Africa is open for business

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International conference circuit reveals a resurgence of interest in the African mining industry - the PDAC report

For almost a decade and as part of its on-going thought leadership initiatives, Webber Wentzel, has hosted a breakfast seminar at the start of the Prospectors and Developers Association of Canada's International Conference (PDAC) in Toronto, Canada. PDAC is the largest mining focused conference in the world, attracting over 25 000 delegates from over 120 countries annually.

The Webber Wentzel seminar is an official affiliated PDAC event and takes the form of a panel discussion aimed at creating a forum for open dialogue between African governments and Africa focused investors, thus promoting investment in Africa's mineral rich jurisdictions. The panel discussion once again provided an insightful look at the perspectives of African governments, on the one hand and investors in the mining sector, on the other.

This year, the panel was chaired by Webber Wentzel's Manus Booysen, and consisted of an eclectic mix of senior representatives from African governments, the African Union, Chambers of Mines and the investor community including: H.E. Ato Motuma Mekassa, Minister of Mines, Petroleum and Natural Gas, Federal Democratic Republic of Ethiopia;

  • H.E. Prof. Hashim Ali Mohamed Salim, Minister of Minerals, Republic of Sudan;
  • Mr Daniel Major, Chief Executive Officer, GoviEx Uranium;
  • Mr Paul Msoma, Economic Affairs Officer - Mineral Governance, United Nations Economic Commission for Africa's Africa Minerals Development Centre; and
  • Mr Veston Malango, Chief Executive Officer, Chamber of Mines of Namibia, and Technical Advisor, Association of Chambers of Mines and other Mining Associations of Africa.

The resurgence of interest in mining on the continent may be gleaned from the fact that over 150 delegates braved an icy Toronto morning to attend the panel discussion. Delegations and representatives from 16 African nations including the Kenyan Mining Minister and the South African Deputy Minister of Mineral Resources were present and actively participated in the debate.

The message from investor's was clear - potential investors will look for investor friendly climates with reasonable, clear and predictable mining policies. Although governments are entitled to shift policies for a host of reasons, including the need to address the socio-economic needs of the country and redress prejudicial historical practices, government must also provide business with the comfort that such changes will be done through proper consultation which follows due process and takes into account the commercial realities and cyclical nature of the mining industry. Fiscal, policy and regulatory certainty are key elements for the type of long term investment mining requires. For governments, the real long term benefits may be derived from the 'multiplier effect', the growth of ancillary industries and the indirect benefits that a thriving mining industry will bring rather than short term direct taxes and other obligations which are deterrents to investment. Although mining companies accept some sensible level of social investment in communities - they cannot be looked upon as surrogate governments - the sole purveys of education, healthcare and infrastructure in the communities where they operate. It is simply beyond the remit of what any investor could feasibly do.

African governments wish to see more direct benefits for near mine communities and the fiscus in general. Possible means of obtaining more direct benefits include: requiring mines to pay royalties or more tax; requiring some level of local ownership of the mines/mining rights (through employment equity or localisation obligations); and/or though requiring mining companies to beneficiate minerals locally. In essence, African governments, like other governments in resource rich regions, are seeking to take advantage of the recent spate resource nationalism measures. For some governments, resource nationalism has also become simple politicking rhetoric to ensure leftist votes at the polling stations (possibly sacrificing long-term investment and job creation at the altar of opportunism).

The fact of the matter is - that there is truth in both these messages and the future of the African mining industry requires that governments and investors appreciate each other's objectives and find a healthy balance. What was truly inspiring was the seminar's core theme that both business and government appear to have an earnest desire to find that very healthy balance that would lead to growth in the African mining space to the benefit of all stakeholders.

What was apparent from the panel discussion is that African governments are keen to start driving investment into the mining sector again and to do this they need to recognise that it will need to create an environment which is appealing to investors. Business, on the other hand accepts that there is a cost of doing business in Africa and an urgent need to constructively assist in an equitable distribution of the wealth created by mining development. And both government and business recognise that economic growth through mining development requires bridging the trust deficit that has developed between them. To enable the mining industry to obtain the social licence to operate we need healthy relationships between all stakeholders including labour and communities to ensure equitable participation in the continent's vast mineral wealth for the benefit of Africa and all its people.

From a South African perspective, the uncertainty regarding Mining Charter III and the MPRDA Amendment Bill has been a significant stumbling block to the growth of its mining industry. Despite very positive recent political developments in the country, the positive sentiments amongst mining investors have been stumped by parliament adopting a motion approving the principle of expropriation without compensation - a principle at odds, not only with creating investor confidence but also with all local, international and constitutional legal principles. The reality is that we are in a global economy where investors are free to choose the best investment opportunities. Sensible policies need to be put in place in order for South Africa to put its best foot forward in attracting much needed investment. All eyes are on the new leadership to achieve a united labour, community, business and government front to create an environment conducive to mining investment.

The resounding message that came out of PDAC is that Africa and South Africa are open for business. Now it’s time to put talk into action, and turn action into results.

Background

PDAC is a four-day annual convention held in Toronto, Canada, and has grown in size, stature and influence since it began in 1932 and today is the event of choice for the world's mineral industry, attracting more than 25 000 attendees from across the globe.

Webber Wentzel continues to act as thought leaders at world events such as these in furthering its comprehensive service offering to the mining industry, governments and other stakeholders to make the African mining space a better place for all.​