Indaba preview
Indaba preview
The Africa-rising narrative
Africa is a mineral-resource-rich continent, hosting not only
gold, copper, and platinum, but also minerals that are key to a
sustainable future, for example, the so-called battery minerals.
This, on its own, means that Africa should be a key
investment destination. Add to this Africa’s growing working-
age population and its developing consumer base, and it is a
perfect mix for investment.
Within this context, it is completely understandable that
foreign direct investment into Africa is increasing year on
year. One of the biggest economies in Africa, South Africa,
unfortunately hasn’t seen the same growth in investment
activity. This is due mainly to policy and regulatory uncertainty,
the costs of doing business, corruption, and licensing delays.
Meanwhile, other African countries like Ghana, Uganda,
Angola, and Namibia have benefitted. Where countries
provide a business framework that is investor friendly, capital
will naturally flow to these countries. Countries with highly
sought-after minerals, investor-friendly policies, efficient and
effective licencing regimes, security of tenure, flexible exchange
control regulations, and where the governments are seriously
committed to rooting out corruption and irregular practices, are
most likely to attract big investments.
Accessing funding
The age of mining monopolies seems to be over, with
exploration, the lifeblood of the mining industry, often being
carried out by single project and asset companies that require
access to capital that will allow them to explore and develop
the assets up the value curve.
Mining and its related industries rely heavily on small and
medium enterprises (SMEs). SMEs are critical for the growth
of emerging economies and increasing employment, but access
to finances is one of their greatest obstacles. According to
the World Bank, formal SMEs contribute up to 60% of total
employment and up to 40% of gross domestic product in
emerging economies. This is significantly higher when informal
SMEs are included.
The need and opportunity for power and infrastructure
development in Africa is enormous. In sub-Saharan Africa, only
approximately a third of its people have access to electricity.
The demand for more exploration, and energy requirements,
have created opportunities for alternative lenders to fund across
the value chain, from power producers, commodity traders, and
producers, to other energy infrastructure and logistics services.
In 2018, there has been a strong focus on innovative
funding mechanisms, with borderless crypto-capital and metal
streaming arrangements also under serious consideration.
Unconfirmed figures suggest that over USD200-million
was raised through crypto-capital mechanisms. Mining is
likely to see an increase in alternative and innovative funding
mechanisms in 2019.
Policy and regulatory certainty
Creating policy and regulatory certainty, on its own, is not
enough to make a country investment-friendly. It is the
holistic framework of good law, access to an independent
judiciary, a solid banking and finance structure, and a
commitment from all stakeholders in the mining industry to
achieve this.
www.miningmirror.co.za
FEBRUARY 2019 MINING MIRROR [25]
FEBRUARY 2019 MINING MIRROR [25]