MINING INDABA
in the investment framework, including the Zimbabwean
mining laws. The announcement that the act will be repealed
means that the restrictions, including in relation to diamond
and platinum mining companies, will be done away with, and
hopefully open up investment opportunities, for Zimbabwe.
Zimbabwe will however also need to radically overhaul
its mining laws, to attract further investment, including in
respect of an ageing and crumbling infrastructure. It can do
so by amending its policy and regulatory framework so that it
supports investment, while benefitting the Zimbabwean people.
African countries that can create a legal landscape with the
least amount of red tape, are likely to attract more extensive
investment. In Uganda, for example, there are no restrictions
on foreign investment in mining, provided the mining
activities benefit the local communities. This has attracted
large investment from companies such as Rio Tinto, and in
the third quarter of 2018, Uganda recorded and all-time
high in terms of its GDP from mining. Botswana is another
example where, because of its legislative framework, mining
companies believe that they are able to function effectively
and efficiently. About 40% of the GDP of Botswana is a result
of mining, and this is mostly due to the relatively certain policy
and regulatory environment.
Rwanda has more recently made amendments to its mining laws
and regulations in a bid to attract foreign investment, which is
aimed at promoting partnerships between foreign investment
companies and local companies. The new mining laws were
introduced in Rwanda in 2018, and it is still too early to tell
whether these new laws will attract the expected investment.
Which regulatory risks should mining companies and suppliers
that venture into Africa be aware of? How should they go
about mitigating these risks before entering that country?
The most important thing that mining companies can do, before
investing in a country, and to mitigate the risks, is to have a
proper understanding of the relevant landscape in the relevant
country – there has to be a realistic view, and expectations must
be managed accordingly.
What is absolutely critical to successful investment is to have
a good understanding of the community landscape. Unless
mining companies invest and develop mines in such a way
that they are granted the social license to mine, investors and
the mining companies can expect to face lengthy delays, and
disruption to the implementation of the project, and, once
the mine is up and running, disruption to mining operations,
including getting the minerals to market.
Community activism is extensive, and potentially disruptive.
This can be avoided by not only identifying the need to engage
with communities, but also to understand the needs and wants
of particular communities (social and socio-economic projects
cannot simply be implemented without understanding what
the needs and wants of the community are), and delivering
on promises made. For example, it is not simply good
enough to build a structure for a school – everything that is
required to make the school function properly, must also be
provided, such as furniture, IT, qualified teachers, and proper
administration and funding.
Recent cases in South Africa (Duduzile Baleni and Others, and the
Minister of Mineral Resources and Others, and Grace Masele Mpane
Maledu and Others, and Itereleng Bakgatla Minerals Resources
(Pty) Ltd and Others) have also highlighted the importance of
understanding decision–making structures within communities
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and the acknowledgement that, different communities have
different decision making structures and requirements. These
principles also apply elsewhere in Africa.
Hidden costs of implementing mining projects must also
be considered. These hidden costs may come in the form of
additional taxes, import and export duties, exchange control
regulations, regulations around which minerals can be sold, and
to whom, and the often-extensive costs involved in complying
with a particular country’s mining laws. Investors and mining
companies should also be mindful of the additional costs
incurred as a result of delays, particularly where the processes
contemplated in the mining laws, are not complied with,
properly, or at all, because they are not understood properly.
Where do you see the African mining industry in the next
year or two? Which countries or regions in Africa will be the
hotspots and why? Will West Africa continue attracting the
majors and exploration companies? Will East Africa become
attractive again?
Most, if not all the African countries that are mineral rich, face
the challenge of having a dual mining system: namely a formal
mining sector; and an informal (small scale an artisanal) mining
sector. Often, the two are not aligned, and therefore clash.
While formal or large-scale miners cannot always be said to
comply with the mining laws (including the environmental laws)
in a country, it is often the artisanal and small-scale miners that
flout the mining and environmental laws, essentially, making
them illegal miners.
This must, however, be distinguished from the true illegal
mining activities which are carried out, often, side by side with
lawful mining operations at existing mines, where the illegal
miners are facilitated by those employed in the formal or legal
mining sector, and at abandoned mines.
This is likely to be a significant challenge to the mining sector,
within Africa generally, and it is necessary to regularise the
small scale and artisanal mining, and the true illegal miners by
creating regulatory frameworks which facilitate easy access,
administration and management. This may not be easy. In
certain instances, the small scale and artisanal mining forms part
of a greater corrupt and criminal network, often supported by
members of government, protected by the defense force and
police services in that country.
The reality is that Africa is a mineral resource-rich continent,
including battery minerals, and there will always be investors
who are willing to take the risks, regardless of the level of
uncertainty.
Africa is therefore likely to continue seeing significant
investment in the mining and natural resources sector and,
out of necessity, the infrastructure which ultimately supports
getting the mineral to market.
2020 is likely to see further investments in countries such as
Angola, Uganda, Rwanda, and Egypt, based on the view (and
possible perception), that these countries still offer a good
return on investment.
Growth and development of the mining sector in Africa is
heavily dependent on exploration spend. Exploration is high
risk, with low return, and African countries will need to create
incentivised frameworks which encourage investment on
exploration.
African Mining
African Mining January 2020
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