Potash Corp. of Saskatchewan has been in existence for about 35 years. It took more than 30 years to build the company's equity value to $10-billion. Right now, it is in the midst of an expansion that will see it nearly double the amount of potash it can produce; doing so will take 10 years.
Many of its individual assets will last decades. In North Carolina, Potash Corp. runs a large phosphate mine that currently has approval to stay open until 2045. (Phosphate, like potash, is a crop nutrient.) The reserves are there to keep mining it until the end of this century. Then there are the enormous potash deposits of Saskatchewan, which could supply the world for hundreds of years; Potash Corp. controls a larger chunk of those than anyone else.
Now BHP Billiton of Australia wants to own this fine business, one built to last for decades. And under the Investment Canada Act, the federal government must decide if it can, after deliberating for a total of … 75 days.
(Asked by a Bloomberg reporter whether he would grant an extension to the approval window, BHP executive Andrew Mackenzie replied: "I'm not that interested, I want the whole thing done by Nov. 3.")
This is absurd - the 75-day rule, Mr. Mackenzie's bluff, all of it. (BHP, by the way, just waited patiently for 16 months to find out that a proposed joint venture with rival Rio Tinto would die at the hands of regulators.) Such is the Canadian mindset about foreign investment that not only will we permit our biggest companies to be sold to the highest bidder, but we're willing to do it in the gestation period of a dog.
This is symptomatic of a larger problem. Canada's commitment to attracting foreign investment is laudable and, contrary to what the anti-business weenies on the political left will tell you, absolutely necessary. Without foreign capital, there isn't a hope of properly developing our natural resources. But there's being accommodating, and there's being spineless. If an Australian or Chinese or Brazilian company wants do buy some undeveloped potash deposit in central Saskatchewan, or an oil sands project, or some unloved mid-sized natural gas company, 75 days is more than enough time to decide.
But not for one of the most unique businesses in the country. Not for this one. This deal is complicated; it has an impact on jobs and resource control and provincial revenues; the answers are not clear and neither are the alternatives. Yet the whole thing is so rushed that the debate is focused largely on a yes/no question - should BHP be allowed to buy Potash Corp.? - rather than the more nuanced one - under what circumstances should BHP be allowed to buy it?
Saskatchewan Premier Brad Wall now says the answer is, "It shouldn't." Too many foreign mining companies have swept in, he says, bearing large cheques and grand commitments, only to dump those promises in the tailings pond after a year or two. The most-cited example is Brazil's Vale, which bought Inco in 2006 with a solemn pledge to Investment Canada that it wouldn't cut jobs for three years, then slashed them by the hundred when the Great Recession hit.
Even the Vale story illustrates the short-term bias of the Investment Canada process, which requires foreign buyers to make commitments on items like employment and Canadians in management. The term of these commitments is generally three to five years. Why? What does the next three years have to do with anything, if the government's concern is the long-term health of the economy? Why not measure Vale's performance on whether or not it increases employment in places like Sudbury over 10 years, or 15? In fact, why not make some of the commitments permanent?
For instance: BHP says it will make Saskatoon its global potash headquarters, creating high-level executive jobs. Very well. So the government's job, then, ought to be to force BHP to spell out exactly what that means - the office can't be a shell; the top executives can't live in, say, Chicago, or Melbourne; power over certain kinds of decisions must be vested with the local office - and say, this is how it must always be. Forever. You shut the head office, you lose the asset.
If BHP is really in it for the long term, it shouldn't have a problem with this. So what if it's a 100-year commitment? The potash will still be there in 100 years. Or, for that matter, in another 75 days.