The challenges and opportunities in the African mining sector

Wandisile Mandlana, partner, Bowmans South Africa

South Africa

It goes without saying the greatest challenge facing the mining industry in 2020 just like society was the pandemic through impact of the pandemic is yet to be seen. Another challenge facing the mineral industry in South Africa which unfortunately is not new is that we need to balance the competing interest of the stakeholders in the minerals industry - interest of government, communities and companies or shareholders. This imbalance has manifested itself in many legal challenges that are pending or before the court – and some recent decision which have huge implications for the mining companies.

A further challenge facing the minerals industry, which too is not new is the ongoing blackouts which affect mineral processings, smelters and refineries. Without electricity or alternative sources of energy those can’t be run optimally.

Like everything in life – where there is a challenge there is an opportunity – the pandemic has presented the minerals industry with an opportunity to accelerate their mechanisation programmes and such mechanization will hopefully deliver to the long-standing objective of zero harm and result in reskilling of employees. In respect of energy security there has been some movement in amending the electricity regulations to allow some degree of self-generation and this degree of self-generation can be utilised by the mining houses. It must be said though that although regulations have been amended the amendments aren’t comprehensive – one would have to carefully analyse the regulatory regime in deciding on how to go about self-generation.

Challenges

• Covid-19 pandemic
• The need to balance the competing interest of the stakeholders in the minerals industry
• Ongoing blackouts which affect mineral processing, smelters and refineries

Opportunities

• Acceleration of mechanization programmes
• Amendment of electricity regulations to allow some degree of self-generation

Malawi

Challenges

• Corruption – allegation against government official
• Demands by local communities – demanding services to be delivered to them by the private sector
• Political interference – new government made suspicion to decisions of the previous government and this has affected the mining sector

Kenya

Challenges

• Covid-19 pandemic – presenting obstacles to the mining industry in Kenya – drastic fall in price of many of the minerals due to the pandemic and the pandemic has resulted in many of the minerals site closures, disrupted supply chains and suspension of projects
• Revision to tax laws – in relation to the VAT exemptions
• Community grievances – gold prospecting prospect with Shanta Gold

Opportunities

• Completion of the national airborne duo physical survey in 2021
• Building bridges initiative task force appointed by the government in May 2018 – recommended government prefer policy on exploitation of natural resources
• Draft frameworks and instruments in the sector that are expected to enhance the mining sector regulation an improve investment

Uganda

Challenges

• Bureaucracy in the mining application process for miners licenses

Opportunities

• Investors partnerships with license holders

Zambia

Challenges

• Unpredictable mining tax regime
• Foreign investment protection
• Default on debt obligations put a strain on businesses including those in the mining sector

Opportunities

• Mining tax policy framework to be reviewed by government to introduce a more stable mining tax regime
• Diversifying the mining sector from copper and increasing investment in other minerals
• Start of 2021 has seen an increase demand for copper as well as its price – this should increase production and investment in the sector

Ethiopia

Challenges

• Investor assets security
• Overlapping constitutional mandate between federal and regional governments concerning regulation, conservation and administration of land and natural resources
• Shortage of foreign currency in Ethiopia – investors will find it problematic to setting foreign invoices or dividends in a timely manner

Opportunities

• Policy development for the mining sector
• Reduced profit tax rates, investment guarantees
• New platform for investors to renew licenses and access market information

Nigeria

Challenges

• Security
• Power and infrastructure deficiency
• Predominance of small scale and artisanal mining activity

Opportunities

• Green field exploration of certain minerals categorised as strategic commodities – gold, iron ore, zinc etc
• Establishment of laboratories and testing facilities
• Skills capacity development as well as credit financing