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Perth - Africa's mining sector has taken off in the past few
years, with companies that may once have thought the continent too risky now
keen to invest, despite the continuing challenges of doing business on the
continent.
With demand for commodities such as iron ore set to jump in
the next decade as industrialisation and urbanisation boost demand, miners are
increasingly turning to Africa.
"We believe many African countries will be well placed
to meet this demand," David Joyce, head of expansion projects for Rio
Tinto's iron ore group, said at an industry conference this week in Perth,
Australia.
The move has coincided with an increase in stability in some
parts of the continent.
African Lion, a venture capital fund that has been investing
in African resources projects for over 10 years, said it has seen a gradual
upswing in the number of African countries it considers low risk from 10 in
1999 to 14 in 2011.
Ten to 15 years ago, Africa was "just too high risk -
you couldn't raise capital for African projects; you'd get no credit on the
Australian stock exchange for progress you were making there," said Rick
Yeates, managing director for Middle Island Resources, citing the perception of
Africa as "corrupt and warring" as chief concerns at the time.
But the pendulum has swung the other way in recent years,
Yeates said, in part due to efforts by African governments to make regulations
more transparent and consistent.
"West Africa last year was flavour of the month;
everyone had to have a project in West Africa if they wanted to attract the
attention of fund managers," said Yeates, who spent 23 years as a mining
industry consultant.
In Australia, the number of companies with African projects
listed on the Australian stock exchange has jumped from 40 to 170 in the last
nine years, according to industry publication Paydirt media.
Fears linger
But those in the industry said there were still some regions
that prompted concern for miners, with South Africa and Zimbabwe, which have
both introduced laws to increase black ownership, singled out for criticism.
South Africa is currently debating mine nationalisation and
has also targeted giving previously excluded blacks a greater share of
ownership.
But Sandile Nogxina, an adviser to the mines minister, said
the issue of nationalisation would be "put to bed" by mid-2012 when
the ANC meets to debate the issue.
In the meantime, nationalisation was not government policy,
Nogxina said.
"Nationalisation is not policy for South Africa, and
there is no government process that is formulating a policy on
nationalisation," he said.
Zimbabwe's Minister of Economic Planning and Investment
Promotion Tapiwa Mashakada also tried to reassure investors at the conference,
saying a recent law mandating 51% local ownership was "flexible".
"It is a flexible law, and investors are given time to
comply. It's not about seizure of assets. It's not about expropriation,"
Mashakada said.
Taxes are also high on the list of miners' worries.
"In the past year, at least 10 African countries have
either increased or announced an intention to increase the take of the state
from resource projects," said resources lawyer Michael Blakiston, a
partner at Gilbert and Tonkin Lawyers.
Blakiston said African states were asking for larger chunks
of industry profits in the wake of high commodity prices that have pushed some
miners' profits to record highs.
"A state should not be so seduced by the performance of
these companies, as they do not represent the endeavours of the industry as a
whole... The mining industry as a whole has not necessarily been making super
profits," he said.
