The mining industry worldwide is undergoing unprecedented changes, including high volatility of commodity prices and rising exploration costs. Africa, which produces more than 60 metal and mineral products, has a huge potential with respect to mineral reserves exploration and production. — Mthuli Ncube
Mthuli Ncube, the chief economist and vice president of the African Development Bank, outlined the challenges and opportunities that the mining sector faces in Africa in 2013. He is optimistic although some radical changes are need to industrialise the industry. We have summarised the main points below. For the full article, visit How We Made It In Africa.
Obstacles facing Africa’s mining industry
- Low industrialisation: the continent is under-explored and most exported minerals have not undergone downstream processing (value addition) within their countries of origin. Poor energy and transport infrastructure limits the sector.
- High degree of dependency: the high dependency of many countries (24 out of 54 countries in Africa rely on relatively few mineral products to generate more than 75% of their export earnings) on metals and minerals makes them vulnerable to external market shocks.
- Environmental and social impacts: communities continue to come into conflict with companies and the state often due to poor labour relations, limited realisation of benefits for mining communities, pollution and land degradation and resettlement.
Outlook for Africa’s mining industry
- Low costs of extraction and presence of global firms: costs of production are lower in Africa than in Australia and America so investors, such as BHP Billiton, Rio Tinto, Anglo American and Xstrat, have turned their attention to Africa. The rise of Asian investors (particularly India and China) is leading to investor diversification.
- An urgent need to industrialise the mining sector: additional revenue will be generated through value addition by processing minerals and metals. Establishing an industrial base, with backward and forward linkages and regional integration, is critical. The role of government in developing deliberate policies for this sector is important along with public-private partnerships and ensuring companies comply to international social and environmental regulations.
- Role of international development partners: The Africa Mining Vision (AMV), adopted by the African Union in 2008, must be integrated at the national level to ensure rapid, inclusive socio-economic development. The overall goal of the AMV is to meet the Millennium Development Goals by harnessing Africa’s mining potential