence the outcome of the referendum. Vale employees 1,300 workers and hundreds of subcontractors, alone representing well over a full percent of the island’s 119,500 strong labor force.
There are rumblings that independence advocates could potentially aim to nationalize the industry to prevent layoffs, sales to international mining conglomerates, or closures as threatened by Vale. This would ensure continued capacity in the long term assuming that prices would rebound in the next 3-5 years. New Century has ended talks with Vale for the purchase of its operations after an exclusivity period with no deal, and New Caledonia’s largest private sector employer, the Societe le Nickel (SLN) is also facing financial hardship.
This is not the first time though that Vale has threatened to downscale their operations in New Caledonia. In 2017, just prior to the referendum in 2018, they made similar announcements that they were seeking a buyer, and the CIA suggested that the mass layoffs that may have taken place then had the potential to influence the first referendum. This never came to fruition, as Vale found itself disappointed with the offers made at the time, and instead in 2018 promised to invest 500M USD over three years ending in 2022 in the New Caledonian operations.
At this point, they seem incapable or unwilling to sustain this investment and either the pro-independence or pro-union side could step in with promises of providing financial solvency to keep this industry viable long term. With Vale looking to exit, the only option in this case would be a nationalization, something that Macron may be unwilling to commit to.
New Caledonia has a low public debt, but also faces persistent high level unemployment and poverty, 14 and 17 percent rates respectively, and the close of the Vale plants could land a crippling blow to the economy if nothing is done. If the pro-independence camp goes the route of promising to nationalize and indigenize the mining industry in the country, it could tie the new national economy permanently to this single industry, for better or for worse. The potential for recurring plant sales and layoffs, combined with corporate insolvency in the mines also carries a large economic but also political cost over the short term as if capacity dries up and skills are lost, this could damage the long term potential of these national resources.
This referendum represents a rare example of resource exploitation by multinationals being so closely linked to a political election in a colonial territory.
Staff writer: Ari B