Vague laws hold back mining in Africa
Inconsistent application of new policies frustrates companies
DESPITE strengthening commodity prices this year and mining houses returning to the hunt for acquisitions, Africa remains a tough ground to mine as vague government policies continue to frustrate companies.
This week, Randgold Resources, which has gone headto-head with the Mali government over tax issues, had to pull out all the stops to solve its tax claims problem. The Mali government escalated the dispute on Monday when it closed the group’s offices in Bamako, the country’s capital.
Randgold CEO Mark Bristow said on Wednesday it was disappointing that the company, which had invested in Mali for about 20 years during which time it had successfully dealt with 12 or 13 ministers of mining, had not yet resolved the issue through dialogue.
“This latest round comes across a little bit as collecting money rather than working to calculate a reasonable tax on profits according to our agreements, so of course it’s a matter of interpretation, [But] I have no doubt the issue will be resolved soon.”
Randgold remained on good terms with the governments of the Democratic Republic of Congo and Ivory Coast, the other African countries in which it operated — despite an increase in mining legislation and codes of practice in the past couple of years.
Bristow said the problem lay with grandfather mining codes (in which old rules continue to apply to some existing situations while a new rule applies to all future cases) that were open to interpretation.
In Ghana, AngloGold Ashanti Ghana is awaiting arbitration to solve its dispute with the government which refuses to reinstate military protection at the company’s Obuasi operation which was invaded by illegal miners early this year.
“AngloGold Ashanti Ghana has been unrelenting in its engagement efforts with the Ghana government at various levels,” said AngloGold spokesman Chris Nthite after the start of proceedings at the International Centre for Settlement of Investment Disputes, which AngloGold approached to broker a resolution.
Despite the impasse, relations with the government were “cordial”, he said.
Nedbank mining and metals analyst Paul Miller said it was in the nature of mining companies anywhere in the world to be “held to ransom” by governments. Tensions or a breakdown in trust between mining companies and governments were not unique to South Africa, Africa or developing countries.
“It is the nature of mining. Because capital is sunk and you can’t move the hole in the ground, mining companies are always going to be the sucker when it comes to government looking for additional revenue,” Miller said.
In South Africa many of the more than 200 pieces of legislation relating to mining were “perfectly valid”, but the Mineral and Petroleum Resources Development Act and the mining charter were vague and officials had a huge amount of discretion when it came to enforcing compliance.
“The concern is that many of these laws are not applied in an administratively fair way. Laws and regulations should be deliberately drafted to eliminate official discretion. You can have a policy that wants to transform the industry but you shouldn’t allow individuals to bureaucrat what that means,” Miller said.
BP Bernstein portfolio manager Makwe Masilela said regulation was necessary because shareholders and governments would “try to maximise whatever they can get out of mining — hence the clash”. There should be a balance between shareholder returns and social labour plans, including transformation.
In Papua New Guinea, Harmony has been subjected to a two-year waiting period for a mining licence.
“Obtaining the licence in Papua New Guinea is not an issue, but simply part of the process to apply for the special mining lease. Discussions with government, which is very supportive of mining, are ongoing,” said Harmony spokeswoman Marian van der Walt.
Harmony’s initial application for a pre-mining licence was rejected earlier this year. It then applied for a full mining licence, for which it is now waiting.
The process included environmental assessments, stakeholder engagement and tax and legal discussions — which will take an estimated two years.
Chamber of Mines spokeswoman Charmane Russell said amendments to the Mineral and Petroleum Resources Development Act and the finalisation of the mining charter, which has been delayed, have not made matters any easier for an industry also affected by stagnant or falling commodity prices and rapidly rising input costs.
The increasingly rigorous application of Section 54 of the Mine Health and Safety Act, resulting in work stoppages following fatal accidents, was also a bone of contention.
Russell said: “In recent times the industry has expressed its concerns that Section 54 orders, in particular, have been implemented excessively, in situations that have not warranted suspensions of operations to the extent they have done.”
She added that the industry was in discussion with the office of the Chief Inspector of Mines over this issue and hoped to reach consensus soon.
Masilela said mining companies needed to concede that stoppages were necessary after a death.
“They are stopping because they are not sure and they need to assess whether that fatality can happen again. As a government you have to be responsible and make sure that, whatever the cost, it is not going to happen again,” he said.
Cutting costs was necessary because the industry was depressed, but mining companies should not compromise the safety of workers.
The chamber said the relationship between the government and mining companies had improved in the past few years. “Even as there have been many issues on which we have disagreed, it is possible for us to engage robustly with each other,” Russell said.
It was vital to find mutually respectful and advantageous relationships.
“Where this is not optimised, we all need to assess what we need to do to change that,” she said.
Nthite said once the policy issues and all the other disputes had been resolved with the respective governments, Africa would prove increasingly attractive to foreign investors.
However, Miller said, South Africa was making no progress.
“The new mining charter and the Mineral and Petroleum Resources Development Act don’t go anywhere in reducing the discretionary power that officials have over mining companies,” he said.
The Department of Mineral Resources did not respond to requests for comment.
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Miners are the sucker when government looks for revenue