There’s little doubt of the vast mineral resource potential across the African continent, though investment conversation is often tempered with underlying concern over the stability of the jurisdiction and potential risk.

There are a number of stories of companies entering Africa only to face unforeseen challenges, and EY’s recent Attractiveness Program Africa report found greenfield foreign direct investment in the continent continued to diversify in 2016, with coal, oil and natural gas, and mining and metals collectively accounting for just 6.2 per cent of FDI projects over the course of the year.

But the diversification of Africa’s foreign investment may not be a bad trend for the economies of those in the region. Speaking recently at a WA Mining Club event in Perth, Resolute Mining Chief Executive Officer John Welborn drew significant parallels between Africa today and the Asian economies of years gone by.

Africa ‘the new Asia’: Welborn

“Think for a moment about a continent – what do you see if you think about poverty, poorly drawn borders, malnutrition, disparate tribal warfare, an unfathomable cultural difference, huge and vast landscapes, political uncertainty, unknown legal systems and regularly seen as a disaster area of the world,” Mr Welborn said.

“People may think I’m talking about Africa, but I’m describing the Asian economies of the 1970s. You don’t have to go that far back – in my primary school and even in the early years of high school, Asia wasn’t seen as a major trading partner.”

Resolute has a strong presence in Africa, operating the Syama gold mine in Mali, and Mr Welborn is a well-known advocate for the economic expansion of the continent – a process he said was happening before our very eyes.

“There are huge challenges but there are huge opportunities – massive spending rises, technological change – the congruence of primitive systems and modern technology is very interesting,” he said.

“It happened slower in the Asian economies than it did in our own, and it’s going to happen a lot faster in Africa. There’s an opportunity to get in ahead of that.”

Most importantly, Mr Welborn said the continent’s mineral opportunities were particularly vast.

“There’s lots of everything in Africa, and it’s underexplored – there’s huge opportunities,” he said.

Resolute’s Syama project has total reserves of 3.5 million ounces of gold and resources of 3.2 million ounces.

Many explorers, few producers

At least 170 Australian resource companies holding more than 400 projects are involved in Africa in some capacity, according to statistics released by the Australia-Africa Minerals & Energy Group (AAMEG) in February.

However, only 5 per cent of these projects are currently in operation while 30 per cent are in exploration and 21 per cent at grassroots level.

Reflecting the status of the projects is the financial breakdown of the companies which hold them – 5 per cent of ASX-listed companies with projects in Africa have a market capitalisation over $1 billion, while 23 per cent sit below $10 million and 57 per cent between $10-100 million.

“This research highlights the significant number of mid-cap and junior resource companies who have a dedicated focus on the African continent,” AAMEG’s report, titled Assessing the scale and potential of Australian engagement in Africa, said.

Interest in emergent African mineral spaces such as lithium and graphite has lifted significantly since 2016, while Australian interest in West African nations such as Zambia, Botswana and Cote d’Ivoire has increased over the past decade.

The report said the figures showed Australia’s resources opportunity in Africa.

“Australia has a far reaching footprint in Africa, with trade increasing significantly over the past 20 years,” it said.

“Australia is uniquely placed to benefit from Africa’s economic potential through its active involvement in the positive process of supporting African governments to unlock the growth potential of this continent, while providing mutual benefit to African nations and their people through direct foreign investment, job creation and skills development.

“The Australian resources industry is well-positioned to play a pivotal role in the development and economic growth of Africa’s natural resources.

Challenge and the future

While there may be ample potential for mineral development in Africa, there is plenty of work still to be done in parts to overcome infrastructure and jurisdictional challenges, according to the African Minerals Development Centre (AMDC), a joint centre of the African Union and United Nations Economic Commission for Africa (UNECA).

The AMDC is the custodian of the African Mining Vision (AMV), an initiative adopted by the African Union Heads of State in 2009 to encourage an inclusive mineral sector fuelling socioeconomic development and transformation across the continent.

Delivering a keynote speech on regional value addition in West Africa to a West African mining forum in Ghana in late April, AMDC Coordinator Kojo Busia told the audience the promising areas of West Africa would benefit from a more regionally-minded approach linking infrastructure chains – the kind outlined within the AMV.

“The continent’s stagnant activities and returns in the minerals sector are due to a failure to link into higher value segments of value chains surrounding minerals, such as beneficiated outputs, manufactured and service inputs, and higher value research and development and marketing,” he said.

“Advancing along global value chains has been a key means by which emerging markets have increased employment and income generation based on capturing economic activities from more advanced and diversified neighbours and partners – particularly as their costs begin to rise and they look for outsourcing opportunities – as exemplified in East and Southeast Asia.”

Dr Busia said infrastructure challenges in road, rail and port transport and energy were detrimental to the development of a thriving cross-border resources sector and drove up costs, but opportunity existed to turn this around.

“There are many means by which regional integration can unlock opportunities for infrastructure development,” he said.

“Similar to the benefit of pooling markets and producers, integrated industrial development will also take advantage of joint investments and larger returns to regional projects.”

Dr Busia encouraged nations to embrace the AMV and a shared prosperity view for the longer term benefit of the continent and its nations.

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