Southern Africa has long profited from its mineral wealth, until recently. Mature mining destinations were the hardest hit by the collapse in commodity prices. At last the area is seeing some respite.
By Mungo Smith
IMAGE: Courtesy of Vermeer
The downturn in the prices of commodities has slowed down mining activity in Southern Africa over the last three years. Nonetheless, signs of recovery are evident. Immense mineral wealth, from diamonds in Botswana and Zimbabwe, to massive coal deposits in Mozambique and South Africa’s well-known gold reserves, continue to lure investors as commodity prices recover gradually and governments undertake efforts to boost mining activity.
South Africa, the region’s heavyweight, has experienced some renewed interest from investors. White Rivers Exploration and Harmony Gold Mining have announced the prefeasibility study phase of what could become one of the country’s major new gold mines in the Witwatersrand basin. Additionally, the Hong Kong-based Taung Gold International is in the post-feasibility stage of the Evander gold mine and conducting prefeasibility studies on its Jeanette project.
However, South Africa faces headwinds that could derail its recovery. Political uncertainty persists, particularly regarding a new Mining Charter that could change regulations on black-ownership and impose new levies on mining companies. Tensions with working unions have eased during 2016, although persistently high unemployment and future layoffs could reignite them. Despite this, juniors and service providers are generally now more optimistic, particularly as South African mines incorporate important technological advancements and automation processes, thereby boosting the country’s productivity and competitiveness, while its software and high-tech industries blossom.
Neighbouring Botswana, one of the continent’s success stories, has experienced a year of mixed developments. Global demand for diamonds, still the economic backbone of the country, has recovered, with revenues estimated to grow by 27% this year, following a 12% decline in production during 2015. Moreover, the country is pursuing a diversification strategy for its mining industry, with projects on coal and copper starting to materialize. However, state-owned BCL Limited and Tati Nickel Mining were placed under provisional liquidation this year, resulting in the loss of over 5,000 jobs and severely affecting contractors. African Copper and Discovery Metals also closed their operations this year, succumbing to a protracted period of low commodity prices. Despite this, the country’s strong reputation as a safe haven continues to attract investments.
Resource-rich Mozambique remains politically unstable amid resurging violence following the 2015 election. Higher coal prices in the latter half of 2015 have proved beneficial for Mozambique, attracting interest from Chinese, Indian and Japanese companies, lured by the huge reserves found in the Moatize basin. Furthermore, the governments of Maputo and Gaborone announced plans for a railway export line from Botswana to the new port of Technobanine, with the potential of transforming the region into a coal-exporting powerhouse.
Zimbabwe’s mining potential has been decimated amid political and economic instability. However, signs of improved engagement with the international community and a slowly ameliorating economy have boosted prospects for the country’s mining industry. The Chamber of Mines of Zimbabwe expects roughly 50% of the country’s mining operators to invest in the expansion of current projects. Meanwhile, exploration projects are once again taking place, particularly in gold and platinum, with major investments announced by Zimplats. Moreover, increased demand for coal and diamonds are expected to bring Zimbabwean production back to growth, after a year of decline in 2015.
Southern Africa’s traditional strengths, such as a skilled workforce and a competitive infrastructure, will continue to attract investments. Moreover, important projects in the energy sector are expected to tackle the power shortages that have impeded the industry for decades. Southern Africa’s long mining tradition has resulted in its companies moving up in the mining value chain, thereby becoming important service providers and players in the rest of the continent, and the region will benefit from this.