Mining Indaba preview
Is Africa
rising A
again?
frican mining seems to be on the map again. With the
Investing in African Mining Indaba, held in Cape Town
in February 2019, celebrating its 25th year in existence, it
is an opportune time to ask some of the pundits about the state of
African mining and where we are headed. Nobody can contest the
fact that the continent hosts some of the best ore bodies the world
has ever seen and might have some hidden gems we haven’t even
discovered yet. Although we cannot view Africa as one country, it
remains difficult and risky to do business in most jurisdictions.
The upturn in commodity prices has been good
for African mining, but challenges remain, writes
Leon Louw.
To gain more insight, and to answer our question on whether
the African mining industry is rising again, we asked some of
our regular contributors about the opportunities, the risks, the
challenges, and their predictions for Africa in 2019.
International investors and major mining
companies will invest in countries that
offer incentives for investment and that are
politically stable. Mining majors will most
likely continue to develop their tier one
prospects in these countries. These companies
will continue to monitor the situation in other
countries or may opt to place their operations
under care and maintenance or in extreme
circumstances, exit the country. A prime
example is Zimbabwe after the coup of 2017:
the new government made all the right noises
to attract investment, but has failed to change
the conditions on the ground and in fact, are
now back in the situation of the early 2000s,
with no food in the shops and no fuel at the
pumps, along with health concerns — for
example, the cholera outbreak in late 2018.
The main concerns in Africa revolve around
policy and regulatory uncertainties, along with
increasing royalties and taxes. Several countries
have moved to taking more control of the
existing mines, and raising taxes and royalties,
but offering very little in return. Most African
countries have also not implemented any
plans for benefitting from a potential market
upswing projected in 2020 and may miss
the boat again. The trend of ethical sourcing,
especially in the DRC and its neighbouring
countries, will remain high on the agenda,
especially with the Dodd-Frank Act (gold,
tin, tungsten, and tantalum) requiring all
operators and refineries to declare that their
ore was obtained in an ethical manner and are
not conflict minerals. The Kimberley Process
is also looking to expand the definition of
‘blood diamonds’. Another concern is the
influence of loans from China, where countries
defaulting on payments end up handing over
key infrastructure, for example ZESCO in
Zambia.
Diversification is the key to mitigating
most of these risks. If at all possible, mining
companies should, for every high-risk country,
have an operation or at least a joint venture
in place in a more stable region. Putting the
correct measures in place as soon as possible,
such as blockchain platforms, will also put
them in a good position in the eyes of end
users. Companies should remain vigilant and
develop a strong anti-corruption culture when
operating in Africa.
28 AFRICAN MINING JANUARY - FEBRUARY 2019
Nicolaas Steenkamp: independent consultant – geology and geotechnical
Nicolaas Steenkamp
The countries that have made an effort to
attract investors and put regulatory and tax
certainties in place, are expected to do well in
2019. Nigeria and Burundi have made huge
strides in developing their mining policies over
the past couple of years and investing in the
development of their solid mineral resources.
Namibia has also dropped their black
empowerment requirements for prospecting
licences after heeding the warning that it will
result in a drop in investment; this may result
in renewed interest in Namibian exploration
projects. Mauritius has emerged as the go-to
country for registration of businesses due to
their investor-friendly policies and attractive
tax regime.
www.africanmining.co.za