File photo by Waldo Swiegers/Bloomberg via Getty Images
Infrastructure is a bellwether of a country’s potential for economic growth.
Governments that spend on infrastructure give themselves the best chance to succeed, while underinvestment restrains inclusive economic prosperity.
Mining is directly impacted by a country’s infrastructure and ability to move products, key equipment, materials and goods from source to market.
A large number of African states are visceral examples of these maxims. Many have failed to improve or maintain infrastructure to match population growth rates and economic needs. Growing populations and other demands have stretched the public fiscus, making it increasingly difficult — to the point of being unaffordable — for governments to fund infrastructure on their own.
For the continent to grow, it must address the problems stymying development and set up the necessary legal structures, regulatory frameworks and financing mechanisms to bridge Africa’s infrastructure gap.
Africa’s infrastructure deficit and its link to mining
The scale of the problem facing infrastructure development across Africa’s different markets is stark. While the mining sector has, in many respects, helped to develop key infrastructure in markets ranging from South Africa to the Democratic Republic of the Congo (DRC) and Zambia, this infrastructure is often purpose-built and does not support the wider economy.
According to the African Development Bank, the continent must invest $130 billion to $170 billion annually indevelopment to close its infrastructure gap. But investment has only ranged from $68 billion to $108 billion annually in the past few years.
About two-thirds of the continent’s people have road access, with transport costs often double compared to other developing markets. Only 30% of Africa’s population has regular access to electricity, with water and internet access below 10%.
Beyond physical infrastructure, regulatory and legal red tape and corruption continue to hobble policy efforts, with Transnet’s woes in South Africa and the continued delay of the Simandou iron ore project in Guinea indicative of such instability. For countries that depend heavily on mining as a percentage of exports, like Guinea (87%), Mali (85%), Zambia (79%), and the DRC (77%), infrastructure gaps and delays can prove terminal to efforts to develop their wider economies.
Red tape
The scale of the problems facing Africa’s economies and mining sectors highlights the need for a globally competitive infrastructure platform that can enhance mining sector growth continent-wide. Getting there means addressing the legal problems that inhibit infrastructure developments at the source.
These include poorly drafted legislation; the inconsistent application of law and policy; a lack of policy certainty and changes in the regulatory environment ranging from ministerial appointments to key leaders of regulatory bodies.
The above issues can drive up the cost of infrastructure development significantly, with time a casualty as much as capital. Governments must ensure the correct policies, regulations and legal structures are in place — and enforced — to support the development of infrastructure which is vital to the long-term prospects of the mining industry.
These essentials range from a functioning mining cadastre system, national standards and legislation to an overarching vision or strategy squarely focused on infrastructure development to tie all activity together.
When regulations, standards and legislation are devised, beyond their local implications, governments need to consider how they interact with international agreements, conventions and trade.
Financing and legal consequences
Mining companies have been able to play an outsize role in developing infrastructure in Africa due to their historical access to finance, access that African countries have traditionally struggled with.
Over time, mining companies and governments have sought different solutions to developing infrastructure where interests align, using several vehicles to do so, each with specific legal restraints:
- Public-private partnerships must account for existing laws and regulations, with private sector considerations often clashing with public sector policies and law, with disputes difficult to resolve without a dispute mechanism. Competition law and separation of powers is another fact composite to most public-private partnerships.
- Green bonds have no single, definitive definition or mechanism, while compliance and due diligence demands, plus the lack of specific rating standards, can make them administratively onerous.
- Multilateral financing must comply with both local and international law, not undermine the sovereignty of the host state or lead to corruption and can be at the mercy of prevailing international market conditions.
- Leveraging favourable trading regimes, such as the African Continental Free Trade Agreement (AfCFTA), to maximise the benefit of lower tariffs and reduced cost of doing business, keeping an eye on key jurisdictional relationships where cooperation is needed.
To attract infrastructure investment, governments and mining companies should create an enabling environment that eliminates these constraints by:
- Working together to create a harmonious and consistent relationship, with predictability highly attractive to foreign and local financiers and investors.
- Removing costly bureaucracy and implementing policies that increase competitiveness and make their mining sectors attractive for greater investment.
- Partnering with key local and international institutions to underwrite the financial stability of a project, while leveraging regional and international trade agreements where relevant.
- Strategically targeting infrastructure bottlenecks that constrain economic growth and, if removed, accelerate infrastructure development.
International financial institutions such as the International Monetary Fund (IMF) and World Bank, for example, can provide a key source of finance for infrastructure development, with mining a vital part of the conversation as a key economic sector. However, working with these types of organisations means paying heed to the legal frameworks that govern them, such as the IMF Charter and regulations and the World Bank’s approach to identification systems within public-private partnerships.
Cross-border and regional opportunities
Outside of major international institutions, regional cooperation and legal integration can provide a significant fillip for infrastructure development and mining sector growth. The AfCFTA recognises the important role played by the continent’s regional trade blocs such as the Economic Community of West African States and the Southern African Development Community (SADC).
Infrastructure projects developed across borders can be advantageous to participating countries, driving economic growth in each market while benefiting the region. Governing these relationships are regulations and agreements that ensure that each actor is accountable for their specific inputs and ensuring such relationships are conducted with fairness in mind. An example is the Lesotho Highlands Water Project, which is managed by the Lesotho Highlands Development Authority and is designed to provide Gauteng with water while generating electricity for Lesotho.
The legal framework governing the project is drawn from the 1986 treaty signed between South Africa and Lesotho, which has since been amended with several protocols, a second bilateral agreement and the development of the Lesotho Highlands Development Authority and the Trans-Caledon Tunnel Authority in South Africa.
If designed with intention, cross-border projects can support the mining sector as well as their host economy through the provision of key resources and access to legal and financial expertise, enhancing mining profitability and sector viability.
Maximise economic and mining synergies
With the right strategies and collaborations in place, governments and the mining industry can proactively source the legal expertise needed to formulate the necessary policies and programmes.
The dynamics between the state, the mining sector and infrastructure development are complex. Programme conceptualisation must consider the different legal risks and structures applicable to each.
If done so correctly, and consistently, further opportunities to work with international and regional financiers and partners could arise. At each step, a cohesive legal strategy, which includes efficient cross-border transfer mechanisms, is needed to foster collaboration between governments, the private sector and regional bodies.
As it stands, with the various SADC protocols and the AfCFTA, we still witness long queues of trucks at various land borders, which not only increases the price of doing business but also the chances of corruption. The solution to this can only be achieved with the political will and collaboration between the different members of SADC.
The theme of the 2025 Mining Indaba, to be held in Cape Town in February, is “Futureproofing African Mining, Today”. This serves as a reminder that innovative financing mechanisms and collaborative frameworks hold the key to unlocking infrastructure potential and positioning Africa as a global mining leader. There is no doubt that the region can achieve more.
Nomsa Mbere and Rita Spalding are partners at Webber Wentzel.