Doing business in Africa offers plenty of opportunities, particularly for those in the mining sector and the lawyers who serve it and the wider business community. That was the message from the International Bar Association’s 4th Annual Investing in Africa Conference, held in London last week.
There is plenty of scope for growth in African mining, particularly in cobalt, of which millions of tons lie in wait in Africa, while copper prices have risen steadily, said Nigel Boardman of London-headquartered law firm Slaughter and May.
The problem that the mining sector faces is that to start a project from scratch includes a huge investment in physical infrastructure, from digging the mine to building railways and ports, explained Boardman, and that is an investment that the companies cannot take with them when they leave, so they are particularly vulnerable to political risk as they have a lot to lose from expropriation, changes in regulatory regime, imposition of capital controls, sanctions or other governmental interference.
Speaking on a panel hosted by Batanai Peresuh of Zimbabwe’s Honey and Blanckenberg, Boardman laid out his “golden rules” for doing business in Africa, which included avoiding corruption, unfair bargains, politics and ‘fudged’ agreements, recognising the legitimate concerns of sovereign states, being a good citizen and employer, being culturally attuned, heading off problems early and having “clout”.
There are also opportunities in East Africa, explained Agnes Gitau of trade consultancy GBS Africa, who made a point of looking for positive stories in Africa.
She attributed this favourable environment to shared experiences and common thinking on regional economic stability, as well as specific developments, such as hydrocarbon discoveries in Kenya, Uganda and Tanzania, growing investment in national and regional infrastructure, a focus on healthcare and an improved legal and regulatory framework – of which arbitration is an important part.
Above all, East Africa is expected to be politically stable during 2019, which gives great cause for optimism.
Gitau called on investors to align their services and products with the market, but to apply the same standards they would in London or anywhere else in the west.
In particular, she advised investors to create local partnerships, have a local presence, to be co-operative and to be ethical, not just legal, pointing out that the two are not always the same thing.
PROGRESS AND POLITICS
As well as many familiar political and social issues, mining also offers opportunities for those willing to embrace technological change and Tanneke Heersche of Fasken in Toronto illustrated this by explaining the potential which blockchain has to transform the industry through its use in smart contracts, or more innovatively, by using it to track minerals to ensure they are ethically sourced.
Using technology is not the hard part of ethical sourcing, she said. That is the political and economic side, but the mining sector’s new focus on transparency and openness through technology is a positive step forward in an industry not previously known for its transparency.
Political and social issues are not exclusive to mining in Africa, explained Chris Stevens ofWerksmans in Johannesburg, pointing to unrest over mining operations in Latin America, Australia and Canada, but he acknowledged that they are more acute in Africa, pointing to the debate within the Xolobeni community over whether to allow mining in the Eastern Cape of South Africa.
Other legal issues faced by the mining industry in Africa include the complexities of land titles, which, as Diogo Xavier da Cunha of Miranda & Associados in Portugal explained, often involves regulatory approval and various local complexities.
Elsewhere, the Democratic Republic of the Congo’s new mining law has raised concerns in the mining industry, explained Yves Baratte of Simmons & Simmons in Paris.
Many of the new opportunities in Africa come from diversification. Following the plunge in commodities prices, particularly oil, in 2014, many African economies, which relied heavily on mining and drilling, found themselves stuck without viable sources of income. In the subsequent years, even as prices have recovered, the governments of these countries have moved to diversify in order to reduce their vulnerability to future problems and to develop new sources of income.
Nigeria is one such country, explained Sina Sipasi of law firm AELEX. Before the country discovered oil there had been investment in mining, but that got left behind in the boom. After the 2014 price drop, the government began looking around for ways to diversify and mining has become part of that, with the country having 44 types of mineral available for mining.
Sipasi said key factors for success in mining projects including proper due diligence, well drafted agreements, community engagement and buy-in from the state government.
However, those relationships with governments are not always easy, explained Timothy Fodenof law firm LALIVE in Geneva. Foden looked at the conflict between mining corporates and governments in the era of increasing resource nationalism, typified by the new wave of mining codes sweeping across the continent, such as that in Tanzania.
At other times the conference took a regional and cultural focus, looking at the state of affairs in Lusophone and Francophone Africa.
Angola is another country to have learned hard lessons about diversification. Following the election of João Lourenço in August 2017, the country’s first new president in 38 years, there has been a great deal of change, explained Tatiana Serrão of FBL Advogados. A new private investment law which removed the requirement for international investors to have local partners in their projects is one such measure, aimed to help Angola diversify into under-developed areas such as agriculture and transport, and reduce its reliance on oil.
The country is beginning to adopt modern standards and policies in law and business and that a new tax law is next on the agenda, explained António Vicente Marques of AVM Advogados in Luanda, who expressed confidence that change would happen.
Further Lusophone mining and infrastructure opportunities were illustrated by Debra Denizot, legal manager at mining giant Vale International, through a case study of one of the company’s coal-mining projects in the west and the associated Nacala railway, designed to get it to port in the east.
The company partnered with development finance institutions (DFIs) on the project, which illustrated the range of challenges involved in mining – it is not just about extraction, but about ports and railways, and financing.
There are legal challenges too, which were covered by Manuel Santos Vitor, based in Lisbon with PLMJ.
Asked by panel chair Luiz Aboim, of White & Case, to pick a Lusophone jurisdiction which they ranked highly as a place to do business, the panellists, among them Vitor, Serrano and Marques all picked Cape Verde, which has been consistently highly ranked for its governance by the Ibrahim Index of African Governance.
They highlighted the quality of its business services and the level of education of its population despite a lack of natural resources, with Marques describing it as “a developed country in Africa”.
As an opportunity, São Tomé and Príncipe stood out as an interesting country with a strategic location with some potential mining opportunities and the possibility of development if a deep-water port is established.
On the Francophone side, the El Merk hydrocarbons project in Algeria served as a useful case study, courtesy of Reena Mohamedi of United State mining corporation Anadarko, but the big discussion was of the usefulness of arbitration, which has begun to really grow in use in relation to Africa, but which still has a great deal of untapped potential when it comes to settling commercial disputes on the continent.
Alexis Martinez of Squire Patton Boggs explained that arbitration is very useful in African contracts, due to enforceability under the New York Convention, which Angola became the most recent African country to sign up to, while in Francophone west and central Africa there is a well-regarded, if under-used international arbitral institution, the Common Court of Justice and Arbitration (CCJA), which serves members of Organisation pour l’Harmonisation en Afrique du Droit des Affaires (OHADA).
OHADA recently overhauled its arbitration law and introduced a mediation counterpart, with the aim of improving its procedures and making them more attractive.
Martinez pointed out that enforcement of CCJA awards is faster than for most arbitral institutions, with OHADA rules providing for 15 days for local recognition, three months for a local court to make a decision on annulment and, if no decision is reached, six months for the CCJA to make a decision.
Another arbitral resource which is under-used in Africa, is the Riyadh Convention, which Martinez described as “possibly the least known arbitral convention in the world, but possibly the most useful”.
The convention provides for enforcement and recognition of arbitral awards between its member states, which in Africa include Algeria, Djibouti, Sudan, Somalia, Libya Morocco and Mauritania.
With many challenges to be taken on, but an improving business climate across the continent, future gatherings of private practice and in-house lawyers should provide a useful gauge of Africa’s progress as an international business destination.