Social licence to operate will remain critical

"Social licence to operate will remain critical."

Issues related to the social licence to operate will remain critical throughout Africa. While commodity prices have perhaps been the central concern in recent years, the potential for community related conflict will increase as the effects of climate change are felt. African countries like Senegal and Niger have already experienced temperature increases that affect food security, while desertification is a growing problem. Added to this, the rise in terror related instability, migration, and the risksof disrupted communities are likely to impact significantly on African economies, including the mining sector.

The number of concurrent famines, for example, is already at record levels, and mines cannot live in isolation from these factors. There are complex risks that mines face in being an island of wealth in a sea of poverty, and the risks are expected to become greater and require more coordinated and challenging responses.

We are seeing strong trends in thedevelopment of EVs and other 'green technologies. Despite indications that countries like the US are no longer officially committed to this direction, it is likely that minerals such as lithium and graphite, which are required in the manufacture of electric batteries, will see growth. However, the possibility of step-changes in technology makes forecasts unreliable and are likely to create short term volatility in commodities used in current and yet to be developed technologies.

Views on the future of gold are mixed, but current concerns about geopolitical stability are making it a popular investment for some. If South Africa, for example, can incorporate technology into the deep level gold mines to maintain profitability into the future, the country can probably rely on market demand to endure for some time.

When mining companies enter Africa, the key is to find the right partners who have local knowledge and a depth of specialised technical expertise — from the management team to the advisors. These experts need to be familiar not only with the country in which they are working, but also the commodity they are mining.

Engagement on the issue of the social licence to mine is also crucial. All the necessary stakeholders need to be involved, and the messages conveyed by the company must be carefully planned so that expectations are managed. Local legislation, permitting,and compliance requirements must be understood in detail, with the necessary strategies put in place to go beyond compliance to develop sustainable relationships.

A misconception often exists that just having the right mining regulations will create the conditions that investors need to be attracted into a country. There are, however, several broader challenges in parts of Africa that are growing in their bearing and intensity. In the Sahel region, for instance, there has been the rise of extremism and terrorist groups — fostered by the collapse of local agriculture in many areas resulting from climate change,desertification, population growth, and poor governance.

In the light of many destructive forces at play, the environment for mining is becoming more complex and difficult for mining operations to manage. In Senegal, temperatures have risen 2°C since 1950, and rainfall has declined by over 50mm with major impacts on communities. Good regulations and a competent government can only partly overcome the challenges posed by some of these macro trends.

Good mining regulations remain essential for a viable mining sector in any country, but mining companies will have to confront the reality that climate change is creating 'winners' and 'losers'in Africa, and that the losers may well create instability for the continent as a whole. These trends and opportunities need to be well understood to ensure that the range of risks involved in exploration and mining can be properly managed.

Rather than expecting an ideal environment in which to operate, investors should be looking for a sober and detailed assessment of  the risks around each of their prospects, and to strategise realistically and practically to create sustainable enterprises that ngage positively with their social and natural environments.

African Mining - Social licence to operate will remain critical

Andrew Van Zyl - Partner | Principal Consulting

SRK Africa