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  HOME | Oil, Mining & Energy (Click here for more)

Africa, the World’s Great Mine

JOHANNESBURG – The African continent, often dubbed the great mine of the world, has a third of the planet’s mineral reserves, and its weight is even greater in metals such as gold, diamonds or platinum.

Under African soil lies a treasure trove of more than 40 percent of world’s gold stocks, 55 percent of its diamonds, 66 percent of its cobalt and more than 80 percent of its platinum.

This enormous wealth coexists with socio-political crises that have resulted in armed conflicts – like the one in the northeast of the Democratic Republic of the Congo (DRC) – and have fed the rampant corruption that is endemic on the continent.

Institutional weakness and underdevelopment of infrastructure further complicate a sector plagued by a history of colonialism and plunder.

To this, there is the added concern of the sector’s impact on the environment, the potential health problems workers are exposed to and the woeful conditions for workers with regards to salaries and safety.

But the challenges of intensive extraction spearheaded by large Western, South African and Asian companies are slight compared to the lack of control of the informal sector and illegal and sometimes deadly mining where workers are exposed to inhumane conditions and children are exploited.

According to experts, small-scale and informal mining are proportionately much more harmful in almost all areas, while large global companies have improved their levels of responsibility.

MINERALES: THE BACKBONE OF SUB-SAHARIAN ECONOMIES

Minerals are a fundamental component of the regional economy and in some countries there is a strong dependence, especially in the southern half of the continent.

The Asian market is the sector’s primary trading partner, with China standing out as the main importer of these minerals.

In countries like Botswana – the most stable democracy in Africa and where the most valuable diamonds in the world hail from – in 2017, the mining sector accounted for 19 percent of its gross domestic product (GDP) and 92 percent of exports, according to data from World Bank (WB).

In Zambia, mining that year accounted for about 80 percent of total exports.

These exports were dominated by copper, a key mineral for the development of new technologies.

The largest deposits of copper are in the Democratic Republic of the Congo, which also houses the world’s largest reserves of coltan, a mineral used in telecommunications, microelectronics and the aerospace industry.

South Africa – the most industrialized economy on the continent – spans the planet’s most valuable lands, if energy resources are excluded, which are valued at some $2.4 billion, according to the WB.

Further north, the World Economic Forum predicts that Ghana will be the fastest growing economy in 2019 – and this boom relies on its lucrative gold deposits.

The dependence on mining, however, leaves these nations very exposed to cyclical fluctuations in demand and prices.

“The sector was hard hit by commodity market developments from 2008. However, there has been recovery to some extent at different times in respect of most minerals,” Charmane Russell, spokesperson for the South African Mineral Council, told EFE.

“Many developing countries, including African ones, are significantly dependent on mining. Yet it does have the potential to give a ‘kickstart’ to economic development.

“South Africa is a good example of a country where mining was the foundation of our modern economy, especially insofar as there developed around it major supplier sectors, from forestry to steel to the financial sector and much else,” Russell added.

REGULATING A SECTOR WITHOUT DETERRING INVESTORS

Despite the challenges, responsible extraction is key to the future of African mining, provided that countries are able to develop a stable legal framework that allows the redistribution of wealth and boosts development whilst remaining attractive to foreign investors.

“The issue is how do you make sure that the rewards are equitable between the investors, the country and the communities,” Andrew Lane, leading consultant for Deloitte on Energy and Resources in Africa, said.

“When governments regulate is in attempt to balance that equation. And nobody has really got it right.

“I think there are many gaps in the system, because the mines pay their taxes but that money does not necessarily benefit citizens,” Lane added.

The slow pace at which the sector has improved economies have led some countries, such as Tanzania, Zambia or the DRC, to hike up taxes and barriers on extraction activities, which puts investors on hold.

“It is a fine balance and some countries have a much better balance than others. We can say Ghana’s policies are attracting more investment than chasing it away,” said mining analyst Peter Major, of the consulting firm Mergence Corporate Solutions.

In general, African regulatory frameworks tend to be unstable and this, together with problems such as the lack of adequate infrastructure, maintain the sector in a climate of uncertainty.

“The global majors are not prioritizing Africa at the moment but there is a lot of interest from China and India in African assets. It’s a slightly different investment because it’s more around securing supplies for themselves in the future,” Lane added.

Experts believe that it is a key moment for mining to contribute more to the development and well-being of Africans, but for this, governments have to refine their policies without adding excessive risk to the sector and without the benefits being lost to corruption.

At the same time, from the base, the struggle for reparation and respect for the rights of communities is an upward trend, especially in countries with proven judicial systems of independence such as South Africa or Kenya.

“Behind mines there’s a trail of social disintegration,” Johan Lorenzen, a human rights lawyer from the South African law firm Richard Spoor, told EFE.

“Once you have disrupted the communities’ dynamics, to find a way to engage with the community it’s not a straightforward thing, it takes a lot of work, it takes a lot of social science and expertise

“We should improve community-agency dialogue so you don’t just start mining and pay people off along the way after making their lives intolerable,” Lorenzen urged.

 

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