Tech suppliers must understand risk in African mining project opportunities

However, while the presence of many prominent technology providers from Europe at the Mining Indaba 2023 conference in Cape Town earlier this year highlighted that that opportunity is well understood, there is a need for greater understanding of the risks of providing technology solutions to mining projects in Africa.

The drivers of digital transformation in mining

Mining companies are seeking to decarbonise their operations amidst growing pressure from investors and lenders as those project financiers themselves respond to the ESG agenda. Technology can play a role in supporting that objective.

For example, many of the greenhouse gas emissions associated with mining come from the use of vehicles on site for transporting people and materials. Industry is exploring the potential of electric or hydrogen-powered vehicles and other low-carbon synthetic fuels, but they are also looking at ways to use technology to reduce or remove the need for people in carrying out certain tasks altogether.

Research by McKinsey has highlighted how a combination of digital technologies – from sensors, to machine learning, autonomous vehicles and data analytics software – is helping mining companies make mining processes more efficient, predict when equipment needs to be repaired or replaced, and generally make mining less carbon-intensive and safer for workers.

In addition, some mining companies are using drones to conduct site inspections and transporting tools and materials across a site, while robots can also be used to perform tasks in environments too dangerous for humans to enter.

Understanding the legal and regulatory regime

Amidst the environmental, health and safety and financial factors driving digital transformation in mining, European-based suppliers have an opportunity. However, there are tax, data, telecoms, labour and permitting issues, among others, to consider when seeking to operate in Africa – and choosing to operate remotely from Europe or elsewhere will not necessarily help suppliers get around the issues they may encounter.

It is also common, for example, for the use of certain technologies such as drones to be subject to permits, and for businesses seeking to establish a private telecommunications network to enable on-site communication to require authorisation and a licence to do so.

Another issue to consider is whether parachuting workers in to carry out maintenance works or inspections on a regular basis would constitute the creation of a permanent establishment in the jurisdiction and trigger associated obligations under local tax laws.

Also, often in African countries, legislation requires sub-contractors to be local entities. Suppliers that operate exclusively from abroad can expect to be asked to justify those arrangements to local law makers and regulators and may be encouraged to establish local branches or partnerships with local firms – in which case thought must be given to shareholder agreements, including the law which should govern such agreements and the mechanism for resolving disputes.

In some circumstances, there could be commercial or regulatory retaliation to arrangements that are not able to be justified in the eyes of local officials – from fines, seizure of equipment, rejecting of permit applications, or the hold-up of imported goods at customs. A further risk arising in those scenarios is that local ‘gatekeepers’ solicit a bribe to help businesses address those issues.

It is also a common misconception that African countries do not have data protection law frameworks – many do. Suppliers need to understand what types of personal data their technology might capture and understand whether there are particular conditions or restrictions on, for example, the processing of health data captured when workers use digital health tools designed to help in the diagnosis of health conditions. Restrictions on the international transfer of personal data outside of the jurisdiction are also common and need to be understood before data is exported for processing or storage in Europe or elsewhere.

Labour law issues can also arise around the collection and use of workers’ data, so understanding how the use of sensors and drones, for example, might trigger disclosure or consultation duties, or engage rules on employee monitoring, will be important.

European technology suppliers exploring how to support digital transformation at African mining sites should therefore seek expert legal advice before engaging in such work.