INVESTING IN AFRICAN MINING POLITICS, PRACTICE AND POLICY FOR SUCCESS

By Lili Nupen,

Africa has a remarkable mineral endowment that already provides many of the critical minerals needed by the global economy, but abundant natural mineral endowments do not automatically translate into successful and sustainable mining industries. This is especially true for junior miners.

To develop sustainable mining on the continent, Africa needs long-term, responsible investors who not only consider regulation, but develop a local minesupporting ecosystem to capture more of the value for its host communities.

At a recent panel held during the Mining Indaba 2023 these policies, practices, and politics were unpacked by Tebello Chabana, senior executive: public a airs and transformation, Minerals Council South Africa; Lili Nupen, co-founder and director of Mining and Environmental Law, NSDV; Antony Phillipson, United Kingdom High Commissioner to South Africa; Dr Thakane Ntholi, Council for Geoscience (CGS); and Miyelani Shikwambana, director, Brunswick (moderator).

WHAT DO GLOBAL ECONOMIES NEED FROM AFRICAN MINING?

Although we have this significant endowment of minerals, global economies need to at least be able to access these minerals considering the major demand for raw materials for the green revolution – minerals that Africa has in abundance.

This type of global access is currently policy-driven and no longer solely based on supply-and-demand economics. Look at the shi from the United States (US) previously focusing on China, to now focusing more on Africa. The politics matters and you can see this in the political and policy flux between China and the US.

Western economies are hedging their supply chain accessibility away from a single focus on Southeast Asia access and have come to Africa to strike up collaborative agreements for access to our minerals. The latest memorandum of understanding between the

US, Zambia and Democratic Republic of the Congo (DRC) is just one example.

We have also seen an influx in interest through South Africa to places like the DRC for copper, Zimbabwe for lithium, and other countries like Zambia for access to green metals because of political demand for a “greener solution” worldwide.

WHAT IS NEEDED TO CREATE WEALTH AND TRANSFORM THE INDUSTRY?

We have all heard about the dysfunctional application system or more specifically the non-existent cadastre system. Wealth is literally leaving our shores given the complexity around merely determining whether there is an existing right for a certain mineral in respect of certain land.

Junior miners for instance – who could become a huge part of creating wealth through mining – are facing major issues with access to international and local finance once an application has been approved due to these challenges.

In most instances, SA’s Industrial Development Corporation will only fund a junior miner if there is an anchor investor already; and in most instances, international funders want to know why no one in South Africa will fund the project before they fund it, becoming a vicious cycle.

Hands Tied

What this ultimately leads to is sterilisation of minerals and a group of junior miners who cannot properly extract and process the minerals without the requisite funding. This lack of funding stems from the perceived uncertainty regarding a strict regulatory environment and corrupt regulator (and the potential for the legislation to change on a whim), and all these issues I’ve just spoken about.

Aside from the above, we have found incredible success for junior (and major players) by nurturing our relationships with regulators, understanding their pain points, and collaborating to find solutions instead of escalating through unnecessary court applications.

Various amendments to legislation can assist in creating collaboration with regulators, junior miners, and majors to “o load” these assets onto operators who are able to fully process them. And where the majors are recognised by the regulator for these transactions, perhaps rewarded through compliance points, as an example.

Additionally, a more concerted collaboration with Southern African Development Community (SADC) countries regarding a regional policy whereby access to logistics, ports, rail, road etc. are considered and permitted transport of ore across borders where expert beneficiation should be considered. Ultimately less “stick” and more of a “carrot” approach in all regards is needed, with a bigger focus on the junior space and exploration of our resources.

Driving Sustainable National Development

There’s a lot that needs to be done, but a lot that can be done in our current circumstances. We need greater transparency with regards to the cadastre system and working together with other SADC regions during the super cycle in a collaborative way.

We can also look at encouraging exploration in several ways. This can be from amending strict legislative requirements which apply to both majors and juniors, to encouraging investment in the junior space.

There also needs to be a greater ability for juniors and majors to collaborate –perhaps tax incentives for majors to assist juniors – collaboration, divesting of smaller assets in favour of juniors, or assisting with logistics, rail allocation etc. Essentially, we need a greater focus on the junior sector and how major players encourage and support mining and investment in this area.

NSDV, as the first fully integrated law firm specialising in mining, construction, energy, and environmental law, encourages collaboration on all fronts to achieve these goals.