Australia: A Sustainable Model for the African Mining Industry

Mining is frequently linked to deforestation, land degradation, air pollution, and ecosystem disruption. Some of the greatest undiscovered mineral reserves in the world are thought to be in Africa. Public administrations in Africa have continued to face challenges despite advancements in mining governance throughout the years following the boom. African countries may adopt Australia’s framework for sustainable mining to realize the full potential of this mineral-rich continent.

The continent has 40 percent of the world’s gold and up to 90 percent of its chromium and platinum. The largest reserves of cobalt, diamonds, platinum and uranium in the world are in Africa. The World Bank indicated that continent produces around 80 percent of the world’s platinum, two-thirds of its cobalt, half of its manganese, and a substantial amount of chromium, leaving it in a strong position to benefit from growing demand for these minerals. Some of the major mining countries in Africa are Democratic Republic of Congo (DRC), South Africa, Namibia, and Zimbabwe. It is estimated that Africa houses roughly 30 percent of the known global mineral reserves, and these desirable commodities have been extracted, and often exploited, for centuries. As at 2021 Canada-based companies own majority shares in two of the three largest gold mines on the African continent (Loulo Gounkoto in Mali, owned 80% by Barrick Gold, and Fekola in Mali, owned 90% by B2Gold). While Africa’s leading mining companies based on market capitalization 2022. Based on market capitalization as of December 2022, Anglo American Platinum was the largest mining company headquartered in Africa.

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However, the African mining industry is facing many challenges. Chief among them is the still low base of the mining activity. A number of African countries depend on extractive resources for revenues and export earnings but mining faces huge challenges related to environmental degradation and social issues, said African Development Bank Group or Banque Africaine de Développement (AfDB), a multilateral development finance institution headquartered in Abidjan, Ivory Coast. Evaristus Oshionebo wrote in his work “Mineral Mining in Africa Legal and Fiscal Regimes” indicated that: the African mining sector has witnessed a revolution in terms of new mining codes and amendments to extant mining codes, which are designed to achieve a multitude of objectives, including the assertion of greater control over exploitation of mineral resources; optimization of resource royalties and taxes; promotion of equity participation in mining projects; enhancement of indigenization in the form of domestic participation in mineral production and local content requirements; value addition and beneficiation in terms of domestic processing of raw mineral ores and metals in Africa; and the promotion of sustainable practices in the mining sector.

Political risk advisory firm Veracity Worldwide’s executive chairman, Steven Fox, said “The reality is that the resources the world wants are typically located in difficult places.” Adding that, Africa presents its challenges, those challenges are no more difficult than the corresponding set of challenges in Canada. It may be easier to actually bring a project to fruition in Africa, than in a place like Canada or the U.S.

African nations are endowed with an abundance of natural resources, but the majority of them suffer from severe poverty. Almost horrible irony. The “resource curse” is said to be responsible for this. Since the beginning of the 1980s, the international financial institutions (IFIs) and developing countries have assigned a high priority to the development of the mining sector to meet the goal of improving national economic conditions, and ultimately reducing poverty. Faced with the environmental and social impacts of the mining industry, these objectives have however constantly been challenged. It is in this context that the World Bank, a leading promoter of natural resource extraction as a development strategy, has been invited to question and revise its involvement in setting up and encouraging extractive activities in countries rich in mineral resources. Many have argued that the mining industry in Ghana has strong potential to generate taxes and related revenue and employment, substantial enough to provide significant economic benefits to the country and improved livelihood for the population. However, over bloated tax concessions and incentives to investors in the mining sector leave little in the way of retained earnings for visible national development efforts. The situation is exacerbated by the growing exclusive use of surface mining technology by mines coming on-stream since the reforms. This has constrained employment opportunities in the sector.

The World Economic Forum’s key partner Deloitte published a study in 2018 titled “The Future of Mining in Africa“, suggested that promoting the Fourth Industrial Revolution’s digital transformation would require African nations to loosen mining regulations intended to protect human rights and the environment. Also, the paper bemoaned how the mining industry “continues to experience scrutiny by regulators in Africa,” which it claimed “creates uncertainty, delayed investment in mining expansion, and stops the development of new mines.”
Africa needs to move away from enforcing (regulatory) compliance for compliance sake and move toward delivering value,” according to Deloitte’s subsequent argument.

A look on Australia

Public administrations in Africa continued to face challenges despite advancements in mining governance over the years after the boom. Persistent and new problems kept cropping up. In order to guarantee that the mining industry’s development results in widespread and equitable prosperity for all, observers ask, “How can governments handle the mining sector?” The response is consistent; The legal, regulatory, and governance structure that a mining nation adopts is thought to be the most sustainable remedy for the natural resource curse. By extension, large economies like Australia are comparable to this.

Australia produces 19 useful minerals in significant amounts, from over 350 operating mines. The country is the world’s largest producer of lithium and a global top five producer of gold, iron ore, lead, zinc, and nickel. It also has the world’s largest uranium and fourth largest black coal resources, respectively. Australia also has large mineral sand deposits of ilmenite, zircon and rutile. In addition, Australia produces large quantities of manganese, antimony, silver, cobalt, copper and tin. Mining occurs in all states of Australia, the Northern Territory and Christmas Island.

Mining is regulated by both State and Commonwealth law, however the State laws are most important. The Mining Act 1971 (SA) and associated Mining Regulations 2020 (SA) are the main legislation governing mining. In general mineral rights in Australia are reserved to the Crown. Notwithstanding, in some cases the minerals may continue to be owned by the land owner.

• Like many countries, Australia reviews foreign investment proposals on a case-by-case basis to ensure they are not contrary to the national interest. Each jurisdiction has its own set of guidelines tailored to its legislation. State and territory mineral exploration guidelines are based on the national guidelines.

• The Environment Protection and Biodiversity Conservation Act 1999 (the EPBC Act) is the Australian Government’s central piece of environmental legislation. It provides a legal framework to protect and manage nationally and internationally important flora, fauna, ecological communities and heritage places – defined in the EPBC Act as matters of national environmental significance. The EPBC Act enables the Australian Government to join with the states and territories in providing a truly national scheme of environment and heritage protection and biodiversity conservation.

• The state and Northern Territory governments collect royalties on mineral production in return for granting the right to private businesses to exploit mineral resources within their jurisdictions. With limited exceptions, these take the form of output-based royalties imposed as a percentage of the value of production or, less commonly, the volume of production. Royalty payments are a deduction for company income tax purposes. Royalty systems on minerals across Australian states and the Northern Territory vary by both jurisdiction and commodity.

A financial services expert named Laurence Sithole believes that: “one of the reasons best to explain the success of Australia’s mining sector is the legal framework and context in which it exists. Its governance system is another reason. Australia is a vibrant democracy that has respect for property rights, the rule of law, and human rights. Its legal framework, combined with its governance system, inspires confidence among investors when it comes to the safety and certainty of their investments.” The entire potential of this mineral-rich continent will be realized if African nations can adopt Australia’s mining framework.

Cover image: Illegal gold miners, Ghana. Photo: Flickr | Francis Carmine