The African Development Bank (AfDB) and Berlin-based financial analysis firm OpenOil are hoping to trigger a new debate within Africa’s oil and gas and mining sectors with the publication of a jointly produced report on how African governments use financial models to manage projects.

In an effort to support African countries in realising the full potential of their natural resources and contribute to countries getting more out of their mining projects, the report, ‘Running the numbers: How African governments model extractive projects’, analyses the capacity of 19 African resource-rich countries to use financial models.

The report indicates a need for African governments to build in-house financial modelling capacity, improve internal business processes and tackle the large gap between the information available to different agencies, departments and ministries, as well as an information gap within extractive companies.

The document further shows where there are capacity gaps and how those gaps could be dealt with and notes a substantial gap in access to data that are key inputs for financial models in African countries, with the largest gaps in assessing information on capital costs and operating costs of projects.

“How are countries supposed to enter into negotiations with extraction companies that use financial models if the governments of such countries are not in possession of the latest and best models to calculate what a potential project is worth?” AfDB’s African Natural Resources Center chief macroeconomist Pietro Toigo questioned.

The report also encourages development partners to make capacity building in financial modelling a more significant part of their support to the management of extractive resources.

“Partners doing so already are encouraged to not just supply financial models as part of isolated technical assistance, but to also invest in equipping government officials with the skills to create and use models,” he concluded.