By Jean-Claude Bastos de Morais, Founder and CEO, Quantum Global Group
Africa’s mining industry is gaining momentum. Steadily rising commodity prices, particularly gold and copper, are creating a more stable environment; and exploration has returned. Combined with a greater level of regulatory oversight and new mining laws in some countries, these factors indicate that Africa’s mining industry may be on the cusp of a period of sustained growth.
Regulatory oversight has significantly improved in some parts of the continent. In the east, Kenya’s government unveiled a progressive new mining act in 2016, which forms part of its 20-year mining strategy, aiming to attract 20 major mining companies. In addition to simplified permits (for small scale operations) and licenses (larger scale), prospecting restrictions have also been removed. The Act also spells out important sustainability and environmental policies; which include technology transfer, local equity participation, labour laws and incentives on local investments. This is an attempt to strike the right balance between deregulation and environmental and social protections. On the other side of the continent, we are seeing similar moves to incentivise investment. The Angolan government is currently working on a new special tax regime for the mining sector, which may include new incentives concerning tax deductible costs and losses.
As the sector continues to evolve, we are also seeing an increase in the number of co-investment opportunities in several African nations; providing opportunities for investors to benefit from reduced operational costs and take on build, operate, transfer projects with short term operational returns and a long-term investment horizon. Naturally, governments benefit from co-investment because it reduces their capital outlay and achieves greater levels of productivity – as well as job creation and exports.
Investment opportunities are rising in number right across the continent, including in Angola, Ghana, Kenya, Mauritania and Senegal. The Angolan Ministry of Geology and Mining confirmed in February 2017 that it had secured funding for the Angolan National Geology Plan (Planageo), which is described by the Minister of Geology and Mining, Francisco Queiroz, as “The main instrument of the government’s strategy for protecting the geology and mining sector.” The plan has already identified over 200 priority targets for the prospecting of iron, base metals, copper, manganese, titanium, gold, lead and aluminium (amongst others).
For private equity investors, the mining sector is now becoming increasingly important. Organisations such as Quantum Global Group, which specialises in providing unique gateway opportunities between African and global markets, is making significant investments in the sector. Quantum Global manages a $250 million mining fund (QG Africa Mining LP), to take advantage of the growth potential within the sector in Africa. There is also confidence in the prospects for mining in Senegal where the government’s Plan for an Emerging Senegal (PSE) initiative is beginning to yield results. The plan aims to make Senegal an emerging economy by 2035 by diversifying the economy from fishing and agriculture, towards the mining and oil sectors. With the government committing to develop the natural resources industry, investors in the mining sector should be encouraged – particularly since the outlook both politically and economically continues to look stable.
The proactive nature of many of Africa’s national governments reflects a regional drive to see the industry evolve and mature. As far back as 2009, the African Union Commission (AUC) adopted a treaty that encourages cooperation between the public and private sectors. It also created the Africa Mining Vision (AMV), which sets out, ‘Africa’s own response to tackling the paradox of great mineral wealth existing side by side with pervasive poverty.’ AMV believes that mining companies and governments have a duty to work together in the collective national interest, to ensure that the industry actually contributes to local socio-economic development through skilled training, environmental protection and fair contract negotiations with multi-nationals. It means integrating mining into industrial and trade policy.
Right across the region, national governments are embracing private investment as a key player as they seek to build mature frameworks for exploring and developing their respective mining industries. Private equity investors can look towards mining in Africa as an industry that is more responsible – and more geared up for long-term sustainability – than ever before. Quantum Global Group has recognised the scale of opportunity in the sector. In May 2016 the company, which already invests extensively across the region, widened investor access to African mining potential through funds registered in Mauritius.
In the global context of rising commodity prices and steadily rising consumption in Asia, Africa’s hard work in developing stronger regulatory and sustainability frameworks that respect the environment and social issues is likely to pay off. A press release from the World Bank in April 2017 projects a rise in metal prices of 16% in 2017 – a welcome return to growth for African economies, global investors and for all Africans in the long-term.
Source: Mining Review