“It’s Time to Engage with Africa”
The recently concluded Dubai Precious Metals Conference centred around the theme: “It’s time to engage with Africa”. Africa is a mineral-rich continent having enough opportunities to explore through investment and participation. Precious metal mining in the continent was previously confined mainly to South Africa. But in the last decade or so, many African countries with an improved political and regulatory environment have emerged as potential sources, thus, heralding a big opportunity for exploration. Furthermore, Africa’s geographical proximity to the developed and developing markets offers enormous benefits. Africa has emerged as the “continent of hope” or even, “future of the world”. Africa has registered an average annual growth rate of 4.9% in the previous 10 years, emerging as the second fastest growing region in the world. The continent’s Gross National Income (GNI) is expected to touch $3 trillion by 2018. The pursuit of export-led growth appears to have yielded results. Exports have risen from $292 billion in 2002 to $1.3 trillion in 2012, enabling balance of trade. Africa has shown that it can withstand economic shocks better than the Western world. Macroeconomic stability, too, improved during the last decade thanks to prudent policies and structural reform. Average inflation fell from 24% in 19902000 to 8.5% in 2001-2011. Interest spread declined from 11.5% to about 9.5%, mainly due to increased competition and banking reforms. External debt /GNI declined from 69% in 1990-2000 to 37% during 2001-2011. Share of trade with developing countries, which was less than 10%, increased to 43%. Foreign direct investment (FDI) in Africa has improved at 18.4% annually during 2001-2011, the highest for any region in the world. (FDI in Asia and Latin America during the same period was 13.8% and 12% respectively).
The conference also touched upon topics such as consumption demand moving East, adapting to changes in Indian regulations, global ‘loco’ markets, focus on white metals and finally, price outlook. Representatives of global suppliers revealed that 1,000+ tonnes of gold were consumed in 2013 in South East Asia and East Asia. India’s newly imposed 80/20 rule was the subject of much discussion and generated a lively debate. Some opined that the government had implemented retrograde steps to counter the widening current account deficit (CAD), while others said that the tariff barrier in the form of increasing customs duty was not effective in curtailing imports; however, quantitative restrictions have worked. From an overseas supplier’s point of view, the biggest issue is customs. More than 30 locations in India import gold. Awareness and interpretation of the 80/20 rule varies across these locations. It affects consigners as well as importers. Also, small exporters cannot buy gold directly from overseas suppliers due to smallticket transactions. Platinum and palladium may face supply constraints in the near future as Russian stockpiles have dwindled to near exhaustion, while continuous strikes in South African mines have impacted production of the two metals. Unanimously, the house remained sceptical about gold and silver prices this year. Gold prices were estimated to reach an upper limit of $1350/oz, while silver would not cross $25/oz. Platinum and palladium are bullish bets at this point.
ABOUT THE AUTHOR
Debajit Saha is the content editor of Bullion Bulletin, promoted by Foretell Business Solutions Pvt. Ltd. He joined Foretell six years ago as a commodity analyst for metals and energy. He can be contacted at deba[email protected]lionbulletin.in