Burkina Faso’s nationalisation of mining may concern investors: experts

The announcement is part of a broader agenda of resource nationalism, following a 2023 revision of Burkina Faso’s mining code and plans to revoke foreign mining permits in October 2024, which saw the decline in share prices of several foreign mining companies.

One of Africa’s top gold producers, Burkina Faso’s mining sector is vital for its economy and provides significant investment and employment opportunities.

Olivier Bustin, a regulatory expert in Francophone Africa at Pinsent Masons, said: “The policy change follows Burkina Faso’s withdrawal from the Economic Community of West African States (ECOWAS) in late 2024, along with Mali and Niger, which raised concerns among foreign investors across various industries.”

“If the sovereign decisions of states must be respected by the other states, it is equally important for the sake of legal certainty in international relations to observe the principle of state continuity. This means that commitments made by a previous government should be honoured because they represent the actions of a single, continuous state,” he said.

“In other words, while a government may revise these commitments moving forward, it cannot retroactively and unilaterally alter them. Accordingly, upholding the commitments arising from ECOWAS membership until the effective date of withdrawal is imperative to maintain legal certainty. As a country advances its nationalisation agenda, it is important to adhere to such commitments concerning property rights and commercial relationships.”

Burkina Faso plans to expand its role in managing natural resources through SOPAMIB, a newly-established state mining entity. SOPAMIB has already taken control of the Boungou and Wahgnion gold mines that were formerly owned by the London-listed Endeavour Mining.

Edward James, an expert in anti-bribery and corruption at Pinsent Masons, said: “The trend towards increased localisation mirrors changes in other mineral-rich African nations, like Botswana, Zambia, Mali and others."

“Whilst the reason provided for the change is to increase the country’s share of mineral wealth, moves like this create clear corruption risk. Crooked officials could shake down mining companies by using the threat of nationalisation to solicit bribes," he said.

"Compared with its African peers, Burkina Faso’s stance is on the extreme end as it wants to nationalise mines whereas other countries typically only want to reserve a part of the ownership for the state or local people."

“This policy is not good for investor confidence or for compliance. Mine owners should double down their focus on their businesses in Burkina Faso and deploy careful legal strategies to address any threats posed by nationalisation.”