How to stimulate post-Covid investment in mining exploration in Africa

"The continent's potential to be a global mining investment haven cannot be disputed, when Africa is home to 90% of the world's platinum supply, 90% of the world's cobalt supply, 50% of the world's gold supply, 35% of the world's uranium, 9.6% of the global oil output, two thirds of the world's manganese, and 75% of the world's coltan supply,” said Hubert Danso, CEO of Africa investor (Ai) while addressing delegates at the Africa Mining Forum on 16 November on the topic: “The Next Smart Move: Covid-19 Recovery Plan to Stimulate Investment into Mining Exploration in Africa”.

Despite the continent’s huge resources, Danso stressed less than 50% of the continent has been geologically surveyed, and estimates that at least the same amount of resources have yet to be explored today.

But Africa only received less than one third of the US$3bn global exploration investment last year. 

“We believe Covid-19 offers a unique opportunity to apply different approaches; public and private partnership models especially can better attract global and domestic shareholders, as well as innovate and assist the continent's mining sector, support Africa's integration and competitiveness in the global Fourth Industrial Revolution,” Danso stated.

“First and foremost, we need to appreciate that the cheapest form of stimulus is confidence, and the ability to provide confidence and clear signals to the investment community is paramount and is really very important. We believe that there is a great opportunity to reset the public-private mining leaders relationship through private sector and presidential mining investment partnerships and collaboration, and we have seen it work effectively throughout the African Union through the Presidential Infrastructure Champions Initiative currently chaired by President Cyril Ramaphosa. 

“We think we can have something like that level of leadership focus on the mining sector. The African Union has a programme with institutional investors called the 5% Agenda, which is a commitment between African heads of state in governments and African pension and sovereign wealth funds to increase their allocations in the region of 5% of all assets under management to infrastructure and long-term assets. We believe the mining sector is ripe for participation in that portfolio opportunity, and we’ve already seen a very good example from Ghana, under the leadership of Nana Akufo-Addo, President of Ghana, who is working closely with the Ghananian Infrastructure Investment Fund, which has now started to invest in the gold mining sector in the country. That has really sent a very positive signal  to insitutional investors. We can already begin to see this model taking form in other countries on the continent. 

“As a consequence the president has gained a great deal of confidence and support as a champion of the mining sector in Ghana and across the continent. But let’s remember fundamentally capital markets and private equity investments are capital raising venues and instruments whose investments are made through companies and determined on their ability to build up a shareholder base and share premiums in terms of equity. Investment in the sector is very complex, competitive, and it is forensically compared to global peers, not just African opportunities.” 

He also stressed that investors are harder to find than actual good projects, which likewise are difficult to discover.

 “We feel that the continent only needs to cultivate a cluster of real catalytic investors to mount a strong build back better, resilient mining investment Covid-19 response. The reality is it is easier to secure current investors and local producers to increase and expand their investment rather than secure new investors. However, it is easier to get new investors with the support of current investors and local producers. We, therefore, feel that a compelling Covid-19 mining sector response to attract investment into the mining sector should be in the form of a government partnership with local producers, premised on a four-point plan to optimally increase investment.”

This plan involves:

• working with government and local producers to expand existing mines 

• assisting local producers to purchase new mines

• bringing in new joint venture partners to invest in that growth 

• intentionally targeting and attracting a larger percentage of the global exploration spend. 

He continued, “There is a strong and unique opportunity now for governments to work with local producers and the investment community in partnership. We, in the private sector, wherever we are going to invest, in whichever sector, the first conversation is with the local producers and local private sector to ask how they are being treated, what the opportunities are for growth, and what the nature and the depth of the relationship is with governments. HE Francis Gatare, CEO at Rwanda Mines, Petroleum & Gas Board (RMB), has already seen fruit because of the leadership delivered through his own ministry, and his president being a very dynamic leader, who understands the private sector.

"I really believe that partnership is something that should not be underestimated, it should be a forward looking partnership. There is a big world out there but I think with that partnership, and taking into account our blessed endowment, naturally we are well ahead of most competitors around the world. We just need to facilitate that partnership which will unlock unprecedented levels of capital, if it is properly cemented."

By Samantha Payne