Counting the cost of coups on commodities

It has been a rough year for coups and the knock-on effect on minerals has yet to be fully seen

The cost of coups has always been steep. There are often human casualties, damage to infrastructure in the midst of protests and riots, and punitive economic sanctions. Such measures can make life for the average person expensive and difficult.

There has been a proliferation of coups in Africa recently, largely concentrated in the Sahel region, and most in resource-rich countries. Assessing the effect of coups on mineral resources is perhaps less about the country and more about the type of resource. We look at Burkina Faso’s gold, Niger’s uranium and Gabon’s manganese.

The effect is also largely concentrated on the demand side. On the supply side countries (including those with coups) need the mineral revenues — so there is no incentive to stop production or halt exports. For some countries, that would be the final strangulation from the global economy.

However, the demand side seems to play a bigger role. If  it is a commodity that is sensitive to national or energy security, it faces a greater risk and buyers will expedite efforts to diversify sourcing. 

We can start by looking at Burkina Faso. Mining accounts for over 70% of the country’s foreign exchange earnings, and much of this is in the gold sector. In a way, it would feel intuitive for a coup to capture resources and impose superficially self-serving natural resource policies. But this was not an issue.

If you consider the coup in Burkina Faso in 2022, mining operations remained untouched throughout. Gold mining production guidance was never revised downwards. Mining stayed stable given that gold is a source of revenue for an otherwise poor country, so maintaining stability of the sector was sensible. 

Niger is a bit more complex, both its coup and its uranium reserves. In July there was a successful coup when President Mohamed Bazoum was taken hostage. There was a widespread international outcry and, regionally, Ecowas member states closed their borders.

But the discourse quickly went to Niger’s uranium trade. The country is the seventh biggest producer of uranium and it has the highest grade uranium in Africa. Niger is also one of the main uranium exporters to Europe. In 2022 it delivered 2,975 tonnes of natural uranium, or 25.4% of the EU’s supplies.

Niger has not cut off trade with the EU, but as with many cases that sit at the complex nexus between natural resources and geopolitics, there is a risk that it could sell its uranium to governments that are upset with their former French colonisers. 

Then there is the most recent coup, which took place in Gabon at the start of September, deposing President Ali Bongo Ondimba. Between him and the father he succeeded they had been in power for a combined 50 years. Coup leader Gen Brice Oligui Nguema has already been sworn in as interim president.

The Gabon coup is likely to have a direct effect on the global manganese supply. Manganese is a critical mineral — the entire world needs it and there are no substitutes. A nascent democracy like Gabon inherently carries a high degree of uncertainty, and mining companies will be hesitant to increase investment in this context.

From 2017-20 the US imported 67% of its manganese from Gabon. While the US does have some low-grade manganese reserves, they are costly to extract. Demand for manganese will continue to increase as we usher in the green energy transition, and there is only one country that can fill that gap in the way that is required — SA, which has 70% of the world’s reserves. 

The recent wave of coups will drive a heterogenous restructuring of global sourcing for the specific minerals at hand. Gold does not give Burkina Faso bargaining power — it is neither rare nor hard to find. Instead, gold gives the country stability of revenue, and without any big policy changes mining firms will not have a knee-jerk investment response.

Uranium and manganese are more complex, but we are likely to see a restructuring of supply chains. Niger’s new government and the French will decouple their economies as much as possible, which will require that France finds new uranium sources in the longer term.

It has been a rough year for coups, and the knock-on effect on minerals has yet to be fully seen.