JOHANNESBURG – Despite escalating trade wars keeping commodity prices in check as well as regulatory challenges across Africa generally, the mining sector is likely to offer real opportunity for expansion in 2019, Standard Bank said on Wednesday.
It said over the last 18 months, the focus in the mining sector had been on debt reduction and balance sheet repair, and the results of this consolidation had been largely successful with a few miners paying dividends for the first time in some years.
"Efficiency improvements and portfolio and asset optimisation are expected to continue into 2019 as companies remain committed to moving down the cost curve in response to the 2013 to 2015 downturn,” Standard Bank head of mining & metals Mark Buncombe said.
The banking group said 2019 would see a renewed focus on mergers and acquisitions, noting that the positive reception to the Barrick-Randgold merger in late 2018 had encouraged other management teams to look more seriously at this as an option.
But Buncombe said optimism levels across the continent would ultimately mirror the regulatory environment “with more investment expected where policy makers have actively encouraged investment".
He singled out Ghana as an indicator that "once policy makers build a business and investment-friendly legislative environment the market responds very quickly".
In South Africa, the finalisation of a revised mining charter and the shelving of controversial amendments to the Mineral and Petroleum Resources Development Act was expected to similarly accelerate corporate activity and the commitment of capital to the local mining sector in 2019.
Other increasingly favourable legislative environments on the continent included Namibia, Botswana, Mozambique and Ghana, Standard Bank said.
The bank said access to cheap and reliable power was expected to remain a key success factor for mining companies in Africa, driving continued investment in captive power generation capacity.