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African countries fare poorly in latest Fraser Institute investment attractiveness rankings

12th April 2022

By: Marleny Arnoldi

Deputy Editor Online

     

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The Fraser Institute’s Annual Survey of Mining Companies for 2021 finds that Zimbabwe now ranks as the least attractive jurisdiction in the world for investment.

Other African countries scoring low on the survey’s Investment Attractiveness Index (IAI) are the Democratic Republic of Congo (DRC), Mali and South Africa.

The survey, which is sent to more than 2 000 exploration, development and other mining-related companies around the world, aims to assess how mineral endowments and public policy factors, such as taxation and regulatory uncertainty, affect exploration investment.

This year’s survey provides an evaluation of 84 jurisdictions.

The IAI is derived from combining a Best Practices Mineral Potential Index, which rates regions based on their geological attractiveness, and a Policy Perception Index (PPI) – a composite index that measures the effects of government policy on attitudes toward exploration investment.

Respondents to the Fraser Institute’s survey have consistently indicated that about 40% of their investment decision is determined by policy factors.

The companies that participated in the survey reported exploration spending of $2.51-billion in 2021.

Compared with the 2020 survey’s IAI, some African countries’ scores dropped dramatically, with the DRC’s score having dropped from 58.12 in 2020 to 29.67 in 2021; Botswana’s from 81.48 in 2020 to 48.61 in 2021; Mali’s from 76.27 in 2020 to 33.05 in 2021; South Africa’s from 56.33 in 2020 to 37.88 in 2021; and Zimbabwe’s from 49.52 in 2020 to 26.55 in 2021.

“While geologic and economic evaluations are always requirements for exploration, in today’s globally competitive economy where mining companies may be examining properties located on different continents, a region’s policy climate has taken on increased importance in attracting and winning investment,” Fraser states.

This implies that many African countries’ immense mineral potential is not enough to save them a better spot on the IAI, and they are severely lacking either stable mining regimes, competitive taxation or political certainty, a combination of these attributes or all of them, it adds.

The median score for Africa on the IAI showed a decrease of almost nine points in 2021. With a median score of 51.87, Africa is the second least attractive region for mining investment, when accounting for both mineral potential and policy, according to the survey respondents.

All African jurisdictions, barring Namibia, Tanzania and Mauritania, saw declines in their policy scores.

Botswana lost its ranking as the top African jurisdiction in terms of policy, ranking thirty-first in 2021, compared with fifteenth in 2020.

Botswana’s significant decrease in its PPI score – a 22% drop – reflects increased concerns over the uncertainty in respect of protected areas, its political stability, its labour regulations and employment conditions and its tax regime.

South Africa in 2021 ranked in the IAI’s bottom ten at seventy-fifth, down from the position of sixtieth in 2020 and a far cry from the fortieth position it enjoyed in 2019.

Morocco, which did not feature in 2020’s survey, was the highest ranked jurisdiction in Africa in 2021, and the second-highest ranked jurisdiction globally based on policy.

The Fraser Institute explains that Mali’s PPI drop from thirty-seventh in 2020 to sixty-sixth in 2021, related to concerns over the country’s regulatory duplication and inconsistencies, its socioeconomic agreement and community development conditions and its legal system.

This while the survey respondents noted fewer concerns over Tanzania’s regulatory duplication and inconsistencies, uncertainty on administration of existing regulations and uncertainty on disputed land claims. The country ranked sixty-third in the 2021 survey, compared with seventy-second in the 2020 survey.

The Zimbabwean issues relate to administration, interpretation and enforcement of existing regulations, its legal system, its taxation regime, its infrastructure, trade barriers, political stability and security.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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