To recapture market share, mining destinations will need to rebuild trust and infrastructure
By Gavin du Venage, South African Editor
CAPE TOWN, South Africa — Africa’s largest mining investment conference, the Investing in Africa Mining Indaba, once again took place in-person in May, following a pandemic-led hiatus the previous year. The continent’s premier mining investment gathering, where the temperature of the African resource industry is taken, brings miners, analysts and investors together under one roof.
The Cape Town International Convention Center once again bustled with men and women in sharp dark-colored suits, huddled in corners cutting deals. The chilly early winter air did little to slow the enthusiasm of the gathering, the largest in the city since the pandemic began. Usually held in February, this year, the event was bumped to May as organizers scrambled to readjust to ever-changing COVID-19 restrictions on international travel and in-person meetings.
Events organizer Hyve Group said this years’ Indaba drew 6,000 registered attendees, only slightly less than the 6,500 at the last Cape Town hosted event in 2020. In 2021, the event was purely online.
From the outset, it is clear that South Africa’s industry, the largest mining economy in Africa, is still struggling to regain investor interest. Gwede Mantashe, mining minister, gave a largely content-free opening address, extoling the local industry but avoided mentioning its main challenges — lack of stable electricity supply and uncertainty around legislation.
A Fraser Institute survey released a month before Indaba indicated the country is now among the 10th least-favorable investment destinations among those polled. The survey sent shockwaves through the local industry, which is working hard to put an end to impediments to investment.
“None of our members participated in the survey,” said Roger Baxter, CEO of the Minerals Council, which represents 70 or so of the country’s largest resource firms. Speaking at an early morning press briefing, Baxter noted that the survey leaned heavily on junior explorers.
However, South African miners were still recovering from nearly a decade of under-investment, a consequence with the country’s flirtation with nationalization under former President Jacob Zuma. After Zuma’s ousting in 2018, the government changed direction and the danger of mine grabs receded.
The industry must still deal with other difficulties that stem from years of misdirected state policies. Regular power cuts due to the poor performance of state electricity entity Eskom, and inadequate rail transport availability from state logistics monopoly Transnet, are just some of the issues to be contended with. “Our estimate is that the industry lost ZAR35 billion ($2.2 billion) in export sales because of a lack of rail availability alone,” Baxter said. “The main issue is rampant theft of infrastructure — rail lines and overhead cables are stripped and sold for scrap. If even one meter of rail is missing, the entire line shuts down.”
Government was aware of the issue and was working with then industry, both to improve security but also to open up its infrastructure to private participation.
Similarly, the state’s monopoly on electricity generation was also ended over the past year, allowing companies to run their own independent power supply. Mines were now adding solar and other energy capacity at breakneck speed.
Zambia is Back
Another country looking to overturn years of bad press is Zambia, Africa’s largest producer of copper. The country had also been pursuing state ownership of its mines, and as a consequence was increasingly bypassed for friendlier copper destinations such as Chile.
But in August last year, business-friendly President Hakainde Hichilema was elected. Hichilema relaxed taxes on mining output and pledged to protect private capital. Now the country aims to more than triple its annual copper output within the next decade to 3 million metric tons per year (mt/y), an ambitious target that would require $30 billion of investments, according to Bloomberg.
Hichilema was one of five heads of state to address the Indaba, and he used his time to assure the industry that Zambia was once again open to investors. “Zambia is back,” he said. “This is a new dawn for the Zambian economy.”
The country was eliminating barriers to investment and seeking partners in the mining and financing world. “Mining has been a major contributor to the Zambian economy, and will continue to be so. We want our citizens to play an increased role in our mineral endowment, without going down the road of resource nationalism,” Hichilema said.
The theme of resource nationalism was taken up by one of the oldest Africa mining hands in the business: Barrick CEO Mark Bristow. Bristow led the former Randgold Resources to become the only gold miner listed on the FTSE 100, before merging with the Canadian-headquartered Barrick Gold a couple of years ago.
Currently, Barrick is in dispute with the government of the Democratic Republic of Congo (DRC), where it has a joint venture in the Kibali gold mine with Anglogold Ashanti. The DRC wants to increase the government’s stake in mining operations to more than 30%.
Bristow said changing the rules will only limit the amount of capital investors will spend on operations in the country. “A mine is like the human body; how long it lasts depends on how well it is treated,” Bristow said.
As a result, the DRC was likely to fall behind other African states that were far more welcoming. “This is why we are seeing new investments in Zambia, but not in the DRC,” Bristow noted.
Few industries are better placed to take advantage of the world’s transition to clean energy than mining. However, it is also clear that supply for critical minerals is lagging behind the surge in demand.
“The numbers are staggering,” said Demetrios Papathanasiou, global director for the World Bank’s Energy and Extractives Global Practice. “To meet demand for battery minerals alone, we need to produce 20 times the amount of raw materials than are currently being mined.”
This is where Africa offers hope. It is the last great mining destination, holding trillions of dollars in minerals beneath its soil. “Africa is the solution to helping the world decarbonize,” Papathanasiou said.
Enabling the development of those resources, however, will require substantial infrastructure investment. Lack of ports, railways and roads mean even if minerals are extracted, it will be difficult to move them to global markets. “Africa is clearly at the table, because this is where the minerals are,” Papathanasiou said.
Financiers are already putting down money into the emerging green industrial revolution. Standard Bank, Africa’s largest financial institution, has committed $3 billion to renewable energy projects over the next year. Sean Evans, mining and metals specialist at Standard Bank, said Africa can provide 75% of the world’s supply of “green” minerals.
Indaba Once More
While online meetings have served the mining industry well, it’s clear that demand for in-person meetings remains strong. The word “indaba” means “to talk” in Zulu, and has become synonymous in southern Africa with conferences and meetings. This year, the Investing in African Mining Indaba underscored the importance of the continent in providing the world with the minerals it needs.
This event ran into hitches — a three-hour queue to get into the venue on the first day because of security checks was a blight on proceedings. With no less than five African heads of state attending, security was tighter than usual. Yet, it remains an important part of Africa’s mining calendar and will likely continue to be so.