Mineral commodities would become less relevant to the development of African countries in the long term as they diversified their economies away from raw resource extraction, said local mining consultancy The MSA Group MD Keith Scott during a panel discussion at research and investment advisory firm Frontier Advisory’s 2015 Africa Outlook conference, held in Johannesburg last month.

Fellow panellist and fleet management services provider Skais SPRL MD Salim Dewji concurred with Scott, adding that African countries that could not decouple themselves from dependence in commodities would find 2015 very challenging.
“If countries like Angola can stop depending on oil and focus . . . on increasing trade with neighbouring countries, such as the Democratic Republic of Congo (DRC), there are incredible opportunities to be had,” Dewji asserted.

Further, Scott pointed out that The MSA Group had noted a rapid decrease in capital available to develop exploration projects. Companies were also unable to raise sufficient funds to not only develop new projects but also recapitalise existing projects.

“During the commodity boom . . . from 2002 to 2012, African countries benefited from high commodity prices, but mines were not able to significantly increase product output and export volumes,” he added.

Scott cited Africa’s largest copper producers, the DRC and Zambia, as examples of countries that did not capitalise the way they should have from the high copper prices, as they only marginally increased their outputs.

“Simultaneously, during this ten-year period, mining giant Rio Tinto managed to increase iron-ore outputs tenfold at its operations in Australia. South Africa increased its iron-ore output by 20% and increases were also recorded in platinum production,” he highlighted.

However, Scott said South Africa’s coal production volumes remained static, while gold output decreased significantly.

He attributed Africa’s failure to increase export volumes to a lack of developed infrastructure in most countries, while South Africa’s mining sector was hampered by the country’s ageing infrastructure.

Scott lamented that, amid the current low commodity prices, “it is very difficult to see” how Africa is going to attract the investment required to develop new infrastructure that will assist in improving mining export volumes in the long term, “when commodity prices invariably rise once more”.

He added that large iron-ore development projects in West Africa were particularly vulnerable, as they relied heavily on major infrastructure, such as railway lines, roads and port terminals, being built.

Cairo-headquartered international financial institution African Export-Import Bank finance banking and administrative services executive VP Denys Denya added that the infrastructure challenges that African countries faced had to be addressed at regional level.

He pointed out that Chinese investments were playing a critically important role in connecting regions of Africa.

For example, China is financing the bulk of the $5.2-billion East Africa railway project currently under construction, and will, on completion of the first stage in 2017, link Nairobi to Mombasa, Kenya.

The second phase of the project will link the Kenyan section of the railway line to South Sudan, the DRC and Burundi.