Maybe you do not want to start a business, maybe you just want to invest – then this article about the best African mining locations for your investment is one you should not miss! In fact, I have just started this new category on investing in Africa here on my blog and pulled some older posts I wrote over. I realized there was a demand for simple investment information and I thought I make it easy for you with a separate category. So expect more to follow. Having said that, the info is always pretty relevant to everyone who wants to start doing business on the ground, too.
The information I will provide will be mostly relevant to first time private investors – small and medium investors to be precise, hopefully a lot from the Africa Diaspora, people like you and me.
I have not written the post below myself. It was recently published on minweb.com. But I decided to post once in a while external content when I genuinely feel the information is highly relevant, and the content is simple and provides concrete guidance for you as an Africa Business Jumpstarter – often new to the trade. It also allows me to make some time to BUILD my business and increase the ways in which I can serve you, as so far most of my time has gone into researching and writing.
Ready? Let’s take it away:
Every year Canada’s Fraser Institute produces a perceived ranking system for various aspects of global mineral investment attractiveness covering the globe, and based on responses to a questionnaire sent out to mineral resource developers and explorers. The latest survey was conducted between August 26 and November 15, 2014, and took into account responses from 485 such company executives globally.
The Fraser Institute rankings are always of specific interest as they do tend to indicate industry perceptions of relative attractiveness for mineral investment based on a number of factors including geological potential, political risk, security, availability of infrastructure and power, among others.
This article will concentrate wholly on Africa, which we will look at in conjunction with a global risk map and commentary from specialists Control Risks. It is interesting to compare and contrast the findings of the two reports.
Fraser Institute’s Mineral Investment Attractiveness Ratings for Africa 2014
Source: Fraser Institute
As Kosich noted, the leading African jurisdictions in terms of attractiveness for mineral resource investment are Namibia and Botswana, not coincidentally two of the only four African nations ranked as low risk, both politically and for security in the Control Risks report. The other two African nations so noted were Morocco and Ghana, fourth and fifth in the Fraser Institute African attractiveness table, which reported on 30 African nations (to view the Control Risks interactive full report and risk map, which breaks down into political risk, security risk, kidnapping risk and maritime risk, click on the following link: https://riskmap.controlrisks.com.)
The second and fourth placed nations were separated by Zambia (only rated by Control Risks as Medium Risk politically and Low Risk on security), but one suspects the timing of the survey may have placed that nation higher than it would be seen now, following proposed changes to the mining taxation and royalty legislation.
Particularly noticeable in the Fraser Institute report is the downgrading of South Africa by 11 places on the global table to 64th out of the 122 countries for which data were published.
What will be galling to South Africans, as they rightly see their country as probably the most technologically advanced, and with the best infrastructure, of all countries on the African continent, is that it only appears in 11th place among the 30 African nations ranked for perceived attractiveness for mineral investment. It has again dropped below the Democratic Republic of Congo (DRC), which not too long ago would have been seen as a nightmare case. On the Control Risks classifications, however, South Africa perhaps does better. It is seen as only Medium Risk politically and in terms of security. However the DRC is categorised as High Risk both politically and for security, with areas close to Rwanda and Burundi classified as Extreme Risk. With most mining operations in areas of the DRC less subject to some of these problems, it seems the mining industry’s explorers and developers give the nation’s terrific geological mineral potential the thumbs up in comparison.
By contrast South Africa’s very politicised and aggressive unions, which brought much of the key platinum industry to a five-month halt last year, weigh heavily on mineral investment perceptions. Also the fact that it has a far more developed mining sector than anywhere else in Africa perhaps leaves the impression that it has been more heavily explored and that there is thus less potential for finding significant new mineral deposits. Power supply problems are also a contributor to South Africa’s downgrading, although nationalisation fears have lessened as they seem to have largely disappeared from the agenda of a vociferous minority within the ruling African National Congress party.
Four African countries – Sudan (113th), Nigeria (114th), Egypt (117th) and Kenya (120th) – are however ranked in the bottom ten of the worldwide Fraser Institute survey rankings for investment attractiveness this year, but at least Africa has avoided the bottom two places – occupied by Hungary and Malaysia.
On the African risk assessment scale, there is a big swathe of territory across the Sahara which is very problematical politically and security wise. Particularly badly affected is Mali (7th), a huge country territorially, where much of the north is seen as extremely risky, the middle sector still of high risk and the south west – where luckily most of the country’s mines are located – as only of medium risk along with much of the rest of West Africa, except Ghana and Senegal (both seen as relatively low risk countries).
Senegal doesn’t appear in the Fraser Institute rankings, presumably because it didn’t get enough responses, but it certainly has some interesting potential in geological formations bordering Mali. North eastern Nigeria is also rated as Extreme Risk – this is where terrorist group Boko Haram has been causing chaos and disruption and recently spreading it across the border into neighbouring Chad.
But overall Africa, the Dark Continent, is also probably the continent still with the most untapped mineral potential of all. Mining exploration and development tends to be about risk mitigation and in the current financial environment for much of the continent, as seen by the Fraser Institute rankings and Control Risk assessments, it would be difficult, perhaps impossible, to raise money for a big new development project in any of the low scoring, and most risky, nations.
But exploration requires less money and is thus easier to finance and will continue in virtually all areas except perhaps those seen as of extreme risk security wise. Of the others, regimes change, often for the better, which means countries can sometimes move rapidly up (or down) the rankings. Miners and explorers are optimists – they have to be – and on occasion finds made, in size and tenor, are sufficient to mitigate some of the perceived development risks.
While assessments like those of the Fraser Institute and Control Risks can be invaluable in assessing investment decisions at a point in time, they may also stimulate poor performing nations to improve legislation and get more of a grip on security when they see what can be very significant mineral development risk capital going elsewhere.
My conclusion: It’s a really interesting article! If you are considering investing into African mining, don’t choose any of the countries that feature at the end of the list, go for the ones that have high investment attractiveness instead – at the top of the list. Investing and doing business in Africa is challenging as it is, so if you are able to enter markets with a more enabling environment go for it as part of your African strategy – it will make a huge difference to your progress! And make sure, you do some due diligence in regards to some social and environmental aspects, too. Major mining conflicts have been created around some mines recently due to appalling working conditions for African workers and other issues, causing the halting of mining operations in a couple of the major mines. This is an important aspect you have to consider.
Extra tip: Get in touch with the Chambers of Mines or the offices of the local investment authority in any of the African countries you would like to invest in. They are usually very helpful and you may find additional information on their websites, too. If you need more in-depth assistance with a strategic approach regarding your African investment, consider to book me.
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