Africa set for a bigger mineral pot

2012-02-04 13:28

A very different mining sector is emerging in Africa as the continent rises from the global economic crisis.

About 4 000 influential people, representing Africa’s $1 trillion (R8 trillion) mining industry, will gather in Cape Town tomorrow to network and appraise the state of play in Africa’s fast-evolving sector. ­­

Delegates from the financial services sectors, investors in mining, analysts and miners will find that African governments have new expectations from mining companies.

Ross Jerrad, mining advisor at Deloitte, said governments in Africa are seeking to reap the long-term benefits associated with the current resources boom and have expanded expectations of the industry on the continent.

The extractives industries have driven Africa’s recent recovery and account for 32% of Africa’s sector share of real gross domestic product. Africa has 40% of the world’s gold and accounts for more than 80% of global platinum output.

Commodity-rich African countries are now making a strong showing on the International Monetary Fund’s report on the Fastest Growing Economies – with Ghana growing at 13.7%, Ethiopia at 8.5% and Angola at 7.8%.

Even though many of these countries are coming off a relatively low base, economists say that their growth is nevertheless remarkable and six of the world’s 20 fastest-growing economies are in Africa.

Trends such as increasing state involvement, higher commodity prices and ravenous Asian demand have not only driven better economic performance and higher growth rates in many African countries, but have changed the way business is conducted in the sector.

Ghana’s government this week announced that it had created a committee to ­­re-examine and renegotiate mining deals in the fast-growing gold rich country. Its government is gunning for a greater share of earnings from gold and is dissatisfied with its 10% share in local mining ventures.

The industry in Ghana – as elsewhere in Africa – faces rising royalty taxes too.

To reflect on these and other changes in Africa, the Cape Town Mining Indaba has scheduled a series of “ministerial forums” focusing on countries such as Zambia, Ghana, Tanzania, Mozambique and the Democratic Republic of Congo – even though diamond rich Angola is glaringly missing from the line-up.

Kicking off the Indaba will be South Africa’s Minister of Mineral Resources, Susan Shabangu, who will have emerged from what is likely to have been a fraught discussion at the NEC meeting of the ANC.

The party was set to discuss contentious issues on resource nationalism and thus the future of the country’s mining industry.

An ANC research team was tasked with looking into how South Africa could benefit from the global resources boom and whether to increase the state’s involvement in the mining industry. This team has finalised its report and will re-submit a more polished document to the ANC’s NEC meeting at the weekend.

It is expected that the ANC will debate a kaleidoscope of options and recommendations as members of the NEC and the research team have visited 13 countries and studied country models such as Chile, Botswana, Brazil, Venezuela, Zambia, Namibia and Australia.

While countries bordering South Africa – Namibia, Zambia, Mozambique, Tanzania and the DRC, have designated slots on the Cape Town conference programme, there is no specific time allocation for a discussion on South Africa, the most significant resource economy on the continent.

SA has suffered declining mining output in some minerals, but the country is still the world’s largest producer of chrome, manganese, platinum and it is the world’s third largest producer of coal.

It will rest on Shabangu to clarify the stance of the ruling party on the simmering debate involving possible increased state participation in the mining industry.

Industry, rocked by global commodity price volatility, has been demanding policy clarity and certainty for some time now.

Even though the only Asian country featured on the Cape Town programme is India, which will be represented by its Minister of Mines, Shri Dinsha Patel, Asia is a major driving force behind the changes taking place in Africa’s mining sector.

According to Dr Petros de Kok, a mining economist with the South African Institute of International Affairs, Asian growth and the rise of China and India have led to significant changes in the structure of the global trade in commodities, and trade winds have turned in favour of resource rich African governments after years of negative terms of trade for the continent.

Buoyed by surging Asian demand for resources like copper, platinum and iron ore, many national economies on the continent have benefited from a resources boom, as African states have staked a greater claim on the industry.

De Kok said that mining industry leaders on the continent look forward to scrutinising regulatory environments in places like Zambia where the state has begun to demand a 35% stake in mining enterprises.

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