Africa as a mining destination still has a lot to offer and – provided all players acknowledge the need for ‘equitable sharing’, along with policy and regulatory stability – there are likely to be sufficient opportunities for everyone to benefit, writes Wandisile Mandlana*
The mineral potential of African countries is not open to doubt, and the mining sector has since time immemorial been one of the major contributors to the continent’s economy. As new minerals continue to be discovered and, subject to the finite nature of minerals, the mining sector will for the foreseeable future continue to be a key component of diversified, vibrant and competitive national, continental and international capital and commodity markets. Questions and criticism are raised from time to time, however, as to whether the benefits of Africa’s mineral wealth are equitably shared. In an attempt to address these concerns, most African countries have passed law and policy instruments aimed at encouraging equitable distribution of their nations’ mineral wealth. These instruments have unfortunately been criticised over the years as ‘protectionist’ and stifling economic growth. It is for this reason that the African Union in 2009 adopted the Africa Mining Vision (AMV), which is intended to be Africa’s blueprint mining sector vision. Among other things, AMV calls for “transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”.
Among other things, AMV calls for “transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development”. One of the practical actions adopted by the African Union to give effect to the AMV is the intended move towards improving the legal and regulatory framework and increasing public awareness of and participation in mining. In response to the AMV, many African countries have recently embarked on legislative and policy reform in one form or the other. This reform is intended to increase or diversify mining companies’ ownership, mainly through indigenisation or local content requirements, increase public participation in decision-making and ensure environmental regulation and community development. Managing these issues could make or break a project. In this article, we consider the minimum content of these issues and where appropriate, make some suggestions on how best to deal with the issues, taking into account some of the country nuances.
African countries are at different stages of their legislative and policy reforms, some of which have unfortunately resulted in regulatory uncertainties in some instances. These policy and regulatory uncertainties include but are not limited to transitional provision of past and present instruments, fiscal regimes, regulatory consents, environmental protection and regulation, and empowerment requirements. The uncertainties may manifest themselves in critical aspects of any mining project regardless of the project phase, including a new project, expansion, exits, closure or when entering a new jurisdiction. If the African mining sector is to continue to be a key component of a diversified, vibrant and globally competitive industrialising African economy, as required by the AMV, it will be important to improve the continent’s policy outlook because this is a key investment consideration.
The importance of a certain and stable policy and regulatory environment is evident from the emphasis placed on it in well-established and widely accepted sources such as the Fraser Institute’s mining survey (Fraser Survey). In determining a country’s investment attractiveness, the Fraser Survey takes into account the country’s mineral potential and policy perception, among others. While geological attractiveness is a key investment consideration, several studies have shown that investors seriously take into account the policy and regulatory environment in choosing their mining investment destinations. A country with stable and certain regulatory environment tends to attract more investment. For Africa to achieve the objectives of the AMV of shared prosperity, more effort should be put into ensuring stability and some uniformity in the continent’s regulatory regimes.
Mining often results in disputes between mining companies and communities living near the mines. Most of these communities are traditional communities. As a result, most African countries have laws that protect the rights of traditional law and traditional communities, as well as general requirements relating to public participation. Over and above these laws, governments are enacting new laws seeking to introduce more stringent public participation requirements, and disputes involving communities are on the rise. For example, in Kenya, new legislation to protect the rights of individual landowners and promote community participation in mining and prospecting activities was recently enacted.The Kenyan Mining Act, 2016 now requires that owners provide
individual consent to mining activities prior to the mining company applying for a mining right. In South Africa, new regulations expanding consultation requirements have recently been published for comment. In addition, South Africa has seen an increase in disputes involving mine communities seeking to test the evolving, internationally accepted principle of ‘prior informed consent’. Given the complex legal requirements relating to public participation, it is essential for any mining company to plan and have a clear programme of managing community engagements and interactions. These are critical to the sustainability of any operation.
Much is written about African countries’ indigenisation requirements. Criticisms and drawbacks of these requirements are well documented and nothing much will be achieved by rehashing these here. It must be mentioned, though, that most countries’ indigenisation requirements have improved and/or stabilised – especially those relating to ownership and local procurement. Given the importance of the objectives of indigenisation or local empowerment, a company invested in the African mining sector needs a
sensible strategy to deal with these requirements. Failure to do so can have a deleterious effect on the sustainability of the operations and/or adversely impact the social licence to operate. Some future developments in the indigenisation/local content space to which mining companies should pay attention include the ‘on and off’ calls many African countries have been making for increased state participation in mining and restrictions on exports of ore that is not beneficiated to a predetermined state
*Wandisile Mandlana is a partner at Bowmans specialising in environmental law, mining law, energy and climate change law.
Most African countries have detailed laws intended to address the impact of a mining operation on the environment and human health and safety. These measures include: (i) the requirements to address the environmental and social impacts before undertaking the mining operation or to conduct the mining operations in accordance with good mining industry practices; and (ii) the obligation to rehabilitate the mining area. Anyone involved in a mining project in Africa will have to contend with increased focus on laws containing various environmental protection measures. In addition to the existing laws, some of the key environmental protection measures to prepare
for include planning for climate change regulation and/or litigation. A few countries are working on climate change regulation laws and policies that will have to be taken into account in planning or implementing new and existing projects. While there is no doubt about Africa’s minerals potential, there is also little doubt about how this potential can be extracted. African governments, industry and communities will have to work together more to achieve the shared vision for the African mining sector. Equitable sharing and policy and regulatory certainty should be high on the agenda of all parties.