The Balancing Act: Benefits Versus Attractiveness in West African Mining Regulations

West Africa looks to harmonize mining regulations.

Amelia Salutz

West_Africa-BLOGCredit: Flickr/imke.stahlmann

FREETOWN, SIERRA LEONE – West Africa is home to a vast wealth of mineral resources, but with its geological and ethnic diversity so too has come a proliferation of mining jurisdictions at vastly different stages of development and with markedly different approaches to regulating the sector. As mining investment dollars have waned, governments have become more aware of the role that their regulations and incentives can play in wooing investors into their borders. As a result, administrations across the region have called for reform, arguing for both more attractive regulatory frameworks and more state benefits.
Yet just as the West African race towards more attractive mining codes has gained momentum, so too have initiatives to pre-empt the regional legislation competition and move towards regional harmonization. As diverse as the region’s countries are, the task of crafting a regional code would be an arduous one, yet could potentially benefit West Africa as a whole, rather than drive a zero-sum reform game. Initiatives led by the Economic Community of West African States (ECOWAS) and the West African Monetary and Economic Union (WAMEU) have made strong efforts but faltered in the negotiation process. The way forward for harmonization will come from stronger leadership from regionally leading mining markets and a careful analysis of existing inadequacies.

Regional Regulatory Harmonization

In August 2013, leaders from Sierra Leone, Guinea, Liberia and Côte d’Ivoire met to discuss harmonizing their codes and tariff and tax laws in order to create a cohesive and balanced regional industry. The four are linked by their membership in the Mano River Union, an international association formed originally by Sierra Leone and Liberia in the 1970s.

One of the most persuasive benefits of a regionally harmonized mining regime would be the facilitation of infrastructure development, an issue pertinent to the Manu River Union states. If less regulatory hurdles were to stand in the way of interregional transport, many of the region’s infrastructure-challenged projects teetering on the brink of feasibility could make significant strides.

The region’s iron ore potential in particular could be unleashed by more transnational cooperation. In the case of Guinea’s Simandou iron ore project, which has among its investors Rio Tinto, Vale and BSG Resources, it could benefit hugely from the use of shipping routes and rail links through neighbouring Liberia (approval for which has been granted to fellow iron ore developer Sable Mining Africa Ltd with their Nimba project).

For transnational cooperation to extend beyond sub-regional groups such as the Manu River Union, regional governing bodies such as ECOWAS and WAEMU will have to provide leadership. Given the immense task that harmonization will be, precedents set by smaller groupings can help to pave the way towards reform.

WAEMU, as a larger sub-regional group formed of eight member nations, for its part has issued a draft framework for a Common Mining Code to govern the granting and ownership of mineral titles, as well as implement an environmental protection program, set up an applicable tax system and standardized policies for recruitment and procurement. The WAEMU initiative is similar to that of ECOWAS, which has issued the ECOWAS Directive as a precursor to the Common Mining Code that all member states would adopt, followed by a Regional Mining Policy that would be implemented in support of the code’s policies. ECOWAS had originally planned for ratification of the code in 2012, although this has yet to occur as a result of stalled negotiations.

WAEMU may be able to bring about its code within a shorter timeline due to its smaller size, though this will require the two bodies to ensure that their harmonizing regimes are harmonized with each other. ECOWAS’s draft framework would apply to member states, and therefore it remains unclear how the systems would interact given that all WAEMU members are also part of ECOWAS.

Leadership on the part of successful mining jurisdictions such as Ghana and Burkina Faso will be crucial to any regional realization of a cohesive code. While the road will be a challenging one, West Africa cannot afford to let its mineral wealth further divide its countries. On a global level, these burgeoning countries must band together to become a more competitive international mining force.

“Mining in West Africa has a bright future. Ten years ago Burkina Faso, Mali and Ghana were the only states that were interested in mining. Today, Côte d’Ivoire, Senegal, Guinea and Mauritania can be added to the list. However, in order to succeed, these countries should not only harmonise their legal statues, but also their environmental, tax and repatriation policies,” said Kebe of Geni & Kebe. “This of course is a challenging process, but if ECOWAS can succeed in agreeing on the same legal rules in many aspects of their economies, they cannot leave out mining sector.”

This article was written as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Second Official Mining in Africa Country Investment Guide, will be launched next February 2015, as the only official publication providing country-specific information at Africa’s top mining event, the 2015 Investing in Africa Mining Indaba™ held in Cape Town, South Africa. You can view the 2014 Official Mining in Africa Country Investment Guide here.

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