Africa is central to Saudi Arabia’s mining ambitions

First Published in Business Day on   January 11th, 2024   |   by   Gracelin Baskaran

Africa is central to Saudi Arabia’s mining ambitions
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The country is deploying significant amounts of capital and fostering unprecedented levels of co-operation in the critical minerals space


Much of my understanding of the mining sector began in Rustenburg. I was an American girl living there in my twenties for two years. They called me CNN for an entire year, because it was the only place they had heard my accent that wasn’t on the US broadcast network on television at Virgin Active.


That time also gave me a deep understanding of the different dimensions of platinum mining — geologically, commercially, socially, economically and politically. I later wrote a PhD thesis on it.


The lessons learnt from the platinum sector are applicable to various commodities and emerging markets, and over time I’ve been able to take this back to the US and international mining forums. I write from Saudi Arabia this week, where I’m speaking at the Future Minerals Forum (FMF), which is bringing together 13,000 people from 145 countries.


Saudi Arabia’s approach to rapidly building its critical minerals security is different to the US’s Minerals Security Partnership, which seeks to sustainably build critical minerals security by working with 13 of its allies — all high-income developed countries and India. In contrast, Saudi Arabia has committed to partnering with what it calls a “mineral super region” stretching from Africa through the Middle East to Central and East Asia.


It is both deploying significant amounts of capital and fostering unprecedented levels of co-operation in the critical minerals space. The ministerial round-table brought together ministers or ambassadors from 80 countries.  The country also committed to investing $20bn in research & development, technology, upstream and value chain opportunities, and implementing $182m in incentives for exploration.


But this needs to be a two-way street. One country or company can be willing to deploy capital and facilitate co-operation. But the resource-rich country on the other end needs to maintain a conducive business environment and avoid excessively protectionist policies.


SA has $2.4-trillion in nonpetroleum resources — it’s a bit of a no-brainer mining jurisdiction. But nonetheless, when the Mining Charter went to court in 2019 it was easy to see how volatile policies contributed to mine closures and divestment. The government tried to milk companies for too much — and companies lost faith in the government. They began to leave. Greenfield investment has gone dry.


A CEO said something yesterday that really stuck with me. “I’d rather have 50% of something than 100% of nothing.” The reality is that if you drive out mining investment by trying to capture too much you also drive out export revenue, exports, jobs and value addition. You need to take the 50% or everyone loses.


To be clear, I am not disputing the merit of the government’s transformation agenda. It’s important. But if you try to over-transform you’ll end up with nothing because companies will leave. Case in point: gold prices hit a record high in 2023 but almost all gold companies have divested. SA has reaped precious little from the significant increase in gold prices.


If SA — and other African countries — are to meaningfully benefit from the surge in interest in international co-operation, not just from Saudi Arabia but also other countries in the Gulf and in the West, and receive needed investments in exploration, production, processing and manufacturing, it needs to adopt pro-investment policies that still require responsible mining.


SA needs to take the 50% of 100 instead of the 0% of nothing. Policies that support domestic and foreign investment in the value chain can be transformative for a struggling economy in which capital is running dry. This week’s gathering in Saudi Arabia has shown me there’s no shortage of interested investors. But they need confidence in the investment jurisdiction — both its policies and governance.


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