Too many investors overlook the importance of local knowledge, respecting local requirements and understanding the different legal frameworks in each African country. This creates unnecessary and potentially huge legal and business risk, explained Warren Beech, the CEO of Beech Veltman Inc.
“Lawyers keep calling for regulatory and policy certainty, but I’m not sure this is really the key issue anymore – it’s properly understanding the legal framework in each country, acknowledging country-specific transformational, growth and development imperatives, and the socio-economic dynamics and requirements in support of the ‘social licence’,” commented Beech, who has more than 25 years’ experience working in the African mining industry.
“The biggest risks we’ve seen are when investors go into a country, whether it’s here in South Africa or other jurisdictions, and believe they know the local law, or believe that they can simply apply their home country laws in the relevant country.”
Deep local knowledge is essential, Beech emphasised, not only for understanding the particular legal framework, but also for managing expectations – regulatory timeframes can be very hazy in some jurisdictions – and dealing with how laws may be interpreted.
“What we’re finding is there’s often a very big gap between what the law says and how the regulators interpret it,” Beech continued.
This underlines the need for expertise “on the ground” where an investment is being made, as local legal experts like Beech Veltman frequently deal with local regulators, so they are more attuned to any differences or evolutions in interpretation.
“Lawyers often get criticised for saying ‘you cannot do this without local knowledge’, because some people think we’re just looking for work,” said Beech. “And that’s genuinely not the case. When we do work in other countries, we make sure that we work with local counsel, because as much knowledge and experience as we have, we don’t necessarily have that local knowledge. And if you don’t work with the regulators every single day, you don’t understand what their interpretation is. It can change from province to province, so that local knowledge is absolutely vital. It’s irresponsible to make an investment decision without that input.”
Beyond the local knowledge risk, Beech points to several key trends that will continue to challenge mining and infrastructure in Africa in the near future and beyond: ESG, digitisation, the transition to a carbon neutral environment, supply chain issues, safety and security, and upskilling and skills retention.
Beech noted that conversations around ESG reporting were prominent at the recent Mining Indaba conference, reflecting broader discussions in Africa and across the world about climate change. ESG is an issue that has picked up momentum in recent years, “but it’s quite frightening how much momentum there’s been in the last six to eight months”, he added.
While the mining industry may be leading the way with moves towards renewable energy and Net Zero, it is also facing very real investment decisions being derailed by ESG assessments that are “still fairly nebulous”. Financing has become extremely challenging as traditional investors have become very cautious. “What everyone wants,” says Beech, “is clear, measurable ESG criteria that are effective and efficient, but we’re not there yet.”
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