Interest In African Mining Fades With Low Commodity Prices
Not much has gone right for Africa over the past few years and now its world-class reserves of minerals and oil can be added to the list of problems as lower commodity prices hit industry and threaten government revenue.
First clue that investment in African resources is slowing came at this time last year when South Africa’s biggest conference, the annual Mining Indaba in Cape Town, attracted surprisingly few mining companies. (Indaba is Zulu and Xhosa for conference).
The event, held at the Cape Town International Conference Center adjoining the port city’s historic Waterfront district, was fully booked with more than 7000 delegates attending though only a small proportion were miners.
Last week, the same event attracted fewer delegates and even fewer miners with the audience and exhibitors mainly made up of equipment salesmen, professional service providers and government employees.
Mining was the theme of the event but very few people at the event knew much about digging, nor where there many of the second most important class of delegate, the bankers who fund the mining that African countries say they need to help pay for social and economic development.
The problem for Africa is that it is caught squarely in the headlights of an oncoming crisis that is not of its own making, but which is being made worse by a lack of understanding at a government level about how to handle the collapse in revenue that once flowed from taxes on mining projects, and from the capital which creates mine construction jobs.
Every country in Africa is feeling effects of the resource sector downturn but the reaction of some governments, and organized labor, has made the situation worse, risking a return to a time when Africa was regarded as a no-go zone by international investors.
South Africa, easily the biggest African economy, is being hurt by lower coal, iron ore and gold prices, while also trying to deal with labor strikes which have crippled its important platinum industry.
Capping off the challenges facing mining companies active in South Africa is a dysfunctional power supply system which has seen a return to routine power outages.
Falling Investment Means Fewer Jobs
The minerals might be in the ground but without a reliable supply of electricity, a willing labor force, and a cooperative government, the risks to investment are heightened.
Reduced job-creating investment is the last thing a developing region such as Africa needs.
Zambia, widely-regarded as having one of the most pro-mining governments in Africa, has annoyed its important copper industry by accusing mining companies of under-paying taxes, while appearing to ignore the problems caused by a lower copper price.
The copper miners have retaliated with a go-slow on new investment.
Kenya, which has a limited history of mining, welcomed the development of an ilmenite and zircon mine near Mombasa, but as soon it was built announced additional levies which threaten the viability of the project.
Ebola Also Hurt Attendance In Cape Town
In West Africa, home to some of the biggest goldmines in the world, business has been set back by the outbreak of Ebola.
Because of its size and diversity there is no single measure of what’s happening with mining in Africa, except through the annual Mining Indaba.
Last year’s poor attendance by miners at the conference was a warning shot for industry and government
This year’s even poorer attendance by genuine delegates, as opposed to the many Europeans in Cape Town for a touch of southern sun, should be ringing alarm bells that one of Africa’s most important industries is walking towards a crisis.