Mining Indaba: Putting capital to work in Africa

By Laura Syrett
Published: Friday, 23 January 2015

With commodity prices down, mining company budgets under pressure and fresh challenges in Africa, this year’s Investing in African Mining Indaba Conference in Cape Town, South Africa, has a lot of ground to cover. Jonathan Moore, managing director of Mining Indaba LLC, spoke to IM about the outlook for Africa’s resources industry.

Who will lead Africa’s resource development?

I think it will be driven by private companies and investors. As the continent develops and its economies continue to strengthen, this will push investment forward.

Fully nationalised mining charters are unlikely to be the most successful mechanisms for promoting mining development and I think governments are going to start looking at other ways of managing their mining sectors.

As for where the capital will come from, I think it’s likely to be a mix of home grown and foreign investment. As a continent, Africa is one of the fastest growing economies, averaging around 5% growth per annum, so there are some domestic investors putting themselves forward, but at the same time, there is a large amount of international capital flowing into Africa.

From an outside perspective, it is key to understand the different nuances of Africa and appreciate that it has a patchwork of different realities across the continent.

What incentives or preconditions need to be laid down to attract investors into Africa’s mining sector?

Consistency and harmonisation of practices will help to drive investment en masse.

One of the things Mining Indaba tries to do is provide a platform and a forum for these sorts of discussions.

It is important to remember that even though the commodities sector is down globally, economies are still growing in many parts of Africa – that’s something that investors want to put money into.

Countries that four or five years ago were completely off limits are now growing with significant investment. If you take Rwanda as an example, a few years ago you couldn’t do anything there, but now it’s rated ahead of Italy as a place to invest.*

What have been the chief barriers to investing in Africa to date and how can these be addressed?

One of the biggest obstacles has been the lack of consistency in government policy and legislation in many areas. This prevents investors from feeling comfortable that the rules they sign up to today will be the same in three or four years’ time.

Before putting money in, people want to know what investing in a particular country is like. They need to be sure that policies won’t change overnight.

Other than that, there have been issues with logistics and infrastructure as companies look at investing in mines in increasingly remote locations. Not only have they got to get there, but they have then got to think about shipping material out to markets, so this has certainly been a barrier in the past.

Then there’s the labour scenario and getting that to a point where there’s some consistency.

Finally, there is the issue of sustainability and community engagement. It is important that communities are engaged in the early stages of a mining project so that it doesn’t get derailed further down the path.

Do you think the Ebola crisis has set Africa back?

It is impossible to look at the Ebola scenario and not be very aware of the magnitude of it and the tragedy that it represents.

The media coverage of the situation was helpful in that it drew attention to what was happening, but at the same time it possibly gave the wrong impression of the extent of its effect on Africa as a whole – it was quite a small area that was affected.

In the mining sector, Ebola has impacted some of the companies operating in that region [West Africa], but if you look at the wider picture, the effect on mining has been very minimal.

What are you hoping for from this year’s Mining Indaba?

The purpose of the event is to bring together investors, mining companies and governments to put capital to work on the continent of Africa.

If you look back on what has happened in Africa during previous down-cycles in the commodities sector, it hasn’t happened to the same degree in this downturn.

This underlines the fact that Africa’s economies are growing beyond the mining sector – population growth, increasing urbanisation and mineral scarcity are all realities which bode well for mining, both on and off the African continent.

I think we will see evidence at this year’s Mining Indaba that the industry will come back even more aggressively from these cyclical challenges than it has in the past.

 

*Based on a business practice ranking by the Transparency International Corruption Perception Index in 2014, which places Rwanda at 55 and Italy at 69.



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