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African FDI into mines on the rise as continent steps up its

[GabeBuffet]

role in energy transition!!!! 

Investors have typically associated Africa with high levels of risk. However, the continent also generates the best returns for investors, and countries such as Namibia have put in place policies and ensured a stable security situation to create an attractive investment environment.

 

Namibia’s strong rule of law, combined with a government that has prioritised working with the private sector, has proved attractive for foreign companies.

 

The trend across Namibia is also being witnessed across the continent. Foreign direct investment (FDI) into mines – and oil and gas projects – across the African continent is expected to rise in 2023 following a sluggish 2022 continent-wide due to lacklustre investment conditions, Investment Monitor analysis finds.

Historically, gold and diamond mines have attracted the most attention from foreign companies, but as the energy transition picks up pace, Africa’s vast deposits of rare earth minerals – needed for electric vehicle batteries – are turning heads. According to GlobalData analysis, a shortage of batteries is expected by 2025, with automakers, governments and investors keen to pre-empt this.

“There is not a great deal that can be done to alleviate this [impending shortage] in the short to medium term,” says GlobalData analyst Daniel Clarke. “However, immediate and significant investment into mining and refining of the battery materials will eventually alleviate this shortage in the long term.”

FDI on the rise in Namibia

As countries work to lower the perception of risk and improve investment appetite, in Namibia the message to investors is clear: “The government is open to having discussions with the private sector and collaborating to find solutions in line with Namibia laws and regulations,” says Nangula Uaandja, CEO and chairperson of the Namibia Investment Promotion & Development Board.

Speaking at the Namibia Investment Summit in Dubai last year, President Hage Geingob reiterated that companies operating in the country have the right to repatriate profits earned.

“On these questions, let me reassure you that not only is Namibia a rule-based democracy with membership to international investment protecting conventions and instruments; we also have an independent judiciary that robustly enforces constitutionally guaranteed property rights for all domestic and foreign investors,” he said.

In Namibia, these efforts are paying off. Overall investments in the country have spiked over the last two years, Harvard Growth Lab analysis shows.

Even without Q4 data, which is not yet available, last year (2022) was the best year on record for FDI into Namibia since 2016, when the country entered a recession. Levels haven’t quite yet reached pre-recession levels, but with 2023 set to be a big year continent-wide, Uaandja is optimistic.

Namibia also historically ranks highest among the countries in Africa in terms of security on Fraser Institute rankings. The country’s work to maintain peace and security, put in place legislation and create an environment attractive to investors is paying dividends.