The biggest challenges faced by African mining industries are a lack of regulatory certainty and infrastructure, says junior mining activist Richard Linnell, who was a speaker at this year’s Junior Mining and Exploration Conference.
The aim of the Institute for International Research’s inaugural conference and exhibition, held in Johannesburg from November 6 to 8, is to determine ways of attracting investment for junior mining projects in Africa.
Many African countries, such as Zimbabwe, have good education systems, meaning a lack of infrastructure is, in most cases, not owing to a poorly educated population but rather a lack of energy and energy investment, Linnell notes, emphasising, further, that coal shortages are not the main reason for Africa’s energy shortages.
The continent has an abundance of coal with an increasing amount of gas and oil available. Resource development, however, plays a big role in energy shortages, he says.
Linnell adds that South Africa is one of the worst examples of regulatory uncertainty. The country’s Mines and Minerals Act allows the Minister of Mineral Resources to delegate the detail of the Act.
“Owing to a lack of precedent, South Africa does not possess institutional memory at government level and people who are placed in positions of power either make the wrong deci- sions or do not know which decisions to take, or when to take them timeously, says Linnell.
He further notes that Africa does not have enough capital to exploit its resources; therefore, foreign capital is necessary. “African countries need to encourage investment by international companies, not make it more difficult for them to invest by talking about nationalisation and beneficiation.”
“Nationalisation is a pipe dream,” Linnell states, reflecting on South Africa’s, in particular, the African National Congress Youth League’s, continuous calls for nationalisation – wholesale or ‘strategic’ – of the country’s mines and resources.
“Nationalisation cannot work without capital flowing into the country. Mines are horrifically expensive to build and maintain.”
Africa’s Struggle
“Mining is the answer to Africa’s economic struggles,” Linnell stresses, adding that mining creates jobs, infrastructure and leads to well-developed functional communities surrounding mining operations.
The increase in foreign revenues from natural resources will render a nation’s currency stronger compared with that of traditional trade partners. As a result, the nation’s exports become more expensive for other countries to import, making its manufacturing sector less competitive, Linnell explains.
“Therefore, clever use of incoming capital should be exercised by these countries, such as investment in offshore funds.”
The international business community’s relationships with Africa, particularly South Africa, has been good as the Northern Hemisphere understood and related to South Africa’s political and economic situation. But the strikes, resulting in violence in South Africa’s mining industry, have led to confu- sion. Therefore, international investors are waiting to see whether South Africa’s mining sector will stabilise and whether government can adequately deal with the situation, he points out.
New Africa Mining Fund
The New Africa Mining Fund (NAMF) is a junior mining venture capital fund, which provides capital for early-to-later-stage exploration and mining development projects for all minerals, except diamonds and uranium, throughout Africa.
Linnell conceived the original idea of the fund at a junior mining conference at Bakubung, near Sun City, in February 2000.
What became known as the Bakubung Initiative, culminated in former Gold Fields CEOChris Thompson concluding that a venture capital-type mining fund needed to be established in South Africa to support new mining entrants.
Early finance to set NAMF I in motion was provided by local mining and financial institutions and after NAMF II director Neil Gardyne and NAMF cofounder, the late Arthur Mashiatshidi, won the bid to manage the fund, NAMF I was launched in March 2003.
The fund invested in about 15 to 20 mining projects in sub-Saharan Africa over its five years of existence and has been a big success, serving its purpose, Linnell says.
“It has played a big role in the development of a junior mining sector in Africa and [now] the NAMF II has been implemented.”