Mining has been the mainstay of African economic development from an agrarian to an industry-based continent.
Africa produces more than 60 metal and mineral products and is a major producer of several of the world’s most important minerals and metals, including gold, diamonds, platinum-group metals (PGMs), uranium, manganese, chromium, nickel, bauxite and cobalt.
Africa also produces many of the world’s leading mining engineers, mining techniques and most advanced mining technologies with excellent education, training, research and technology development centres.
South Africa, Ghana, Zimbabwe, Tanzania, Zambia and the Democratic Republic of Congo dominate mining in Africa, while countries such as Angola, Sierra Leone, Namibia, Zambia and Botswana bank on the mining industry as a major foreign currency earner.
Rod Pickering, president of the Southern African Institute of Mining and Metallurgy, said in his New Year’s message: “The end of 2007 marks the close of one of the most exciting years in the history of the Southern African mining industry.
“We experienced a massive growth in gold mining. In the current high demand for commodities we have seen prices of nearly all the minerals mined in Southern Africa reach new highs, with a corresponding increase in capital investment and major brownfield and greenfield expansion.”
The market has not seen gold prices at current levels since 1981 and demand from the world’s jewellers and motor manufacturers has also seen platinum trading reach record prices. Palladium, rhodium and other PGMs mined as by-products of platinum, have also surged.
Major new mines opening in Africa are distributed between South Africa, Namibia, Botswana, Tanzania and Gabon, and produce gold, diamonds, niobium products, PGMs, chrome and base metals.
Major discoveries include the discovery of several potentially diamondiferous kimberlites in Mauritania and the potential marine diamond deposits off the coast of southern Namibia.
Although recent increases in exploration and mine developments in Africa have been primarily focused on gold and diamond exploration, the high demand for commodities and improving base-metal prices could result in this sector seeing an increase in activities.
Building economies
With the vital role the mining sector continues to play in the development of the continent’s economy, the industry has the ability to act as a catalyst for broader social development on the continent.
Speaking at the African Mining Indaba in Cape Town in February, Randgold Resources chief executive Mark Bristow said that for Africa to prosper from its mineral wealth it must urgently set out to use the mining industry as the foundation for the construction of its economies.
Bristow said mining companies operating in Africa had to accept that they had an obligation greater than the need to enrich investors. They also had a social responsibility to help the people of these countries realise their hopes for a better life.
“To succeed in this, government and mining-industry leaders will have to cooperate and demonstrate the vision, courage and perseverance of true pioneers.”
He contended that mining companies should reinvest for sustainability and should deal with host governments not only as regulators but as partners.
“As for the governments, it is their responsibility to maintain a fiscal and legislative regime that is conducive to mining development, to play their part in infrastructure creation and to share the wealth equitably with their people.
“These governments need to ensure that revenues they earn from the mining industry are used to make a tangible contribution to infrastructural development and the upliftment of the communities in which the mines operate.”
But it is yet to be seen whether a bigger share of revenue collected from mining companies by governments can trickle down to local communities.
According to the World Bank, a problem dogging the mining industry in Africa is ensuring that mining revenue gets to impoverished local communities.
The African Union has found that Africa loses $150-billion each year through foreign companies avoiding taxes. Tanzania recently announced that it lost $207-million in 2007 because of under-declaration of mining profits, while it lost $1 045-billion in 2005 for the same reason.
Revenues
In a bid to reverse the trend, many African countries are demanding more revenues from their minerals.
Delivering the keynote speech at the Mining Indaba Conference, Minister of Minerals and Energy Buyelwa Sonjica pointed out that in the mining sector a number of African countries have made efforts to reform their policies and their regulatory environment aimed at encouraging private sector participation, attracting new capital investments and stimulating mineral exploration.
“These policy changes are intended to ensure that Africa remains internationally competitive in attracting and retaining mining investment for the benefit of all stakeholders.”
She said it is expected that the full implementation of these mineral policies will offer opportunities for sustained investment in the mineral industry in Africa by ensuring a competitive business environment and the removal of barriers to entry.
“To this extent many African mining countries have taken this principle through the African Mining Partnership (AMP), which is a project-based forum of all Africa’s mining ministers aimed at driving New Partnership for Africa’s Development (Nepad) initiatives for mining and mineral-related activities.
“The AMP is committed to pursuing mining and mineral policies which will significantly contribute to poverty reduction and economic development.”
The minister said that during the fifth plenary of the AMP in February one of the key outcomes was the adoption of a new project that will guide the formation of the African Mining Policy, which will be seeking to harmonise mining across the continent.
“This policy framework is aimed at moderating mining legislation across the vast and commodity-rich continent to attract further investment in the sector while optimising the benefit for the African people.
“To date, almost 20% of the global exploration budget was spent in Africa, indicative of the commitment by mining companies to the advancement of the economic state of Africa and equally by African governments in creating an enabling investment environment for mutual benefit.”
The minister said the mining industry in Africa is at an important juncture.
“The changes that are taking place on the continent are intended to bring about greater levels of peace and stability, the greater push towards democracy on the continent and bring about the Nepad programme to improve infrastructure, healthcare, human development and industrial capability, among others. This will have positive ramifications for people doing business in Africa.
“These changes must result in a shift away from mining being tainted with a contributory role towards the conflicts and undemocratic practices that have been pervasive in many African countries over the past few decades.
“The changes we are seeing in Africa form part of a global movement that recognises the need for change in trade relations, the environment and the eradication of poverty. Although Africa is endowed with mineral resources, only 10% of the continent’s global trade basket is made up of trade conducted between the countries of Africa. Mining is seen as the most likely activity that can expedite economic development in Africa.”
According to Anglo American chief executive Cynthia Carroll, Africa still accounts for a high proportion — about $4-billion — of the Anglo American Group’s ongoing project pipeline, which amounts to about $12-billion, with another $20-billion at various stages of feasibility or under consideration.
Also speaking at the recent Mining Indaba, Carroll said: “I think it is important, though, to set the context as to why Anglo American, as a major mining group, intends to remain a major — and, hopefully, the major — investor in African mining going forward. Quite simply, we see Africa as a land of unparalleled opportunity for the mining and extractive industries.”
The continent is estimated to have the best unexploited or under-exploited mineral reserves.
“It may only cover 20% of the world’s land mass, but Africa is estimated to have 88% of global reserves of platinum and 73% of diamonds. It also has an estimated 30% of global bauxite reserves, 40% of gold, 60% of manganese and 60% of cobalt — not to mention substantial untapped offshore oil and gas fields.”
Carroll contends that Africa has been making great strides toward its own regeneration. The continent as a whole has been enjoying GDP growth of 5,7% a year since 2003 and South Africa 4,5% a year over the past five years.
“Our group is actively involved in eight African countries and we are looking at opportunities in five more. In the second half of last year we also opened a representative office in Kinshasa and an exploration office in Lubumbashi — reflecting our growing confidence, despite the many difficulties in the DRC.
“Our exploration expenditure is also showing our increasing interest in Africa. It grew from $38-million in 2006 to $50-million in 2007, and it will rise to $65-million in 2008.
“I believe that African mining can look forward to a decade of real opportunity. Inevitably, there will be peaks and troughs in commodity prices, but the underlying strength of demand from structural changes in the world economy will provide an underpinning that has been lacking in recent decades.
“With the improvement of governance, growing investment in infrastructure and an increasing focus on the role of business in development, I believe that the mining sector will — and must — play an increasingly important role in development and poverty alleviation in the continent.”