A Chinese investment view on mining in Africa
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As the AU marks its 50-year anniversary this month, it stimulates a certain amount of strategic reflection on the economic growth of the African continent across that timeframe, and encourages thoughts on the next phase of development and its contribution to the global economy.
A number of key industry sectors are pivotal to that growth and development, mining being one of them.
The mining sector globally is experiencing unprecedented changes, stimulated by the continuing volatility of commodity prices combined with rising exploration costs.
Notwithstanding such challenges, Africa remains a market with huge potential with respect to mineral reserves exploration and production.
In this context, the African mining industry continues to offer unparalleled opportunities for both local and international investors.
The African continent is home to around 30 percent of the world’s total mineral reserves. It holds 42 percent of the world’s bauxite, 38 percent of uranium, 42 percent of gold, 88 percent of diamonds, 44 percent of chromite, 82 percent of manganese, 95 percent of vanadium, 55 percent of cobalt and 73 percent of platinum.
While Africa is endowed with a substantial deposit of the world’s most sought after mineral resources, as a continent it consumes very little of these resources. Instead it exports them as raw materials with little or no value addition or beneficiation. It stands to reason, therefore, that in order to unlock its full mining potential, Africa needs to find the necessary solutions to overcome the obstacles that hamper the development of the industry.
African economies have the potential to strengthen their comparative advantage and achieve greater economic diversification, if they ensure that mineral resource wealth genuinely serves as an engine of growth and development.
When the Heads of State representing the AU adopted “The Africa Mining Vision” back in 2009, it was seen as Africa’s practical and strategic response to tackling the paradox of great mineral wealth, existing side by side with the pervasive poverty on the continent and, as a result, a way to meet the Millennium Development Goals.
The African Mining Vision looked to create a transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development.
Ultimately, this vision aimed to holistically integrate Africa’s natural resources sector into the continent’s social and economic development process. It also aimed to encourage all the stakeholders within the sector and at a continent-wide government level to think out of the box when it came to developing policies on a local, national and regional level.
The resulting action plan focused on nine clusters of activities including: prudent management of mineral rents, building human and institutional capacities, mining sector governance, promoting research and development, dealing with environmental and social issues, as well as linkages and diversification.
The plan recognises that sectors such as mining have the capability, strength and appetite required to mobilise the necessary investment required to construct the infrastructure needed to access inland resources. The resulting roads, railways, power and water infrastructure benefit not only the individual mining projects, but also the local communities. This strategic partnership between project owners, workers and communities ensures that real benefits are experienced from such large-scale industrial mining operations both locally and across the region as a whole.
The African Mining Vision can only be realised if private sector investment, both domestic and foreign, is encouraged and harnessed, and is seen in the spirit of a true strategic partnership to realise key goals and objectives. It is a fact that the African mining sector is already dominated by such private sector investments.
South African-based mining companies are the largest investors in the domestic market, albeit with considerable equity participation from international investors, such as is the case with my own company, WeSizwe Platinum, the first example of a South African/Chinese strategic investment partnership.
European companies, traditionally the largest investors in African mining, have seen their participation reduced in the last decade, as the global marketplace dynamic has altered. This situation has presented opportunities to other mining interests, especially junior mining operations from Australia, Canada and China.
In this respect, Sino-African partnerships have the potential to play an important role in fostering the future growth and development of African economies. Economic diversification based on high competitiveness, supported by specialist expertise, skills and technology transfer, would be the main catalyst of China’s contribution to Africa’s economic transformation in the global marketplace.
Chinese investment into key sectors such as mining, provides expanded opportunities for accelerated economic diversification throughout Africa. It also provides potential opportunities for African companies to extend their activities towards new markets such as China, a move supported by the membership principles of the Brics (Brazil, Russia, India, China and South Africa).
The global and regional economic environment will continue to experience key challenges in the short to medium term, so it is important that all stakeholders look to intensify their efforts to foster the role of the mining industry as a genuine catalyst for economic growth and poverty alleviation. In return, the mining sector can look to support the key principles of the African Mining Vision.
Jianke Gao is the chief executive of Wesizwe Platinum, which has a flagship project, Bakubung Platinum Mine, in the North West Province.