Foreign suppliers still dominate Africa’s mining industry
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Foreign suppliers still dominate Africa’s mining industry
In African countries mining companies still give preference to foreign suppliers.
By Leon Louw founder of WhyAfrica and editor of the WhyAfrica magazine
In principle mining companies in most African countries are supposed to give preference to local suppliers for the procurement of goods and service. However, this is not happening for a number of reasons.
For one, foreign firms operate with cutting-edge equipment and highly trained personnel. Moreover, they often have a proven global reputation, strong insurance, and financial stability which obviously reduces the perceived project risk.
No capacity or financial back-up
In stark contrast most newly established African Small and Medium sized Enterprises (SMEs) lack the capacity, track record, financial back-up and certifications to meet international standards especially in high-risk capital-intensive projects.
According to Senegalese researcher Papa Fara Diallo limited access to finance is also a key barrier facing domestic suppliers.
Foreign companies have far better access to finance which allows them to offer credit terms, invest upfront in infrastructure and deliver fast on large project.
On the other hand, local entrepreneurs struggle with limited access to bank financing, high interest rates and difficulty in securing sufficient working capital.
Therefore, complex services like geophysical surveying, deep drilling, and automated blasting are typically outsourced to international firms with global experience.
Coordinated effort is needed
To ensure more local suppliers get contracts from large mining companies in Africa, a long-term and coordinated effort is needed which includes, amongst others, policy, capacity building, finance and procurement reforms.
In practice, whether for mining equipment, drilling, explosives, transport, or logistics, foreign contractors continue to dominate procurement across much of Africa, largely due to their greater technical and financial capacity.
In Ghana, for example, multinational miners Newmont, introduced a local supplier program that saw local procurement increase to almost 50% but only after years of training, financial support and significant changes in procurement policies.
Locals struggle to get contracts
According to Ahamadou Mohamed Maïga, an industry expert in Senegal, foreign suppliers still secure far more contracts in Senegal’s mining sector than local companies.
“Although the gap has narrowed in recent years, stakeholders agree that stronger efforts are still required,” says Maïga.
Maïga says that foreign suppliers, who won more than twice the value of contracts as local businesses, continue to dominate the supply of goods and services to Senegal’s gold, phosphate, and mineral sands mines.
“This trend is not new. Over the past four years, foreign firms have consistently secured contract volumes far exceeding those granted to local providers,” Maïga concludes.
To read more about local suppliers in Africa, procurement, mining and mineral exploration in Africa, visit the WhyAfrica website, your one-stop shop for on the ground information and business intelligence about Africa.
Image credit: Aubrey Odom from Unsplash
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