Mining companies investing in Africa are facing constantly evolving political risks – from security threats and extremism to the rise of social media, which is changing communication patterns and shaping public debate.

“The power of social media and its impact on politics need to be at the forefront of investors’ minds. It impacts on all risks, not least security-related risks,” said African independent specialist risk management consultancy Brecon Group director David Butler.

“The challenge is rising populism and connectedness,” he told an Australian Trade Commission briefing at the Mining Indaba, in Cape Town.

Transnational terrorism in Kenya and Nigeria had raised alarm bells. “The rise of Islamic populism and terror events in Nigeria have triggered election delays. That impacts on the risk you face operating in Nigeria.”

Butler believes political maturity is not moving at the same pace as economic development in many African countries. “That is a key risk for us.”

He said politics had not developed at the pace of rising gross domestic product, while some government institutions that were normally expected to be effective were, in fact, highly ineffective.

As an example of this, Butler said he was surprised to see how fast-growing West African countries battled to deal with the outbreak of Ebola.

He suggested that public relations firms working for companies needed to develop strategies on how to protect brand and integrity for investors going into markets.

Investors were also awaiting the outcome of regular elections. At least a dozen elections were due to be held in African countries over the next year or so, including in countries such as Zambia, Tanzania, Nigeria and South Sudan.

Companies were also facing tax, protectionism and local content regulation risks.

“Governments are looking to get more rent from natural resource extraction,” he cautioned.

Butler said the capital gains tax, new rules in some African countries for oil and gas and arbitrary tariffs also posed significant risks. The uncertainty surrounding these was a real challenge. He said uncertainty about Nigerian petroleum legislation was putting investors off.

In countries like Angola, investment by some companies was not possible. “Angola is stuck in a rut. It’s trying to expand infrastructure, but most of us can’t touch Angola with a barge pole because you have to do deal with politically con- nected people. In terms of the UK Bribery Act, we simply can’t do that.”

Butler believes work permits are becoming more restrictive. “They’re
counterproductive in many ways.” This has posed obstacles because of the talent gap in many countries in which mining companies operate.

On the positive side, he said increasing interconnectedness, owing to mobile telephony, and investing in price checking across the continent were signs that business was maturing.