Engineering News and Mining Weekly
Shifting geopolitics brings multiple suitors to African mining M&A
As the race for valuable commodities intensifies, it is increasingly evident that geopolitical competition will catalyse a wave of mergers and acquisitions (M&A), reshaping the landscape of Africa’s resource-rich industries.
This is according to financial services provider Absa Investment Banking MD Craig Brewer who says that India, the US, Saudi Arabia and the United Arab Emirates are all poised to commit further investment to the continent and Africa will need to find ways to improve its investment attractiveness amid global upheaval.
“The rise of the ‘metals of the future’ has seen global demand for cobalt, copper, lithium, manganese and rare earths, among other minerals, soar to levels where demand exceeds current production levels. China dominates critical mineral supply in many of these levels. The country accounts for over 70% of rare earths extraction and 90% of processing – including 90% of the world’s neodymium and praseodymium, the key metals for electric vehicle magnets – and could potentially control up to onethird of lithium mining capacity by as early as 2025.”
China has also taken an increasingly active role in Africa as it seeks to secure access to these key resources.
With shifting geopolitics across the globe, Absa has seen several parties respond with their own moves into Africa.
“The current Biden Administration has declared that the US is ‘all in on Africa, and all in with Africa,’ meaning that the US is keen to assist African countries to use their critical mineral resources for economic development while helping to strengthen supply chains that are diverse, open and predictable. Historically, the US has had limited commercial engagement with Africa so this change in strategic outlook is fundamental and will drive investment on the continent,” explains Brewer.
Africa is attractively positioned as global powers seek to identify key investment assets on the continent. However, it is important that the continent focuses on two elements, he adds.
Firstly, Africa has often struggled with a fractious relationship with international investors who have viewed their activities on the continent as extractive by nature. This has limited the economic benefit being realised by the countries and communities which are home to these valuable resources. It is key that this mining is done in a sustainable manner with a focus on long-term benefits. Secondly, it is important to develop an environment that is attractive to the best long-term investors, rather than short-term partners. To obtain this financial and investment support, Africa will need to strengthen its governance practices, be more open and consistent in its regulatory frameworks and allow a broader distribution of benefits to its own people.
“If Africa can get this right, it will reap the economic benefits for years to come,” believes Brewer. On the first day of the Investing in African Mining Indaba, hosted in Cape Town from February 5 to 8, Coverage Head of Resources & Energy at Absa CIB Shirley Webber spoke on the Disruptors Stage about mineral export bans and how they affect investment opportunities.