Mining News

Mining in Africa: untapped potential due to high investment barriers

Posted by Cheryl Rutledge on 6/4/2015 11:36:56 AM

By Kristine Ramsbottom, Taylor Jackson and Kenneth P. Green

In February, research by Standard Bank concluded that much of the potential of the African mining industry remains untapped. Their research reports that more than 30 percent of the world’s mining reserves are on the African continent. Yet 2013 mineral exploration in African jurisdictions accounted for only 17 percent of the world’s exploration budget.

Despite the presence of immense reserves and development potential, Africa’s political instability and security continue to pose significant barriers to investment. According to the Fraser Institute’s 2014 Annual Survey of Mining Companies, of the 30 African jurisdictions surveyed, an average of 66 percent of respondents indicated that political stability was a deterrent to investment on the continent.

Under the political stability category, an average of 23 percent of survey respondents indicated that they did not perceive political stability as a deterrent to investment, and an average of only 11 percent perceived political stability in Africa encourages investment. Major contributors to this 11 percent are African states such as Botswana and Namibia, of which 48 percent and 50 percent respectively indicated that political stability encouraged investment in either region.

Similar numbers are found under the survey’s category of security.

Of the 30 African countries with responses, an average of 64 percent of respondents indicated that they perceived the security situation to pose a deterrent to investment. An average of 26 percent responded that it was not a deterrent, and an average of only 10 percent felt that security encouraged investment in the region.

The mining community is conscious of these investment barriers, and is working together to improve the investment attractiveness of Africa’s mining industry.

Meetings such as Mining on Top Africa Summit, to be held in London later this year, are working to bring the key players of the African mining industry together and connect investors with opportunities across the continent.

The theme of this year’s summit includes discussion on improving political certainty in Africa. According to a spokesperson from SNL Metals and Mining, political certainty is an issue that if resolved, could be a turning point for investment in Africa’s mining sector.

It is unclear as to whether or not the efforts of the African mining summits will help alleviate the policy barriers currently deterring investment into Africa. However, improving the political and security situation could prove to be a staring place for African companies seeking to attract global mining investment.

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