MAPUTO, Mozambique—In the race between the world’s fastest-growing economies, one would be hard-pressed to find many of the traditional powerhouses from North American, European or Asian markets. In fact, the world’s poorest continent—Africa—dominates the list with twelve of the twenty economies with the highest projected compounded annual growth rate (CAGR) between now and 2017, according to a study completed by the Business Insider. Not surprisingly, many of these countries also have disparagingly low GDPs and standards of living, a fact that makes such stellar growth rates significantly easier to achieve.
If this year’s record turnout at the 19th Annual Investing in African Mining Indaba is to be any indication, however, then the projected growth for these economies will be commendable by any standard. Bernard Sheahan, Director of Infrastructure and Natural Resources for Africa and Latin America at the International Finance Corporation (IFC), said at the conference that “the core message about the continent today is that Africa is rising.” Sheahan went on to address the issue of infrastructure across the region, saying that while it was a hurdle facing the industry, “multi-user infrastructure can be an opportunity for mining to enhance the developmental impact of mining.”
Incoming Anglo American CEO Mark Cutifani expressed similar sentiments in highlighting the need for regional infrastructure hubs. “We need cooperation across country borders. We must find solutions to this and mining should be part of those conversations,” said Cutifani in his address to delegates last week.
In addition to a record 7,700 delegates at this year’s conference, over 100 countries were represented across six continents, including government representatives from 36 countries in Africa. Coming in as the twelfth fastest-growing economy with a forecast growth of just over 8% this year, Mozambique was a key player in talks and discussions throughout the conference. While all eyes have been on the East African nation for what some say is the most significant natural gas discovery of the past decade, the first overseas exports of coal in 2012 in twenty years have also signaled a reawakening of the country’s mining sector.
Though there is significant growth expected across the sector and dedicated FDI is at an all-time high, industry experts suggest that Mozambique may just need to stop and catch its breath as it races to be at the forefront of the African energy and minerals markets. Boasting globally significant reserves of coal, graphite, aluminum and coloured stones—and a healthy resource portfolio beyond these—Mozambique’s government has been hailed as exceptionally transparent and open to discussion with industry players. But perhaps more so than many of its neighbours, the country faces a severe lag as industry growth outpaces infrastructure growth. Grant Demetrius, Partner at Deloitte’s Maputo offices, suggests that though investors are certainly drawn to Mozambique, the country “may already be on its way to being too attractive.” While the need to attract foreign investors was critical some years ago, suggests Demetrius, “now it needs to harness the potential available in this influx of capital. It is rare to find a company that does not find Mozambique to be an enticing investment.” Demetrius believes that the country has at least 150 years of mining potential in its future and remains optimistic that this can be realized so long as the government is able to utilize investments effectively.
Mozambique has also been in the spotlight in the past few weeks as Australian major Rio Tinto faced a $3 billion write-down in its coal assets here. During one of the conference’s ministerial forums in Cape Town last week, Mozambique’s Minister for Mineral Resources Esperança Bias informed audiences that the government was working with Rio Tinto to understand the reasons behind the write-down. Despite initial concerns voiced when Rio Tinto made its announcement early last month, Minister Bias assured industry players that the company’s presence in Mozambique—and significant contribution to its mining sector—would not be affected. “We have Rio Tinto’s commitment that there will not be any changes to announced plans for their Mozambique coal business,” said the Minister during a press conference.
Rio Tinto’s CEO of Diamonds and Minerals, Alan Davies, mentioned the miner’s participation in an investment agreement with the government for a $10-billion-plus 750-kilometer railway project. “Our priority is to find a suitable infrastructure solution with the government,” said Davies. The company has stated infrastructure issues and over-ambitious resource estimates as the main factors in the January write-down. Rafael Benke, Global Head of Brazil’s Vale told delegates that the Nacala Corridor and Sena rail line were just “the tip of the iceberg” in terms of infrastructural investments and developments in the country. “This will be one of the largest integrated transport investments ever made in southern Africa,” Benke said.
Mozambique lies on the southeastern coast of Africa, strategically located along some of the busiest shipping routes connecting to India and China, markets which in the face of an economic downturn in the West, are providing the bulk of demand for Africa’s mineral output. It also provides water access to its landlocked neighbours Zimbabwe, Zambia and Malawi in addition to providing an alternative to Durban’s increasingly busy ports. The ability to transport raw material from the country’s mining hub of Tete and from its inland neighbours to its various ports will be an integral factor in maintaining the projected growth of its mining sector.