A success story for African mining
The MIGA (Multilateral Investment Guarantee Agency) symposium
was held in Montreal from 22-24 May. It brought together some 40 African mining
ministers, most of the important donor agencies and representatives of around 25
mining companies. MIGA, which is a specialised agency of the World Bank,
promotes the flow of private investment to developing countries. It provides
insurance against political risks and assists member countries in attracting
The purpose of the symposium was to attract investors from all
over the world in order to exploit the rich mining possibilities offered by many
African states. Several of the countries that attended went to considerable
effort to present themselves well, and it was evident that some are quickly
learning what it takes to attract foreign investors.
The climate for mining investment in most African states has
improved tremendously over the last two to three years. Most countries have
introduced new mining codes, clearly defining the rights and obligations of
foreign investors. State-owned companies are also being privatised, taxation has
been made more reasonable and institutions in the mining sector, such as
geological surveys, are becoming more efficient.
All this has led to a big increase in exploration for new
deposits and a substantial increase in investment. At present, the activity is
particularly heavy in West Africa, where many countries have very good gold
potential. The European Community is contributing to this development in several
ways. The biggest success so far has been the exploration campaign in Mali,
funded under that country's Lomational Indicative Programme (NIP), which led
to the discovery of the Sadiola gold deposit. A world-class gold mine will be
built here, bringing substantial benefits to the country.
The World Bank has also supported many African countries in
their efforts to reform the legal and administrative framework for the mining
industry. An important element, however, in attracting mining companies is the
availability of good geological data. This is a very expensive activity, which
does not bring immediate returns, if at all. So it is not appropriate to finance
this through bank loans. The NlPs and SYSMIN Fund, on the other hand, are
instruments that are well-suited to this kind of work. The Community has already
financed a series of airborne geophysical surveys in Botswana and Namibia -to
mention just two examples-and a new Sysmin project is currently being prepared
for Burkina Faso.
The Commission Unit responsible for Mining Cooperation and
Sysmin (VIIIl.B.5) was represented at the symposium. Its main purpose for being
there was to present the functioning of Sysmin and the Community's cooperation
in the field of mining to ACP ministers, mining companies and other donor
Current state of the mining sector
The mining sector is currently very active. Exploration in West
Africa doubled between 1993 and 1995 and new mines are being opened all the
time. A lot of this new activity is to be found in the gold sector. This is
mainly due to the development of cheaper production methods combined with a much
more positive investment climate in many African countries. A gold mine takes
less time to reach the production stage than, for example, a copper mine, with
the former being far less dependent on good infrastructure. Outside the gold
sector, activity is much more subdued. While base-metal prices are at a
reasonable level, the pay-back period is much longer and the lack of suitable
infrastructure kills many projects.
For many countries, mining is a key area in the growth of the
private sector. State-ownad mines are being privatised and the new mines that
are being opened have little or no state participation. Foreign investors are
bringing in the most up-to-date mining technologies and business methods, and
they are faced with the need to train local people in technical and business
skills. Supporting the mining sector is clearly an efficient way of supporting
private sector development.
SYSMIN's future role
Given that most metals are currently fetching quite high prices,
it is probable that relatively few ACP countries will be eligible for SYSMIN
assistance over the next two to three years. The viability of most existing
mines is not thought to be under threat and they should continue to be
profitable. Thus, countries that are heavily dependent on mining should not
experience severe losses in export income, which in turn means that relatively
few SYSMIN requests are expected during the period of LomV's second financial
protocol. At the same time, the financial allocation for SYSMIN has been
increased from ECU 48Om to ECU 575m.
When trying to attract new mining investors, it is essential for
a country to have good geological information. Private companies are normally
unwilling to undertake much general prospect ion, such as airborne geophysical
surveys, because it is very expensive and, if they do, it is usually limited to
very small areas.
At present, companies are tending to restrict their activities
to areas for which general information is already available. These points were
raised by several of the mining companies that attended the symposium.
But the present mining boom is not going to last for ever. Metal
prices are volatile and, with the next downturn in the business cycle, a decline
in metal prices will surely follow. So it is essential to prepare the basis for
future mining activities by collecting general data. Given that a significant
part of the SYSMIN allocation may remain unused because of a lack of requests,
it would be worthwhile to consider whether a part could be reallocated to
prepare general geological data for mining activities in the next century.