Ongoing optimism in African mining industry

Phosphate mining in Togo.File photo

BY BUSINESS REPORTER

THE level of interest in investing in African mining continues to grow, and the optimism about the mining industry in Africa, a feature of the 2011 mining indaba in Cape Town, was still evident this year.

At the various African government presentations, it was often 'standing room only' as conference participants jostled with each other for a space to hear what the various ministers had to say.

The major African mining destinations were well represented, but the ministerial mining forums gave some of the less well known countries an opportunity to tell investors what their country has to offer. One such country was Mauritania, where gold and copper projects are in an advanced phase and where there are deposits of iron ore, uranium, black sands and phosphates.

But these ministers faced some serious questions from potential investors, reflecting their concerns about the obstacles faced by mining companies on the continent.

There were often probing questions about access to power supply - a major concern for miners - as well as infrastructure shortcomings, taxes and royalties, resource nationalism and rising costs.

Sternford Moyo, Senior Partner at Scanlen & Holderness, the Zimbabwean Lex Africa member law firm, commented that Africa has enormous growth prospects centered on its resources. However, to harness its full potential and develop through its mineral resources, there are a number of fundamental prerequisites which African policy makers will have to address.

The most important of these appears to be a redefinition of the role of the state in extractive industries and indeed in business in general, Moyo said.

"There is a dangerous school of thought which promotes the state's direct participation in mining ignoring the old age wisdom that the business of government is not good business. To play its rightful role, the state should, through appropriate mining regulation, ensure that there is a balance between the interests of investors and those of communities in which they invest.

"Furthermore, it can, through its international policy instruments seek to influence pricing on the international markets," he said.

At a domestic level, it can introduce policy instruments to prevent degradation of the environment, ensure that appropriate social responsibility is pursued and generally aim to achieve a situation where there is a relationship between depletion of resources and development of the communities endowed with mineral resources.

It can also, through good governance, respect for property rights and the rule of law create an investor friendly environment, he noted.

But it was not only the potential investors who raised concerns. Some African government officials had issues of their own. Common concerns raised by government included safety procedures, mining licences and environmental issues.

Dow Jones Newswires reported that Guinea's s mining ministry will begin an audit of companies operating in the country next month which could see some licences revoked, as the country is currently not "getting the benefit from its resources," the minister said.

"A lot of companies took licences and then went all over the world to sell them," Mines Minister Mohamed Lamine Fofana said.

"If the miner isn't fulfilling his commitments his licence will be cancelled," he said.

Guinea is a significant producer of bauxite, a raw material used in the process to make aluminum.

In addition, Zambia's minister of mines said he will request mine safety is improved when he meets with Chinese mine managers operating in Zambia and the ambassador next week.

"Some methods aren't up to accepted practices," minister Wylbur Simuusa told Dow Jones Newswires on the sidelines of the Indaba. "If they don't improve we may be forced to take their (the miners') licences."

A report last year from Human Rights Watch highlighted safety violations, which followed complaints from workers at Chinese-run mines in Zambia.