Africa’s mining markets show momentum for investors
By Jean-Claude Bastos de Morais, Founder and Chairman of the Advisory Board, Quantum Global Group
It seems almost as if there are two parallel economic worlds right now. In the developed economies, commentators and policymakers are bouncing from one moment of turbulence to another (the latest being Brexit) – whilst Africa undergoes structural, industrial and economic change. Africa’s policymakers and regional bodies have moved quickly to find new funding avenues to support industrial growth and drive socio-economic change.
Despite the enormous impact of the collapse of oil and metal prices, industrial growth and economic diversification are coming from perhaps an unexpected quarter: mining. The evidence for optimism in the sector is plain to see.
Firstly, we must remember that African investment is heavily developmental – so despite what is happening farther afield, the job of nation building must continue. But development needs to be smart: value for money with the promise of low-risk medium-to-long-term returns. And of course, metal prices are at an all-time low, presenting an opportunity to buy at the bottom of the valuation cycle.
This is why Africa’s mining industry is gaining momentum – perhaps counterintuitively - presenting investors with superb opportunities. China is the world’s largest importer of metals and the country’s relative slowdown is obviously still a cause for concern (in 2015 China experienced the lowest GDP growth since 1994).
However, smart structural and funding models being adopted in some African countries – and the support of industry bodies – is paving the way for much more lucrative opportunities in the mining sector.
The mining industry in Africa now benefits from a greater level of regulatory oversight. Regulatory changes help to achieve greater levels of productivity and efficiency for investors, particularly in areas such as labour law: strikes can be avoided and employees can become better motivated through the provision of skills training and global standards of health and safety legislation.
In 2009, the African Union Commission (AUC) adopted a treaty that encourages cooperation between the public and private sectors. It also created the Africa Mining Vision (AMV), which sets out, ‘Africa’s own response to tackling the paradox of great mineral wealth existing side by side with pervasive poverty.’ AMV believes that mining companies and governments have a duty to work together in the collective national interest, to ensure that the industry actually contributes to local socio-economic development through skilled training, environmental protection and fair contract negotiations with multi-nationals. It means integrating mining into industrial and trade policy.
Integration means that African mining can contribute to multiplier industries – moving away from being an exporter of raw materials to a region that manufactures metals and creates knowledge-based services. This is smart government that protects the interests of African communities and contributes to economic diversification.
Look out for part two of this feature on Monday!
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Get in touch with our editor Dale Benton at [email protected]
