The African mining investment case

8th November 2013

By: David Oliveira

Creamer Media Staff Writer


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The current downturn in commodity prices has resulted in decreased project activity globally. This current cycle means that companies are looking for greater security from any poten- tial investment into mines, notes professional services firm KPMG.

This creates a precarious situation for the African mining sector, owing to the lack of infrastructure in most parts of the continent, a shortage in skilled labour and labour unrest and violent conflicts. All these issues have resulted in decreased investor confidence in the African mining sector.

The challenges of getting raw materials to port for export, particularly in iron-ore-rich West Africa, often require mining companies to take on infrastructure projects themselves. This impacts severely on the profitability of mining operations and, therefore, investor’s will- ingness to invest in mining projects.

Further, labour unrest and violent conflicts on the con- tinent, such as the attacks by M23 rebels in the Democratic Republic of Congo, compound the challenge for African countries to secure mining investment. Rebels, who often earn income from illegally ‘taxing’ informal artisanal miners, dispute the authority of central government to bestow mining licences to the international mining industry.

If this factor does not inhibit the investment going ahead, the lack of skilled labour is another hurdle to straddle, as investors are unsure that projects can be executed on time and efficiently.

Meanwhile, labour unrest, particularly in South Africa, has severely impacted on that country’s investment business case.

However, the continent remains the most promising mining destination for future projects, owing to the continent’s abundance of commodities, such as gold, coal and ferrous metals. As such, investors will be more attracted to initiating new projects in Africa when commodity prices rise.

Edited by Megan van Wyngaardt
Creamer Media Contributing Editor Online



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