KPMG: African mining has potential to grow stronger

Africa is the most mineral-rich continent in the world and has the potential to become a mining mecca, says global consulting firm KPMG.

The firm explains that mining companies are attracted to Africa by the low cost of labour and encouraged by the developing regulatory framework for the mining industry. As Africa has minerals, such as coal, diamonds, gold, uranium, platinum, iron-ore, rock salt and potash available for exploitation, the opportunity for developing mines to grow is large.

KPMG mining global lead Jacques Erasmus points out that African countries such as Zambia, Uganda, Tanzania, the Democratic Republic of Congo (DRC), Sierra Leone, Ghana and Angola are all in the top lists of the fastest emerging economies in the world.

“This growth is because of their known mineral wealth and others, such as South Africa, Kenya, Rwanda and Botswana, are showing signs of continued business development and stability. This means that mining has a future in Africa if issues [relating to] security, corruption and supply chains can be well managed and resolved,” he explains.

There are several challenges that mines face throughout Africa. These are not exclusive to Africa and include the commodities down cycle and market volatility, which can affect countries that rely heavily on exports to other countries, Erasmus adds.

Some African mines are suffering from the consequences of manufacturing and production slow downs, which has led to the lapse in demand for commodities such as steel and copper from developing countries like China. However, the gold market has been bolstered by the finance community’s regard for gold as a safe haven, which is why the price has remained relatively stable.

“Copper can be regarded as a thermometer product, as it is one of the first to be impacted on by and recover from a recession, while other commodities respond later in the economic cycle,” he notes.