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Title: Moving towards international best practice: a review of Africa


1
Moving towards international best practice
a review of Africas top mineral regulatory
regimes Peter Leon Partner, Webber
WentzelJohannesburg South AfricaChairman,
Mining Law CommitteeInternational Bar
AssociationMine Africa Promoting investment in
Africa Toronto9 March 2010

2
Structure
  • Introduction to regulatory best practice
  • An overview of commendable components of three of
    Africas best practice jurisdictions
  • Botswana
  • Administrative discretion
  • Fiscal and taxation conditions
  • Dispute resolution
  • Ghana
  • Administrative institutions
  • Investment protection and dispute resolution
  • Namibia
  • Administrative institutions
  • Mining Cadastre

3
Introduction to regulatory best practice
  • International competition for private investment
    has compelled countries to adopt legislative
    reforms which are investor friendly
  • A mining regulatory regime should balance the
    interests of private investors, government,
    community as well as address environmental
    concerns
  • A comprehensive economic, social and
    environmental management system should be
    developed. Such a system must include
  • efficient macro-economic management
  • an effective legal and regulatory framework
  • security of tenure
  • objective criteria for the grant of exploration
    and mining licences
  • limited administrative discretion
  • a defined role for Government 
  • efficient mining sector institutions and
    administrative capacity
  • physical and infrastructure services
  • competitive fiscal and taxation conditions and
  • effective investment protection

4
BotswanaBackground
  • Background
  • Mining (and diamond mining in particular) is
    undoubtedly the mainstay of the Botswana economy.
    In 2008, mining accounted for no less than 36
    of GDP, with diamond production contributing
    about 77 of the overall value of the mining
    sector
  • Botswana is ranked 36 out of 180 countries by
    Transparency International in its Global
    Corruption Report 2009
  • It is the highest ranked country in Africa
  • Two major investment services rank Botswana as
    the best credit risk in Africa

5
Botswana The Fraser Institute Survey
  • In 2008/2009, the authoritative Fraser
    Institute's Annual Survey of mining companies
    (the Fraser Institute Survey) ranked Botswana
    18 out of 71 jurisdictions on its policy
    potential index, and for the second year running,
    Botswana is the highest ranked jurisdiction in
    Africa
  • In the 2007/2008 Fraser Institute Survey,
    Botswana was ranked 11 (out of 68)
  • Botswana was ranked higher than several states in
    the United States, some Australian provinces,
    most Latin American countries (only Chile is
    ranked higher) and most mineral producing
    European countries

6
BotswanaAdministrative discretion
  • The Botswana Mines and Minerals Act, 1999 (the
    Mines Act) is the principal legislation
    governing mining in Botswana
  • a key feature of the Mines Act is that the
    process of licensing the grant, renewal and
    transfer of licences - is predictable and
    automatic
  • the Minister of Minerals, Energy and Water
    Resources (the Minister) grants mining licences
    in accordance with the Act. The Minister has
    little or no administrative discretion and
    licensing conditions that may be imposed are
    explicitly stated
  • the process is clear and transparent
  • the conditions that may be imposed on the holder
    of mining licence are set out clearly in the Act

7
BotswanaFiscal and taxation conditions
  • Botswana has a simple and competitive taxation
    and royalties regime
  • the Mines Act altered the previous taxation
    regime for mining companies. All mining
    companies, other than those which extract
    diamonds, are liable to income tax at a rate of
    25
  • there is a 100 capital write-off in the year the
    investment is made and losses are carried forward
    for an unlimited period
  • a variable income tax formula has been introduced
    on highly profitable mines and rises to a
    theoretical maximum of 50 (only applicable if
    taxable profit equals gross income)
  • royalties payable are easily determined

8
Ghana Background
  • Mining accounted for 4.9 of Ghanas GDP and
    minerals made up 34 of total exports in 2008
  • In 2007, the Ghanaian mining sector grew by 30,
    growth stabilised at 8 in 2008 and 2009
  • Ghana hosts the second largest gold deposits in
    Africa after South Africa. Apart from gold, Ghana
    also produces significant quantities of bauxite,
    manganese and diamonds

9
Ghana The Fraser Institute Survey
  • Ghana has recently taken effective steps to
    encourage foreign investment. These steps,
    particularly a new mining code in 2006, have
    increased security of tenure and limited
    administrative discretion in the mineral
    regulatory process
  • The 2008/2009 Fraser Institute Survey ranked
    Ghana 35 (out of 71 jurisdictions surveyed), and
    fourth in Africa
  • Ghana is ranked higher than several states in the
    United States, including Colorado, Idaho,
    Minnesota, Montana and New Mexico and only
    Chile, Mexico and Peru are ranked higher in Latin
    America
  • In the 2007/2008 survey Ghana was ranked 23 (out
    of 68), and second in Africa

10
GhanaOverview of the regulatory framework
  • The Ghanaian Minerals and Mining Act, 2006 (the
    Minerals and Mining Act) aims to
  • develop a national policy on mining and
    consolidate the disparate laws on mining which
    existed at the time
  • increase investment by foreign mining companies
    in Ghana by removing the uncertainty concerning
    the availability and conditionality of mining
    rights as well as the bureaucratic gridlock which
    provided opportunities for corruption
  • Mining legislation is applied equally to
    Ghanaians and foreign investors, except for
    provisions relating to small-scale mining of
    minerals, which is generally reserved for
    Ghanaians

11
GhanaAdministrative discretion and
administrative institutions
  • Under the Ghana Minerals and Mining Act
  • all minerals in Ghana are owned by the State,
    with the Minister of Lands, Forestry and Mines
    (the Minister) formally granting exclusive
    exploration and mining rights
  • the licensing process was reformed to reduce the
    unbound discretion that the Secretary of Lands
    and Natural Resources previously held to grant
    mining licences and impose regulatory conditions
  • under the new law
  • rights are formally granted by the Minister to
    applicants who demonstrate adequate technical,
    financial and managerial capability to engage in
    mining activities. The Minister must act on the
    recommendation of the Minerals Commission, in
    negotiating, granting, renewing, suspending or
    revoking mining rights
  • all applications for mining rights must be
    submitted to the Minerals Commission for
    processing

12
GhanaMinerals Commission
  • The Minerals Commissions role was expanded under
    the Ghana Mines and Minerals Act to create an
    efficient mining sector institution and ensure
    administrative capacity to process licence
    applications
  • The Minerals Commission is the main promotional
    and regulatory body for the minerals sector in
    Ghana, and is responsible for the regulation and
    management of the utilization of the mineral
    resources of Ghana and the coordination of the
    policies in relation to them
  • The Commissions members are appointed by the
    President in consultation with the Council of
    State
  • The Commission is required by law to formulate
    recommendations on minerals policy monitor the
    implementation of these policies assess
    stability agreements and report to Parliament
    collect data on national mineral resources

13
GhanaInvestment protection and dispute resolution
  • Mining companies may conclude a "stability
    agreement with the government. A stability
    agreement protects the holder from the adverse
    effects of changes in the law for a period of up
    to 15 years, but must be ratified by Parliament
  • The Minerals and Mining Act provides for dispute
    resolution under international arbitration.
    Where one of the parties is not a citizen of
    Ghana, three alternatives are provided
  • arbitration in accordance with international
    standards for investment disputes, if agreed by
    the parties
  • if the parties do not agree, arbitration takes
    place under the mechanism established by any
    applicable bilateral or multilateral investment
    treaty and
  • if no such treaty is applicable the dispute shall
    be resolved under the United Nations Commission
    on International Trade Rules (UNCITRAL Rules)

14
NamibiaBackground
  • The Namibian mining sector accounted for around
    16 of GDP in 2008 and provides for more than 50
    of its foreign exchange earnings
  • Namibia's main mining products include diamonds,
    uranium, gold, zinc, copper and lead
  • Namibia was ranked 34 out of 71 jurisdictions in
    the 2008/2009 Fraser Institute Survey, and was
    third in Africa

15
NamibiaRegulatory framework
  • The Minerals (Prospecting and Mining ) Act of
    1992 (the Namibian Minerals Act) is the primary
    piece of legislation regulating the minerals
    industry in Namibia.
  • The Namibian government published the Minerals
    Policy of Namibia in order to make public its
    goals and policies in this sector and these
    promote confidence and certainty among investors.
    The Minerals Policy guides the implementation of
    the Namibian Minerals Act

16
NamibiaAdministrative institutions
  • The Namibian Minerals Act divides the day to day
    administration of the Act and the broader policy
    formulation and implementation to ensure greater
    efficiency in the performance of these functions
  • The Minister must appoint a Minerals Commissioner
    who is responsible receiving licence applications
    and monitoring compliance with the Namibian
    Minerals Act, generally, as well as specific
    licence conditions
  • Minerals Board of Namibia
  • The board advises the Minister generally, or in
    respect of a particular matter, and makes
    recommendations to him or her, in relation to
  • The minerals policy of Nambia and its
    implementation
  • the amendment or application of the provisions of
    this Nambian Minerals Act and
  • any matter referred to the board by the Minister

17
NamibiaMining Cadastre
  • The Namibian Department of Minerals and Energy
    operates a Computerised Title Management System
    (CTMS)
  • This system covers all transactions throughout
    the lifetime of a mineral title - including all
    relevant spatial information in a geological
    information survey
  • Title information can be archived and updated,
    and all required documents are generated by the
    system
  • Geographic information on the titles, as well as
    related topics like geology and administrative
    boundaries, are fully integrated and can be
    visualized, queried and printed in the form of a
    map
  • Under the Namibian Minerals Act mineral titles
    are public documents which can be accessed free
    of charge
  • The system, which was established in 1996 and
    last updated in 2006, has greatly improved the
    efficiency with which the Minerals Commissioner
    can process and monitor licence applications

18
Conclusions
  • These three important African mining
    jurisdictions have, to varying degrees, become
    best practice jurisdictions
  • A key feature of these regimes is a clear
    regulatory regime which is efficiently
    administered
  • The countries benefit from an increase in foreign
    investment through the payment of tax and
    royalties, as well as the indirect benefits such
    as increased employment and the growth of
    industries related to the minerals sector
  • The essential components of these regimes
    include
  • limiting administrative discretion
  • the creation of specialised agencies to
    administer the minerals legislation
  • clear taxation and royalties regimes
  • efficient systems for the management of mining
    related information
  • effective investment protection mechanisms
    including international arbitration of disputes

19
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