Africa faces global competition

Representatives from 28 African governments were on hand to provide information on mineral opportunities in their countries during the second annual Africa Mining Investment Symposium held recently in Toronto.

The symposium provided a forum for government officials to discuss the advantages of exploring in Africa, and company executives were able to schedule meetings with these representatives in order to discuss specific opportunities in greater detail.

The conference was sponsored by the Multilateral Investment Guarantee Agency, a division of the World Bank. Delegates were informed of the World Bank’s dual role in the development of African mines and mining investment.

First, the Bank works with African governments to help them create a business climate conducive to mining. Second, it assists mining companies in acquiring necessary financing, often unavailable from more conventional sources.

The attractiveness of the region to foreign explorationists is a relatively recent phenomenon, according to Craig Andrews of the Industry & Mining Division of the World Bank.

“Five years ago, mining investment in Africa was negligible,” he told delegates. “In 1994, however, 8-10% of the world’s total estimated exploration expenditures of US$2.4 billion was spent in Africa.” Andrews said the reasons for Africa’s re-emergence as a prime place to explore are as varied as the region itself. Several countries exhibit great geological potential and have undergone little, if any, modern exploration. Social, economic and regulatory reforms have also played a part in making certain countries desirable locations in which to spend exploration dollars.

Attracting mining investment is a good first step; however, Andrews contends, that alone is not enough. Countries must also work at keeping investment, in order to advance exploration successes, develop new mines and generate national wealth. This is where Africa is less competitive, relative to other regions of North America, Latin America and Australasia.

To prove his point, Andrews cited factors that are required in order to maintain mining investment, and then compared Africa’s rate of progress on these fronts with competing jurisdictions.

In areas of policy regulation and government institutional responsiveness, Africa is not as advanced as Latin America, an area of intense exploration and development activity.

Andrews also described a factor known as the “operational condition”. Using a base index, he compared relative costs of operating a gold mine that milled 3 million tons of ore per year. For comparison purposes, the value of the factor in the United States was set at 100. Surprisingly, Africa’s factor value was rated at 125 while Canada, a less glamorous place to explore and operate, had the least expensive value at 85.

This “reality check”, as Andrews put it, is not meant to be discouraging to African investment. Its purpose is to illustrate that if Africa’s mining industry is to thrive, it must compete on a global basis.