Cape Town // Africa’s belt of Muslim countries will be prime beneficiaries from a commodities come-back, as miners and bankers begin to be cautiously optimistic that the market has turned.
The yearly Mining Indaba – the word means “to confer” in Zulu – brings together financiers and mining bosses who pay up to 20,000 South African rand (Dh5,510) for an entry tag for the week-long event held in Cape Town, where they huddle in non-stop meetings talking money and geology.
For the past five years the event has been a gloomy affair. The swift end of the commodities supercycle left the industry in survival mode, struggling with debt and flat commodity prices. This year though the tone was distinctly light during the event that wrapped last Thursday amid hope that a price rally that began last year will last.
During the previous commodity run it was central and southern Africa that benefited the most, but this time countries such as Nigeria, Niger, Senegal, Mauritania, Ethiopia and others that form part of Islamic Africa are hoping to join in.
“We’ve been finding chunks of gold as big as a fist,” Hassane Barke, the head of exploration at the Niger ministry of mines said, while manning a booth at the Indaba. “We are getting requests daily from companies seeking a licence to explore and mine.” Gold, uranium and newly fashionable minerals such as lithium – used in modern batteries – are among those being sought.
Niger has long been the source of uranium, mostly for the French power utility Areva. For decades the company paid a modest royalty for the product, but this changed in 2011 with the election of Mahamadou Issoufou.
A mining engineer himself who spent most of his career working for Areva, Mr Issoufou fought a bruising battle for a better deal, finally coming to a settlement in 2014 that improved Niger’s take of the spoils from uranium sales. Mr Issoufou’s mining background has also led to his fingerprints appearing all over the country’s recently drafted mining legislation, ensuring a better framework for both mining companies and the country.
“He understands mining contracts, having dealt with so many of them during his time at Areva,” Mr Barke adds.
Daniel Major, whose company GoviEx Uranium is in the final stages of planning to build a uranium mine in Niger, agrees. Sitting in the lobby of his hotel near the Indaba conference venue, Mr Major had a line of financiers waiting to see him and learn more about his project.
“I can’t think of many countries where the minister of mines will simply let me walk into his office to discuss an issue,” he said. “Officials in Niger are very easy to work with.”
Mr Major says conditions have turned favourable for commodity producers, even uranium miners. “We’ve battled on with our uranium project since Fukushima, and it looks as if now we can get the mine built.” Hard-nosed financiers that kept uranium plays at arm’s length are now willing to talk money again. By year’s end he expects to begin building his mine.
Elsewhere, Mauritania is also enjoying renewed attention from mineral hunters, said Ibrahim Boh Mavine, an official of the country’s mining and petroleum ministry. “We’ve issued more than 300 exploration permits, most in the past year, and already have 12 mines either working or being built,” he said, pointing to a colourised map crowded with grids that reference spoken-for claims.
Morocco is one of the few countries in Muslim Africa with a long history of mining, mostly phosphates. The north African kingdom has the world’s largest reserves of the product, used for fertiliser production, but now wants to expand into other mineral areas.
“We’ve also got proven reserves of rare earth metals, iron and uranium, precious stones – it’s a long list,” said an official, before bustling off to speak to a pair of Nigerian bankers.
Ethiopia and Senegal both held individual presentations in meeting rooms, which were packed beyond capacity as people crowded in to hear more, standing awkwardly against the wall. Ethiopia has very little mining and is almost entirely dependent on agriculture for exports and its GDP, said Motuma Mekassa, the minister of mines.
“We are the fastest-growing economy in Africa, but we cannot hope to keep this up if we only depend on agriculture,” he said. “By developing our natural resources we believe our economy will keep growing, and that by 2025 will be a middle income economy.”
It is not only the miners who are paying closer attention to these countries. Contractors such as Dubai-based Altaaqa Global, part of Saudi Arabia’s Zahid Group, considers them to be a part of its future growth. The company provides instant power stations, using container sized gas or diesel-fired generators.
“We’ve worked in Iraq and Yemen, so if we can survive those places, we can do business anywhere,” said Majid T Zahid, the chief commercial officer. The company already has offices in Kenya and South Africa, but the “Islamic belt” is where it sees real opportunity.
“We are looking at West Africa very seriously,” Mr Zahid said. “It is a region where countries want to develop their natural resources but lack electricity; this is where we can help.”
In a twist of fate, the ever-present topic of country risk that is raised whenever African states are discussed has changed. Usually the danger of domestic political instability is weighed for African investors, but this year the risk to mining projects is now from outside the continent. In particular, the United States.
The “aggressive protectionism” of the Trump administration could lead to a weaker dollar and sharp drop in imports, which would hurt demand for raw materials, warned Dambisa Moyo, a global economist.
“It is worth reminding that in the 1930s after the Great Depression, the US adopted a very aggressive stance similar to what we are hearing today around trade and protectionism,” Ms Moyo noted.
“It put up approximately 2,300 tariffs to block trade around the world. We know what the consequences were – a decline in economic growth and mass unemployment. Most economists agree that it delayed the recovery of the US economy.”
business@thenational.ae
Follow The National's Business section on Twitter
