Mining companies face a more challenging mining environment, as African governments are demanding greater contributions from mining companies operating on the continent, advisory firm Deloitte has warned.
Deloitte advisor Ross Jerrard told Mining Weekly that African governments were becoming more aware of the long-term benefit associated with the presence of mining companies and the resources boom, and were no longer solely focused on the immediate gain offered by mining taxes alone.
“Globally, there is acknowledgement that Africa has significant untapped reserves; everyone is forced to go into Africa now, and the governments them- selves recognise this and they want to realise the true poten- tial of this move. They are making sure that they don’t lose out on the longer-term benefits of the project, whereas, in the past, it has really been a focus on the maximisation of short-term gains,” he explains.
Jerrard says that, in many instances, junior miners are no longer just expected to supply funds for exploration and local job creation, but are now asked to contribute to the long-term development of the community in which they operate.
“It’s not just about sending money and creating jobs, but there is more of an expectation to contribute more widely. That’s not just about building roads or for the larger mining companies to be responsible for building port and rail infrastructure,” he says.
Meanwhile, Jerrard believes expectations from African governments are bigger, expecting more from associated projects, and no longer relying on straightforward royalty streams only.
Despite these changes in African governments’ approach to mining on the continent, Africa remains a prime investment destination, and while the risks and challenges associated with investing in Africa are well recognised, there is an appreciation that the continent is on the up.
“I think it’s the whole dynamic that Africa and probably South America are considered the last real frontiers of greenfield exploration and development, and there is a lot more appetite to go back into Africa now than there was in the past. Its considered the next big growth area for many companies,” he tells Mining Weekly.
Further, he notes that, depend- ing on the commodity, top investment destinations may include Mozambique, for coal and gold, while Zambia might benefit from a resurgence in the demand for copper.
“Certainly, all the West African countries will benefit as well, as there is a lot of appetite for projects up there, especially gold, but also the emergence of iron-ore projects being developed there.”
He adds that there are also instances where historically inhospitable countries are opening the lines of communication for possible mining invest- ment, with examples of investments into Ethiopia, Morocco, Uganda and Tunisia.
He also mentions that the important thing to remember with Africa is the diversity of the continent, with over 50 countries which are in very different economic phases.
“For example, in one country, you may be dealing with a government that does not even have a mining Act, whereas in others there are very mature economies. It is important to be country specific when talking Africa and not to group everyone together,” concludes Jerrard.
Deloitte says it will be present at the Investing in African Mining Indaba at the Cape Town Convention Centre, and will be exhibiting at booth 1103.
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