African mining is a mixed bag with much promise and peril

Absa Insights is a portal where the bank’s sector experts share essential learnings and new developments with its clients and other businesses. The world is changing; so in 2019 Absa has introduced a series of discussions featuring high-level thinking around Consumer Goods and Services, Agriculture, Telecommunications, Mining and Energy and Infrastructure. Bookmark Absa Insights, where the bank shares insights from discussions designed to help you navigate the ever-shifting trends that are shaping the economy.

Listen to the audio below (or scroll down for a summary of it)

Some commodities (gold, for example) are booming while others (diamonds come to mind) are under pressure.

It was the best of times; it was the worst of times. The proverbial crystal ball is murky.

African countries need investment and political stability.

Shirley Webber, Head of Coverage, Natural Resources, Absa Corporate and Investment Banking

Commodity prices must also play ball.

Shirley Webber, Head of Coverage, Natural Resources, Absa Corporate and Investment Banking

Uncertainty and the management of risk

Absa helps clients manage the risk of volatility in exchange rates and commodity prices by way of “hedging”.

“Most hedging products tend to prefer zero cost collars that provide a floor and a cap,” explains Tawanda Madondo (Absa Natural Resources). “You’re banking the differential between the two.”

What the Continent needs most are clear regulations, says Webber. “Successful implementation of the Mining Charter [in South Africa] will go a long way towards stabilising the industry.”

Many African countries will hold elections soon. Much uncertainty remains regarding the outcomes and the impact they will have on the regulatory environment.

Labour and the mining industry

Labour disruptions do exist in many African countries like it does elsewhere.

Geography partly explains why labour relations are not uniform across the industry in South Africa, according to Webber.

“The platinum and gold mines are all very close to each other,” argues Webber. “Diamond companies are all very scattered across South Africa and you hardly get labour disruptions.”

Madondo says he is hopeful that the worst is behind South Africa in this regard.

“The protracted negotiations at Sibanye has ended,” he says. “As a gold industry, we've got that tick for the next two or three years. Platinum negotiations are ongoing, but I think level heads will prevail."

For more detail, watch the video below. Shirley Webber (Head of Coverage, Natural Resources, Absa Corporate and Investment Banking) in discussion with Tawanda Madondo (Natural Resources, Absa Corporate and Investment Banking) about the future of mining in Africa and Australia's interests in African mining and energy.