South Africa: Developments In The Mining Sector In Sub-Saharan Africa



51 mining projects reached financial close in the years 2014-2018 (according to IJGlobal), which were structured as follows 2:

  • 26 were 100% debt-financed – nine with term loans only, five with term loans and other debt and two with bridge facilities;
  • 14 were 100% equity-financed; and
  • seven were mixed, with six being majority debt-financed and one being majority equity-financed.

According to IJGlobal, there are at present 35 mining projects at the financing or pre-financing stage in Sub-Saharan Africa. It is worth noting that traditional project financing remains rare for mining projects in Sub-Saharan Africa, with one notable, recent exception being the bauxite mine and associated rail and port infrastructure project in the Republic of Guinea.


Various jurisdictions in Africa have, however, been making a number of legal changes, which seek to increase their income from their mining sector and improve community engagement and participation in mining projects. A few recent examples are set out below:

  • Democratic Republic of Congo:The new mining code was published in the Official Gazette on 28 March 2018 and has since proved controversial. While it increased royalty payments, it also increased taxes by 2-10% and introduced a new "super profits" tax of 50% on profits exceeding 25% of those forecast in the mine feasibility study. It also includes an obligation for 0.3% of turnover to be contributed to development projects. The ownership rules require 10% of the capital of mining companies to be held by Congolese citizens, something which has raised concern among investors. These legal changes have been supported by the new President 3.
  • Ethiopia:To help ease a dollar shortage in the country, the Ethiopian Government is seeking to reform and expand its nascent mining sector. In a recent interview with Reuters, the Mining and Petroleum Minister, Samuel Urkato, expressed the intention to introduce tax incentives and ensure a competitive royalty regime in order to compete for global mining investments. The current law guarantees the Government a 5% minimum equity stake in projects, which it is noted is a lower share than many other African jurisdictions 4. It is hoped that these measures will help encourage investment into the country's mining sector, in particular given other jurisdictions in Africa appear to be taking a more aggressive approach.
  • Mozambique:The Economy and Environment Committee of the Mozambique Parliament undertook a visit to a ruby mining area to ensure that a law it has requiring 2.75% of tax revenues to be used for the development of the communities located in the mining districts is being enforced. In a similar vein to the law in the Democratic Republic of Congo (discussed above), a number of other jurisdictions in Africa are seeking to ensure that local communities are able to reap the benefits of the mining industry and governments are focused on ensuring local content requirements are met 5.
  • Zambia:Zambia has taken a number of steps over the past six months to deal with dwindling foreign currency reserves and increasing public debt. These have included: (i) increases in the country's sliding scale for royalties in September 2019 (including a new 10% tax when the price of copper exceeds $7,500 per tonne); (ii) an announcement in October 2018 that mines will have to pay royalties in dollars to help stabilise the Kwacha; (iii) the introduction of new mining duties and a new sales tax in December 2018; and (iv) the introduction (reported in January 2018) of a new 5% copper import duty 6.


In order to see what practical implications these regulatory changes are having, we speak to Anthony Lepere:

Q: Who do you mainly advise?

A: Our clients consist of a full range of sponsors, including large multinational corporates to mid-sized and more junior companies. We tend to advise sponsors whose capital strategy combines equity and various types of debt, either because of the size and nature of the sponsor or the size and nature of the project proposed to be undertaken.

Q: What is some of your recent experience in African mining?

A: We have recently worked on projects in Guinea (bauxite), Sierra Leone (iron ore), Tanzania (gold), South Africa (gold), Zambia (copper) and the Democratic Republic of Congo (tin). We have been advising clients on the project development side in relation to new projects and in relation to disputes concerning existing projects.

Q: How do you see investors viewing some of the regulatory changes we see happening including as set out above? What other key challenges exist?

A: The prospect of increased taxes and royalty payments has been and always will be present, both in Africa and elsewhere. Our experience spans the full life-cycle of mining projects, from making sure that appropriate investment protections will be available when structuring investments all the way through to advising mature mining businesses engaged in disputes with the host State. Given the number of high quality resources situated in African jurisdictions, strong global market demand and the associated recovery in commodity prices, the recent regulatory changes we have seen are not particularly surprising. They are also unlikely to significantly impact investor appetite: investors that are highly sensitive to regulatory change are unlikely to allocate capital to mining in Africa in the first place. Changes in regulation also create opportunities for sponsors to leverage their natural strengths. For example, some of our larger sponsor clients benefit indirectly from state-to-state relationships and are therefore able to invest with greater confidence of receiving fair treatment; this in turn creates a virtuous cycle, as confident sponsors are better able to raise debt finance. By contrast, we have seen junior clients exploiting late life resources with associated infrastructure in more developed jurisdictions; such projects are well understood but no longer financially viable for larger sponsors when increased taxes and royalty payments are factored in.

It is worth mentioning that the lack of infrastructure remains the biggest barrier to further mining investment (in Africa and elsewhere). It is one thing to locate and then delineate high quality resources and quite another to establish a feasible pathway to either domestically process or export production.


While there remains a number of challenges in the mining sector in African markets, in particular in relation to a lack of infrastructure and recent changes to the regulatory environment, market data and our own experience suggests that there remains a healthy appetite for both investment in, and financing for, mining projects in Africa.


1 (accessed 27 March 2019).

2 To the extent data was available.

3 (accessed 12 April 2019) and ad84-9ce381daab66 (accessed 12 April 2019).

4 (accessed 12 April 2019).

5 (accessed 12 April 2019).

6 (accessed 12 April 2019).

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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