Contrasting performances for Sub-Saharan African, European miners – BMI

17th May 2018

By: Simone Liedtke

Creamer Media Social Media Editor & Senior Writer


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JOHANNESBURG ( – Europe and sub-Saharan Africa are on opposite ends of BMI Research’s Mining Risk and Reward Index (RRI), as can be seen with Europe’s significantly stronger performance in country and industry risk indicators, while sub-Saharan Africa continues to lag in country reward scores.

The country reward scores, research firm BMI says, include electrification rates, which bring to light the African continent’s serious infrastructure deficit.

Nevertheless, BMI’s index indicates that a highly dynamic mining sector with strong growth potential and a diverse commodity base will continue to mean sub-Saharan Africa remains as an attractive mining destination relative to the safer but slower growth environment in Europe.

Sub-Saharan Africa’s risk/reward index scores are, however, particularly hampered by a weaker risk profile, BMI said, as key markets remain more prone to social, economic and political upheaval that poses risks to mining operations.

For instance, in the Democratic Republic of Congo (DRC), President Joseph Kabila’s unwillingness to step down and organise national elections since the end of his constitutionally mandated term in December 2016 has since sparked increasing civil unrest and mounting insurgencies in the eastern provinces.

As a result, BMI notes, foreign donors will likely withdraw aid, which limits government’s capital projects while simultaneously increasing the country’s economic risk profile.

In comparison, BMI highlighted that Europe’s strong rule of law and institutions provide a strong foundation for mining investment, particularly at a time of low-risk tolerance in the mining industry.

Meanwhile, the infrastructure deficit in Africa remains a key challenge.

Despite BMI’s expectations for increasing regulatory uncertainty in the sub-Saharan African mining industry this year, poor power infrastructure will be the more important factor determining the region’s poor overall scores, relative to Europe.

Key mining markets, including the DRC, which is highly dependent on electricity imports, and Zambia, which is over-reliant on hydropower, are prime examples of sub-Saharan Africa’s ongoing power woes, BMI stated.

The correlation between low overall scores and poor power infrastructure among the region’s markets is reflected in the regional rankings, where the three worst performing countries on the BMI’s index – Sierra Leona, Mauritania and Liberia – are also last in the region in terms of electrification rates.

Both Sierra Leona and Liberia rank last globally.

Electrification rates, BMI added, are the only indicator which all European countries, with an average of 80.3, score higher in than all sub-Saharan African countries, which average 13.1.

In terms of regulations, BMI notes that it has previously indicated how a series of mining policy changes in sub-Saharan African markets in recent months is increasing the risks to mining operations.

However, BMI warns that Europe’s regulatory environment does not fare much better, as reflected by the regulatory scores on its RRI, where the distribution of Europe and sub-Saharan Africa on a country-by-country basis is relatively dispersed, with Botswana coming ahead of all European peers, for example.

Miners operating in Europe remain hampered by stringent environment regulations across the European Union (EU), BMI’s index noted.

The coal sector will fare badly owing to the industry’s large contribution to global carbon emissions and the growing role of renewable sources of energy generation.

“Indeed, the European Commission is keen to drastically reduce regional reliance on coal-fired power plants in a bid to cut pollution levels, which are underpinned by EU-wide 2020 and 2030 emission targets, as well as the climate commitments agreed upon at the United Nations Conference of the Parties 21 summit in Paris in 2015.”

The pace of the decline will, however, be spread unevenly between Western Europe and Central and Eastern Europe.

Meanwhile, high growth and a diverse commodity base will boost the sub-Saharan African profile.

Although risks remain widespread across sub-Saharan Africa, BMI stated that the region retrains an attractive investment outlook relative to Europe owing to a significantly more dynamic and diverse mining sector.

“We expect growth in various African markets to be boosted by investment benefiting from underdeveloped mining sectors, untapped resources and a diverse commodity base.”

Sub-Saharan African’s resource base ranges from precious metals including palladium, platinum and gold, to base metals like copper, nickel, bauxite or tin and rare metals that are used in batteries, such as cobalt and lithium.

“We forecast the DRC, Mali and Côte d'Ivoire's mining industries’ value to grow on average by over 10% a year during our forecast period from 2018 to 2022, as reflected in strong mining industry growth scores for these,” BMI said.

On the other hand, the research firm added that Europe places third globally in terms of vulnerability to commodity prices and second to last in terms of mining industry value

growth, a reflection of the region's already highly developed mining sector, low dynamism and relatively low commodity diversity.

The European mining industry's dependence on iron-ore will be a key factor behind subdued growth expected across the region over the coming years.

“We expect iron-ore producers globally to struggle over our forecast period from 2018 to 2022 as prices average lower, driven by a weaker demand outlook from primary

consumer, China. Only Romania will witness substantial growth over the coming years, mainly owing to its starting position from a very low base,” BMI said.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online



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