July 15, 2024

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Africa renews momentum for mining sector growth

Close-up of a construction site excavator

From drafting new policies that attract investors to negotiating joint agreements and deals, African governments are demonstrating a renewed political will to unlock the mining sector’s potential.

Bonface Orucho, bird story agency

Thousands of mining stakeholders – including two presidents – in Cape Town for what is billed as the world’s largest mining investment conference have heard renewed commitments from African nations to improve the mining sector to achieve economic growth.

“Mineral wealth must bring development to Africa,” said Marit Kitaw, the Interim Director at African Minerals Development Center, from Cape Town during the annual Mining Indaba.

Host South Africa has committed to empowering junior mining companies, managing energy and regulatory impediments and attracting more investors.

According to South African President Cyril Ramaphosa, an off-the-shelf online cadastral system that will provide much-needed transparency on existing mining rights, exploration permits and known geological features, for the South African mining industry – a system that could provide an example to the continent.

“This is essential for the operation of a modern mining rights administration system, which in turn is vital for the growth of the industry,” Ramaphosa explained.

The current system has resulted in licensing backlogs in their thousands, limiting the number of companies undertaking active explorations.

On energy, Ramaphosa indicated the government was “facilitating investment in new generation capacity by private producers by removing the licensing threshold for embedded generation projects.”

Among other issues, delegates from South Africa addressed and outlined commitments to improve regulatory and economic environments to attract investors.

South Africa’s mineral production recorded R1.18 trillion (US$66 billion) in 2022. This is the second consecutive year that the value of mining production exceeds a trillion rand. Mining’s contribution to GDP grew by 4% to almost R494 billion (US$25 billion).

However, it estimates an additional R150 billion (US$8.46 billion) more could be realised if critical investments such as in the rail system were undertaken.

World Bank projects that the global mining industry begs for an excess of US$1.7 trillion in investment to meet global mineral products demand.

The renewed commitment to facilitate investment and empowerment of the mining sector in South Africa is being witnessed elsewhere in Africa.

Sierra Leone, Mali, Namibia and Tanzania are actively revising policies and establishing state-owned miners to tap into mining opportunities.

Sierra Leone, in 2022 passed two laws that have been critical in changing mining activities.

The 2022 policy establishes an Investor-Induced Displacement and Resettlement clause allowing customary land owners to negotiate with investors intending to acquire their land for mining, extraction and exploration services.

The country’s government this week announced securing a $476 million mining investment that will benefit rural communities in iron-ore-rich Northern Province besides facilitating revenue generation from the mines.

On the other hand, Mali is pursuing a more protective and domestic strategy for its mining industry.

After suspending the issuance of mining permits in November 2022, the government of Mali launched Sorem SA, a state-owned miner, to explore minerals and develop mines.

According to Lamine Seydou, the Mines, Energy and Water minister, “the mines developed by Sorem will offer 100% of the benefits to the state.”

Just like Mali, Burkina Faso is also seeking to leverage its domestic systems to maximise returns from gold, the country’s primary revenue-generating mineral.

Mining Weekly reports that after Burkina Faso’s mineral revenues sank by 15% last year, Junta, the interim authority, is considering developing a domestic refinery to avoid seeking refining services from external companies.

Beyond regulatory frameworks, some countries, including Namibia and Tanzania, have invested more in attracting foreign investors to unlock their mining sector potential.

Mining plays a vital role in Namibia’s economy. Between 2000 and 2022, revenues from mining averaged $2583 million, hitting an all-time high of $4018 million in the third quarter of 2022.

Accounting for close to 10% of the country’s GDP, Namibia prioritises partnerships while simultaneously looping in Namibians and local investors.

A 2021 law requires all applications for mining licences in Namibia to have 15% of owners being Namibians.

Tanzania has also shown a renewed commitment to leverage its extensive mineral deposits for economic achievements.

Beginning in 2020, there has been widespread renegotiation of the agreements and policies guiding mining activities in the East African country.

The Natural Wealth and Resources Act of 2017 has been amended recently. They now compel sector investors to make the government own at least 16% non-dilutable, free carried interest from mining proceeds.

Between 2020 and 2022, Tanzania signed close to 10 major agreements with investors in the mining sector targeting gold, Nickel, and Graphite.

Despite the developments, value addition remains a prime opportunity for Africa to increase mineral revenues.

Some African countries are tapping into bilateral and multilateral partnership opportunities to increase value addition for minerals.

Angola, Zambia and the DRC recently agreed to establish the Lobito Corridor Management Institution. This agency will man a trade corridor off the Atlantic Ocean port of Lobito.

The corridor is a vital control line for mineral exports from the three countries.

Last month, the DRC and Zambia signed a joint MOU with the US on electric vehicle battery value chain development.

Market optimism has spurred a rush of investments into Zambia’s mining sectors, giving the economy new growth impetus.

Investors include Kobold, a consortium linked to tech titans Bill Gates, Jeff Bezos and Richard Branson. The California-based mineral exploration firm is eyeing the country’s mines for electric vehicle components, leveraging reformist President Hakainde Hichilema’s efforts to revitalise the economy.

Upon his landslide poll victory in 2021, part of Hichilema’s economic blueprint entailed placing an electric vehicle battery and components supply chain at the centre of Zambia’s economic transformation architecture.

Battery technology, critical to improving electric vehicles’ driving range, is heavily dependent on minerals buried beneath the surface of Africa, with DRC and Zambia possessing some 70% of the world’s cobalt reserves.

Speaking at the Conference, the Democratic Republic of Congo’s president, Felix Tshisekedi, announced that exploration of nickel and chrome would begin “in the next few days” in Congo’s southern, diamond-rich Kasai region.

The country is also looking for partners to invest in cobalt, tantalum, tin and lithium processing.

With energy challenges crowding the sector, miners are now using self-generating renewable energies to run their operations.

South Africa’s Seriti Green, a subsidiary of mining giant Seriti Resources, announced plans to develop a 900 MW wind farm at Mpumalanga.

Harmony, another mining bigwig, is reportedly considering Green Hydrogen options to power its machinery.

However, as different countries propagate activity in the sector, experts point out the need for increased industrialisation within the continent to achieve value addition.

According to Kitaw, “Africa’s minerals could be stranded if no new technologies develop.”

“Africa needs to industrialise to drive economic transformation. No rich economies developed without industrialisation and Africa won’t be the exception,” she explained.

In her view, integrating nature-based solutions in mineral production will cut emissions and realise the required six-fold increase in mineral production.

The Investing in African Mining Indaba conference ends Thursday, 9th February.

bird story agency

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