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A second chance for African Mining

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The Just Energy Transition has resulted in an increased demand for minerals like copper. Image credit: Leon Louw for WhyAfrica

A second chance for African Mining

The African mining sector has been given another opportunity to benefit from the continents vast mineral resources.   

By Warren Beech CEO at Beech Veltman Incorporated

It is a well-known fact that Africa has vast mineral reserves including platinum group metals (PGM), copper, cobalt, iron-ore, chrome, manganese, gold, and lithium, with Africa’s top mineral-producing countries including South Africa, Nigeria, Algeria, Angola, Libya, Egypt, Ghana, Democratic Republic of Congo (DRC), Gabon and Zimbabwe.

With the accelerating pace of transition to renewable energy sources and decarbonisation, demand for battery or green minerals has increased exponentially.

African countries should already have taken advantage of the increased demand for these minerals as well as for gold, the traditional “safe-haven” when the world’s economy is in the doldrums.

Unfortunately, most African countries have squandered various historical opportunities to benefit from increased demand, but they have been given another chance to benefit significantly, particularly as the energy transition gathers further momentum into 2024 and beyond.

Uncertainties add to complexity (A second chance for African Mining)

While some countries, such as the DRC, Tanzania, and Zambia, appear to have implemented programmes which have supported investment and increased benefits from mining and beneficiation, not many other African countries have done so successfully.

While some of the reasons are country-specific, there are common factors including policy and regulatory uncertainty, bureaucracy, graft and corruption, security concerns, and infrastructure constraints (water, electricity, roads, and ports).

South Africa is an example of a country where the mining and natural resources sector has been throttled for these reasons, and there doesn’t seem to be an end in sight. Uncertainties in an election year are adding to the complexities of the mining and natural resources sector.

It would be extremely unfortunate if South Africa does not actively take advantage of demand for its minerals including PGMs and iron-ore.

I also hesitate to mention the “dirty” word: coal. The reality is that, despite approval of the Just Energy Transition Implementation Plan by Cabinet and the apparent funding that has been secured in support of this, South Africa will continue to rely on coal-fired power stations for the foreseeable future.

China, one of South Africa’s key strategic business partners, also continues to rely heavily on coal-fired energy, with coal being sourced from various countries, including South Africa.

Demand for PGM on the rise (A second chance for African Mining)

While lithium prices (at the time of preparing this article) were literally falling through the floor, industrial demand for PGMs was at record levels in 2023 and anticipated to continue into 2024.

With South Africa’s vast PGM reserves, and a PGM mining sector that consists of both mature (older) mines and newer mines, PGM miners in South Africa could have a very good year or two ahead.

The increased industrial demand is because PGMs can be used in various applications such as the production of specialised glass and fibreglass. Almost ironically, as more wind farms are built, the demand for fibreglass and platinum-containing facilities for the manufacturing of fibreglass, which is used for turbine blades, is increasing. PGMs are also a critical component of hydrogen technology (electrolysers and stationary fuel cells).

It is an unfortunate reality, however, that several key challenges will continue to hamper South Africa’s mining sector, and the African mining and natural resources sector more broadly in 2024.

These challenges are mostly supply chain constraints which include, amongst others, infrastructure limitations, exponential increases in costs of doing business (mostly employment costs), cyber-crime and cyber-attacks, geopolitics (including security and safety risks), and the inability to access capital.

Trends to watch in 2024 (A second chance for African Mining)

Key trends from 2023 will also continue in 2024 including environment, governance and social (ESG) considerations, the effects of climate change, cyber-attacks and crime, illegal mining, graft, and corruption.

There are of course a number of positive trends, that will also continue in 2024 including the development of artificial intelligence, process automation, and workplace productivity initiatives.

What has become even more clear in 2023, is that, for Africa’s mining and natural resources sector to succeed and to benefit from the opportunities that are being presented, collaboration is vital.

Collaboration is required amongst all stakeholders including between the mining companies and government, mining companies and communities, mining companies and employee representatives (trade unions), amongst mining companies themselves, and between African countries, and their counterparts, in the rest of the world.

A fundamental cornerstone of collaboration is transparency, which, unfortunately, there is simply not enough of, at this stage.

Proper collaboration can result in local, regional and continent-wide benefits including in relation to infrastructure (getting the minerals to market), trade incentives, and enforcement of programmes to prevent illegal mining and transportation of illegally mined and beneficiated minerals.

Recent examples of collaboration have not yet had a proper opportunity to demonstrate whether or not they will be successful, but they are notable. These include the collaboration between the DRC and Zambia to make batteries for electric vehicles. These countries have significant copper, cobalt, and lithium reserves, that are key components for electric vehicle batteries.

As a South African, I am obviously going to back South Africa as a mining jurisdiction to watch in 2024. Other countries that are clearly on the radar, because of their programmes aimed at making it easier to do business in their countries or because they have the opportunity to exploit their vast reserves for the benefit of their citizens, include Zambia, Namibia, Angola, DRC and Zimbabwe.

The watchword for 2024 will be collaboration in pursuit of the genuine social licence to mine.

A second chance for African Mining

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A second chance for African Mining

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