Government Must Stay Away From Economic Suicide

Published 6 years ago

It is common knowledge that West Africa is blessed with abundant mineral resources. Aside from the macro-economic factors that affect the price of commodities, the micro-economic factors of each country in the region dictate the pace at which their mining sector progresses.

Australia, Canada and South Africa are generally perceived to be first-class mining destinations and are highly revered by countries that harbour aspirations of replicating their successes. They are not immune from the global factors associated with mining, but they have developed sustainable, and implementable, mining policies with supporting financial networks. It is this that should be followed, not the comparison of resources.

At present, a number of mines in West Africa are facing a number of challenges, such as a difficulty in accessing finance as well as the global slump in the sector. As a result, investment in mining projects has slowed down; though there are investments being made with China-based Chalco recently announcing plans to invest $500 million in a Guinean bauxite project. Crucially the aluminium will be produced in Guinea, a major coup for Guineans, especially as the issue of capital flight plagues the continent. In more developed mining countries, part of their success has been the ability of the government to develop and implement policies to protect resources. There is also a concerted effort to aid industrial development and, where possible, finance is made accessible to companies who wish to acquire foreign assets.


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In many West African countries, would-be participants in the mining sector are restricted to small scale and artisanal mining due to an inability to obtain finance at competitive rates. In Nigeria, for example, two out of 25 banks have desks dedicated to solid minerals. Coupled with high interest rates for loans and a dearth of viable mining projects to finance, there is a catch-22 for banks to lend to participants in the sector.

However, with the development of the Solid Mineral Development Fund, there is fresh hope and, crucially, the political will to assist artisanal and small-scale miners with funding. Though there are on-going projects in Nigeria, the level of activity pales in comparison to Burkina Faso, which as recently as 10 years ago, did not have a notable mining sector to speak of. Despite its challenges, Nigeria remains an attractive proposition for foreign investors.

Some governments may not have the financial capacity to develop projects. They then need to ensure there is a stable political environment, with a clear understanding it acts as a crucial component in attracting investors.


South Africa, which is widely acknowledged as the premier mining destination in Africa, serves as a prime example to all. It has a wealth of experience to lend. However, the recent proposed revision of the mining code has triggered a wave of uncertainty among mining companies in the country. This is the second revision in recent memory and only goes to support the idea that investors require a degree of certainty, which they can marry with their long-term plans.

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Tanzania has also ruffled the feathers of multinationals operating in the country as recent policy changes have had an adverse effect on foreign investments. The political landscape of the continent often goes through periods of volatility. For the development of a nation to happen smoothly, government interference must be limited to policy development and implementation. International mining companies, along with the expertise and technical skills they provide, also increase the profile of the host nation they operate in. This, in turn, reflects well on the host nation’s ability to create an environment suitable for international best practices to be adhered to. The resultant effect is improved credibility and more investment.

Deterring investors through haphazard policy changes is tantamount to economic suicide. – Written by Richie Seun Johnson

Related Topics: #Investment, #Mining, #West Africa.