Warren Beech is the CEO of Beech Veltman – a leading South African law firm, specialising in the mining, infrastructure, and natural resources sector. Lawyer Monthly recently caught up with Warren to discover why the African mining industry is facing challenges.
Shaping Africa’s Mining Industry
My career as a specialist mining and natural resources lawyer was completely unplanned. When I started practice in the early 1990s, being a specialist mining lawyer was not a natural choice. There were extremely limited mining-focused courses being offered at South Africa’s universities at the time, and unless one happened to do articles at a firm with a mining law department, practising as a mining lawyer was not really possible.
To pay my university fees, I started working underground at a gold mining company in a town called Springs, approximately 50km from Johannesburg, South Africa. Each holiday I went to work on the gold mine, which I did for five years. At the end of my last shift (night shift of 23 December 1990) I happily told all of my co-workers that I was now off to be a lawyer, and I would never step foot on a mine again! Famous last words.
Shortly after starting my articles at Deneys Reitz (now Norton Rose Fulbright), a significant event occurred in South Africa’s mining industry with the convening of the Leon Commission of Inquiry into Mine Health and Safety. Deneys Reitz was instructed on behalf of several mining companies to make representations and appear at the Leon Commission. During one of the preparation sessions a partner shouted down the passage to me “Hey Beech, you’ve worked on a mine, come here!” and that’s how my career in the mining industry started. I met some exceptional general counsel early on, who supported me over the years and exposed me to the broadest possible range of work within the Mining and Natural Resources Industry, and I am extremely grateful for their support. This support underpins one of my core principles namely to assist and expose as many young practitioners as possible to mining and natural resources law.
While I remain extremely passionate about health and safety in the Mining and Natural Resources Industry, I have had the privilege of working on significant mergers and acquisitions, other commercial transactions, ground-breaking regulatory matters, and increasingly, on environmental compliance.
I am also extremely fortunate to have long-standing loyal support from major mining companies, but, at the same time, we have had the pleasure of working with new entrants to the Mining and Natural Resources Industry as they have developed to become medium and large role players in the industry.
Mining Law in South Africa
My primary focus historically has been on health, safety, and environment, where there are extremely few experienced practitioners. Almost every transaction in the Mining and Natural Resources Industry involves health, safety, and environmental elements, and as a result of this, I have become increasingly involved, over the years, in significant mergers and acquisitions and other commercial work, including supply agreements, contract mining arrangements, off take, pre-funding arrangements, and related aspects. As a result, my current practice is also significantly focused on the corporate and commercial aspects.
As a natural consequence of my practice, I also focus on the regulatory and compliance aspects, and, unfortunately, in certain instances, on criminal prosecution arising from the complex health, safety and environmental compliance framework.
We are extremely privileged to have continued support from key stakeholders in the Mining and Natural Resources Industry such as the Anglo American Group, BHP Billiton, South32, Glencore, and contracting and service provider companies such as Aveng, Wilson Bayly Holmes, Murray & Roberts, and other similar companies.
All of this would not be possible without a dedicated, competent team, which we have at Beech Veltman Incorporated.
Top Legal Issues and Challenges
It is a well-known fact that many countries in Africa are endowed with significant minerals including gold, copper, nickel, platinum group metals, iron ore, diamonds, lithium and other metalliferous and non-metalliferous minerals.
Unfortunately, Africa has not necessarily benefitted to the maximum, from these mineral resources. There are certain common reasons for this, including political instability, regular changes in government, inconsistent policies and mining laws which are uncertain and subject to interpretation by the government of the day, capacity constraints, lack of key infrastructure such as electricity, roads, rail, and water, and more recently, safety and security events, with a well – known example being the incursions into Northern Mozambique (Cabo Delgado).
There are however some African countries that have optimised the benefits from their mineral resources such as Botswana, Zambia, Namibia, and Tanzania. The key driving factor of the current success of the Mining and Natural Resources Industries in these countries is strong political will with clear guidance on the application of the mining laws in these countries. Investors into these countries are able to make informed choices with a clear understanding of what is required.
Demand for minerals from Africa has been inconsistent, and the demand has been impacted by global events such as the Russia-Ukraine war, the situation in the Middle East, and other regional geopolitical conflicts. At the same time, the Africa Mining and Natural Resources Industry has been impacted by the after-effects of supply chain disruption following the COVID lockdowns and restrictions and the cyclical demand from key economies such as China.
The African Mining and Natural Resources Industry is therefore affected by both Africa-specific constraints, and global constraints and challenges.
Recent statistics issued by the South African government (published in August for June 2024) indicate that production in South Africa’s mining industry was down in June, but the volume and value of sales, increased. The dip in production is likely to affect the industry negatively, in the fourth quarter, and the increased value of sales, is as a result of the current minerals pricing, which is anticipated to continue for the remainder of the year, placing the South African mining industry and that of other African countries, in a good position, in a short to medium term.
African countries that have large reserves of the so-called “battery minerals” and other minerals related to renewable energy have an incredible opportunity to benefit from demand, but the right incentives must be put in place to encourage rapid investment and development of the mines and the related infrastructure.
Corruption and Compliance
Most mining companies have, over the past five to ten years, significantly strengthened anti-bribery and corruption policies, procedures and compliance systems in response to growing actual and perceived corruption and dishonest or potentially dishonest dealings within the Mining and Natural Resources Industry in Africa.
This is a reflection of both increased corruption and dishonest dealings, and a tightening-up of anti-bribery and corruption laws, around the world, including the United States, the United Kingdom, Australia, Canada, and other similar jurisdictions. This has also been supported, in many African countries, by governmental focus on addressing corruption, in its many forms, from gifts through to “backhanders” and complex structures that are put in place to receive payments. While cash is often still the preferred method of payment of these gifts and “backhanders”, we have also seen the introduction of payments through cryptocurrencies and payment into offshore structures and accounts.
At the same time, there is increased transparency because of basic tools such as anonymous hotlines for reporting, through to forensic systems. However, the primary mechanism for disclosure of corrupt practices remains “whistleblowing” by community members, disgruntled service providers, and other persons who are simply not happy with the state of affairs.
Corruption in its various forms remains a significant challenge for mining companies because it potentially undermines the “social licence to mine” and relationships with regulators, placing mining projects and operating mines at risk, but also because of the potential exposure to criminal prosecution either as a result of direct involvement in corrupt activities, or vicariously, because payments have been facilitated by key employees.
Risk Reduction & Regulatory Compliance
Health and safety remains a key concern, and a top priority, for South African mines, and the various stakeholders including government, and trade unions.
Unfortunately, while the number of persons sustaining serious or fatal injuries has decreased on a year-on-year basis, there are simply still too many incidents/accidents, causing serious and fatal injuries. By mid-August 2024 twenty-seven persons working on South Africa’s mines were fatally injured.
The historical gold-mining class actions in relation to gold mineworkers who presented with silicosis and the current class actions in relation to coal mine workers who present with chronic obstructive pulmonary disease or coal worker’s pneumoconiosis have also resulted in a focus on occupational diseases.
Health and safety is becoming more of a key criteria for investors, along with measurement against environment, social and governance (ESG) criteria.
With the increased focus on health, safety and the environment, particularly within the framework of ESG, this impacts on investment decisions. Unfortunately, due to the sometimes ambiguous nature of the ESG criteria, projects that could benefit all stakeholders including government, through taxes and communities, through jobs and infrastructure development, do not secure approvals and financing.
South Africa’s occupational health and safety laws, are extremely robust, and if complied with, can provide a proper framework for mining activities to be carried out safely.
The stakeholders in South Africa’s Mining and Natural Resources Industry, including the regulators (Department of Mineral Resources), the mining companies, and the trade unions, are committed to improving health and safety and it is only through co-operation amongst the stakeholders that health and safety can be significantly improved. The current focus includes occupational diseases as a result of exposure to dust, diesel particulate matter and other fumes and gases, and the protection of women (including a focus on gender-based violence) within the industry.
Provided that the key stakeholders focus on implementing appropriate measures in support of their commitment, health and safety within the industry can improve and, ultimately, meet investment criteria to facilitate growth and development in South Africa’s Mining and Natural Resources Industry.
Health, safety and environmental considerations are becoming increasingly important in African countries with a strong mining industry. As initiatives around health, safety and environment develop, the country-specific and regional focus on health, safety and environment, including protection of communities and their interests, will reconfirm just how important the “social licence” is in creating opportunities for all stakeholders.
Current Threats & Challenges to the Mining Sector
Figures that are often quoted in relation to gross domestic product (GDP) only include the formal contributions within the Mining and Natural Resources Industry in the relevant countries.
In most African mining jurisdictions, there is a parallel industry that is operated by small-scale and artisanal miners. Often, unfortunately, because of the complexity around compliance, these artisanal and small-scale miners carry out their activities unlawfully, and without complying with key provisions such as environmental laws. This often results in irreparable harm to the environment, and the contraction of occupational diseases by the artisanal miners. Unfortunately, often, criminal and corrupt activities surround artisanal mining which have significant and long-lasting socio-economic impacts.
The multiplier effect applies which means that, generally, for each person employed in the mining industry up to ten other persons benefit. If an employee or a person working on a mine loses their job, up to ten other persons are therefore also affected.
It is therefore vital to protect the Mining and Natural Resources Industry, which remains a significant contributor to the economy of the country where mining takes place, and, often broader local and regional economies.
It is also important to regularise the artisanal and small-scale mining by making the mining laws easy to comply with.
This, together with robust enforcement of environmental and mining laws, and increasing the ease of doing business for mining companies conducting lawful mining operations, will ensure that even greater contributions are made to economies.
Providing Solutions
Our primary focus over the years, has been on developing deep knowledge about the Mining and Natural Resources Industry and the clients that we have the privilege of working with. We view our relationship as a key business partnership which means that unless we are continuously up to date with developments in the Mining and Natural Resources Industry and the clients, the advice we give may not have practical application, and we work very hard at ensuring that the advice we give takes into account both the practical and legal challenges that our clients face on a daily basis.
Our team typically spends 60% to 70% of each month, at the clients’ operations and we prefer being at the mines, rather than behind our desks, and we prefer wearing personal protective equipment rather than suits. Through this approach, we genuinely understand the challenges facing our clients, and this guides the advice that we give.
Warren Beech
Chief Executive Officer
Beech Veltman
Tel: +27 11 285 0011
Email: [email protected]
www.beechveltman.com