It is a commonly known fact that Africa is a continent of endless possibilities. Its wealth of natural and human resources brings much promise to the continent and its people. Through mining, these resources are harnessed. As a sector, mining is central to many African economies. Its contribution to sustainable economic growth and job creation thus makes it appealing as an investment opportunity. Over the past few years, however, the African mining sector has faced many challenges, negatively impacting its investments. But, now, things appear to be looking up for the once-great sector.
The challenge:
2 years ago, the African mining market took a big hit. China, the top mining nation in the world and economic superpower, essentially turned off the tap of access and shut down many of its mines. This deeply impacted the African mining sector, considering China’s mass influence on the world. The nation has expanded its influence to a mass of major mining and mineral processes across Africa. Furthermore, South Africa is currently China’s largest trade partner. Any move the country makes can thus bring about mass change in other countries. A lack of demand for our commodities from China contributed to investments in African mining becoming fewer and fewer. Iron Ore specifically took a big knock, as China’s steelmakers buckled under chronic lack of profitability, overcapacity, and the ‘war on pollution’. Large mills collapsed, and the drop in worth signaled the worst performance since the financial crisis and an 18-month low. Issues facing investment in African countries often come down to political instability, perceptions of systemic corruption, regulatory uncertainty, high costs of employment, community activism, and the state of infrastructure. The 2016 mining sector saw subdued commodity prices, an increase in short-term volatility, increased pressure on operating models, and regulatory uncertainty. There was an international downturn in Africa’s resources, leading to a decrease in commodity prices, heavily impacting the mining sector. The commodity bust deeply impacted the mining sector. Here at CA Global, we could feel this hit, as mining jobs became fewer and fewer.
The resurgence:
But all was not lost. For the past 2 years, the mining sector in Africa has been slowly reclaiming its former glory. Largely a result of a shift in focus, as companies are looking at more cost-effective ways to encourage mining growth, and emphasize mechanism and automation of mining operations in hopes that it will better withstand future price volatility. In addition, a focus on localizing the mining sector holds the promise of improving the sector’s stability.
Our major minerals also helped boost the sector. Gold, one of Africa’s main commodities, helped launch the increase in investment, with a further expected increase as demand on the global market rises, but it is graphite that is steadily picking up investment. This popularity is largely a result of the increasing importance of ‘technology minerals’. Graphite is China’s latest mineral obsession. Iron Ore and Platinum are the other two commodities supporting the African mining sector. As such, despite concerns, it is important to remember the sustainable promise that comes with mining. “The mining industry works on a long-term basis, and therefore there is a long-term future for it”, says Andries Rossouw, mining assurance partner and project leader at PwC.
As previously mentioned, here at CA Mining, a division of CA Global, we experienced a decline in the number of mining companies reaching out with employment opportunities, a reflection of the hit the mining sector had taken. Recently, however, the situation seems to be improving. Between 2016 and 2017, we received almost 100 more job orders from companies. The majority of the work is in mine operation, followed by mine development. In particular, there has been a large focus on jobs related to graphite mining. Exploration work has finally featured again after a few years of non-existence. This is a good indicator that the industry is looking to gain momentum again in terms of new discoveries for mining at a later stage. The stabilization of the political environment in South Africa has led to a decrease in risk, and thus more opportunity for investment. PwC partner, Ben Gargett agrees. “Africa is changing. The political environment has stabilised,” Gargett argues. “Despite the challenges the mining industry has faced in recent years, increasing commodity prices, the levels of global investment pouring back into resource projects, and the market rebound for mining services companies, shows positivity has clearly returned to the sector.”
