Harmonisation of laws regulating investments into the extractive industry Sub-Saharan Africa countries
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Date
2024
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Publisher
University of the Western Cape
Abstract
Many African nations, despite receiving significant foreign direct investment (FDI) in mining, have failed to translate this into broader development. This discrepancy is starkly evident in Niger, which, despite having been a leading uranium exporter since the 1970s, consistently ranks the lowest in the Human Development Index globally. The revenue generated by the French mining company, Areva, which extracts Niger’s uranium, is nearly double the country’s gross domestic product, highlighting the limited benefits accruing to the host nation. This situation is attributable to weak FDI laws, particularly those pertaining to the mining sector, which result in low mineral royalties for African countries. Historically, international investment law has been designed to protect investors, often at the expense of host states. This imbalance is reflected in existing bilateral and regional investment treaties (RITs), contributing to the failure of African countries to derive substantial benefits from FDI in mining. While recent African RITs and the AFCFTA Protocol on Investment aim to introduce more balanced provisions, their impact remains limited. This is mainly because most mining investors originate from outside Africa and these instruments have yet to be widely ratified and implemented. Even in countries where RITs are in force, such as Niger, their innovative provisions are not effectively adopted into domestic law, hindering their beneficial potential. In contrast, Botswana presents a compelling case study for other African nations. Through a robust regulatory scheme that emphasises performance requirements, equitable benefit sharing, and a well-structured incentives regime, Botswana has successfully leveraged its mining industry for broader development gains. This underscores the importance of effective national policies and regulations in harnessing the potential of FDI in the mining sector. Given the limitations of existing regional efforts and the unique challenges faced by the mining sector, a comprehensive, continental approach is needed. This study proposes a harmonised mining-related investment framework for adoption at the African Union level. The proposed framework incorporates compliance mechanisms to ensure that African countries effectively implement regulations. By addressing the structural issues that have historically limited the positive impact of mining FDI, this framework could pave the way for a more equitable and prosperous future for African nations rich in mineral resources.
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Keywords
Bilateral investment treaty, Foreign direct investment, International investment agreements, International investment law, International investment legal framework