In recent years, relations between African governments and mining companies have been… turbulent. On 13 May 2021, Congolese President Félix Tshisekedi said: “It’s time for the country to readjust its contracts with the mining companies and forge win-win partnerships.” Chinese operators, who have a large presence in the Democratic Republic of Congo (DRC), were in his sights.

A few months later, Tshisekedi launched a plan to review the contracts signed with the Chinese companies in question and thus began a showdown with the CMOC group over the Tenke Fungurume mine.

But is this an underlying trend or a passing phenomenon? Opinions on these tensions are divided. However, according to industry experts, the balance of power has shifted significantly in recent years – to the advantage of the states. “The level of mining revenues has unquestionably risen compared to one or two decades ago,” said the Africa director of one international organisation specialising in the extractive industries.

Modernised legal framework

In many countries on the continent, one reason for this change in dynamic is the renewal of the legal framework, driven by “a growing awareness on the part of governments,” says Thierry Lauriol, a partner at Jeantet and adviser to several governments. “Mining law is in the throes of modernisation. Every year, around a third of African countries revise their regulations to varying degrees.”

As a result, governments are increasingly adopting more detailed regulations that define the content of standard contracts, how to conduct negotiations and how mining agreements should evolve. Senior civil servants are increasingly better trained in these matters.

“The Ivorian authorities are sticking to a stricter application of mining law than in the past, which is not without effect on the economic balance. Fortunately, the Ivorian code is still fairly favourable,” said one operator in Côte d’Ivoire.

Long-term vision

In addition to royalties and other entry fees, the compulsory allocation of higher stakes in mining projects, whether free or not, is a major trend. In Mali, the code promulgated by the junta in August gives the state the option of pre-empting a project by paying up to an additional 20% (compared with 10% previously), in addition to the 10% free of charge. In July 2022 in Guinea, following tough negotiations on the Simandou iron mega-project, the transitional authorities obtained not just a free 15% stake in the mine, but an equivalent percentage free of charge in the railway infrastructure.

According to Moez Ajmi, a partner at EY in charge of extractive industries in France, North Africa and French-speaking Africa, “some governments are now seeking to create appropriate contractual vehicles or funds with operators to maximise their mining revenues over the long term”.

He added: “Others are relying on new remuneration levers, in particular the allocation of production shares, as is the case in the oil industry.” This was recently seen in the DRC with a Chinese cobalt off-taker, in return for a secure supply for its batteries.

Are the days when contracts offered little return to governments through tax exemptions negotiated by operators over? “Africa is making progress in terms of governance. But to attract investors, some countries are still negotiating in isolation, with little transparency,” said Lauriol.

Local value chains

When it comes to finance, however, governments are no longer satisfied with tax resources alone. They are demanding spin-offs in all economic and social areas, the use of local businesses, the funding of community projects, and benefits for employees.

“In the DRC, the authorities are putting in place a regulatory framework that restricts subcontracting by operators,” says Benoît de Carbonnières, who wrote the chapter on copper in the Cyclope report on raw materials. “It’s a powerful lever whose effects are beginning to be seen in the creation and growth of specialised companies.”

The ultimate goal for governments is to create integrated industries, such as the joint battery platform that Zambia and the DRC want to create, with the support of Afreximbank and the Africa Finance Corporation. “This downstream orientation is very much in demand from operators,” said Ajmi.

On this point, the balance of power on the government side seems more uncertain. The acceleration of the energy transition is leading operators from China, the US and Europe to court African countries that have strategic minerals, particularly for batteries. But the complexity of the technologies and value chains makes rapid progress in terms of industrialisation difficult. When it comes to the mineral bauxite, for example, Guinean authorities’ oft-stated desire to develop a downstream alumina and aluminium industry has been hampered by the country’s lack of electricity capacity.