Dealing with Africa? Recognise sensitivities

CONFERENCE CALLER: A hit list of seven key areas of sensitivity which could wreck or salvage future deals between Australian miners in Africa if handled poorly, has been identified.

Speaking in Perth on the first day of the 2013 Paydirt Africa Down Under conference, Gilbert+Tobin Lawyers Partner, Michael Blakiston, said it was increasingly essential to have all agreements between stakeholders, documented.

This applied whether it was simply the grant to an Australian miner of an African exploration tenement, or a deal of such maturity that it required protection under legislative action by the host country.

“Given the nature of many African economies and the outcomes they need to achieve from foreign investment in developing their mineral resources, there have emerged in recent years some very specific areas of real sensitivity which can compromise agreements,” Blakiston said.

“These are how the interests of each agreement signatory is protected under an aggressive tax planning regime, particularly one which is treaty based; the status and use of offshore bank accounts and booking foreign currencies, and external securities such as OH&S issues applying to an agreement.

“Individual country politics in areas in close proximity to an Australian-African mining project, and the failure to appreciate the colonial past of many countries which still have the hallmarks of business models still used from the past, are considerations.

“Transfer pricing is also a cause for concern but worst of all, is flipping a deal.

“That is a real issue as historically we have seen deals done, then flipped, and the host country ends up with little or no benefit – a situation now viewed as unacceptable.”