East Africa Mining Masterclass
Tom Harris and Janet Bewsey of Swann Global attended A Masterclass on investment in mining in East Africa on the 24th September, hosted by Simmons & Simmons. With an overall focus predominantly on Uganda and Kenya, Dr Roger Key MBE of the British Geological Survey first gave the keynote speech and showed the audience the huge potential for mineral deposits in the area. He said there is also strong industrial minerals potential and the large gas deposits off the East Africa coat will transform the region. There is good uranium potential whilst coal-bed methane has been poorly explored so far.
Uganda in particular is sitting on some extensive mineral deposits, with nearly 50 different minerals identified. Deposits of some minerals, like tungsten, are world class, and in a positive move mineral licences in Uganda are all managed via an online Cadastre registration system.
Kenya has positive potential for oil & gas but is relatively lacking in metallic minerals. Their location is helped by extensive ground water and the country produces sufficient energy to share with its neighbours, having a well-developed geothermal energy source, investment in renewables to augment the supply, and a regional energy-sharing agreement and infrastructure in place.
Tax planning and the mining code are evolving in the region. Each country recognises the need to make it attractive for companies to do business within the area and Kenya has made considerable advances in these areas. With respect to record keeping and applicable tax laws, there was a firm warning from PwC who said government audits in these regions are rigorous, meticulous and painstakingly slow. PwC’s Partner, Nicola Corp spent some time talking about ensuring local processes were robust and captured every document for every payment, due in particular to the consequences should a company not be able to produce the appropriate material. She also pointed out that overpaid VAT can take years to recover.
There was a further presentation by lawyer Dr Elly Karuhanga, Chairman of the Ugandan Chamber of Mines and Petroleum, and until recently a director of Tullow Oil. He confirmed that Uganda is very well endowed with minerals resources and has the potential for world supply of rare earths which has not yet been exploited. Uganda is keen to attract foreign investment, and becoming a steel producer is on their wishlist. He reasserted that under the Mining Act 2003, anything below ground belongs to the people of Uganda, under the Government’s trust, and that the mining code is under review to make it more investor friendly.
Andrew Mugambi, Partner at Hamilton Harrison & Matthews, spoke next representing Kenya’s interests. He said the Chinese have been awarded a contract to expand the airborne geophysics survey of the country, and mentioned how the leaders of the East African nations meet every two months to discuss regulatory matters. As such, the East African countries all have a very similar approach to mining and oil & gas with subtle differences in their mining codes and taxation. Kenya, for example, requires a demonstration of the training a company will provide to its local employees. They are pressing towards resource nationalism but know they lack the skills currently, so want to see more collaboration with universities and are transparent in their objective to replace expats with local employees in due course. They have no sympathy with companies that have had long delays over community issues. He said some representatives did not take the community seriously which is a mistake.
Kenya has a well-developed legal and political framework and they are considering opening a metals exchange for the region. They expect to introduce competitive bidding for the licences of strategic minerals shortly.
Andrew stated that Kenya has sufficient power for heavy engineering projects in the country and surrounding area. They currently supply to Zambia. By 2018 there will be an oversupply of power