Together, the mining industry and the banking and finance sector can power Africa’s economic growth

If there is one industry that can catalyse a fulsome transformation of African nations’ economies, it is mining.

This has been said before, and applied too, in the context of envisaging economic growth in countries on other continents. But our present time is different. The world is at the watershed of an energy switchover the impacts of which may be as dramatic as was the birth of the oil industry 150 years ago. Almost all forecasts linked to, or spinning from, the green energy transition, include escalating global demand for the metals and minerals embedded within Africa’s crust.

Mining already comprises a significant proportion of the Gross Domestic Product (GDP) of many sub-Saharan African nations. In Zambia, for instance, the industry’s contribution to total GDP has ranged between 13% to 19% over the past five years. Major global mining conglomerates including Anglo American, First Quantum Minerals (FQM), Glencore and Vedanta Resources not only have prominent existing operations in Zambia but are embarking upon major expansion projects or have announced significant new exploration ventures.

Political and business leaders throughout the world understand the motivation for this. Renewable energy technologies require copper – much more of it. Worldwide copper demand will surge to over 30 million tonnes by the end of the decade, with an overall market value projected at USD 260 billion. Tied to the ongoing momentum of renewables and related industries, rapid growth is forecast through to 2050, by which time the global copper market will have grown 70% since 2020. Zambia’s Copperbelt and North- Western provinces are one of the world’s richest source of known reserves and estimated future discoveries.

Albeit clearcut, and vital, copper is just one illustration. Similar forecasting and financial and market size modelling applies to other metals and minerals also important for net zero emissions targets and a future for humankind that does not rely on fossil fuels. In particular, cobalt, lithium and nickel are crucial for electric batteries and vehicles, for solar panels, turbines, and energy storage. Figuratively speaking, southern Africa is almost certainly sitting on a new-wave, 21st -century goldmine.

Looking wider, the Lobito Trans-Africa Corridor project is a joint U.S., Angola, DRC, Tanzania and Zambia scheme to link logistics infrastructure from east to west, connecting the Indian and Atlantic oceans.

Even grander is the Vision 2030 idea, backed by rulers and business leaders in the Arabian Peninsula, of a mining super-region spanning Africa and the Gulf. This could be a pan-African, pan-Arabian version of China’s modern-day Silk Road. As such, on top of commodity market optimism, in place already are big-picture ideas and visions upon which Africa’s miners can capitalise.

However, a note of cautionary realism is relevant. Mining industry players in Africa should not expect this global projected growth trajectory to materialise easily or to apply by default to their operations on the continent. Chile remains the world’s largest single copper producing nation, while rare earth metals market share and known reserves are dominated by China. This means that strategies are required to shift the balance – effectively, to improve African mining’s productivity by gearing competitiveness. Successfully operationalising these strategies will be the key to seizing market share as opposed to inching upwards as the market grows. A sea-change in the fortunes of African countries’ economies depends on the former.
But this will involve overcoming multiple challenges. 

First and foremost, shall we address the elephant in the room? C-Suite and senior leadership must engage honestly with the issue of purposefully and meaningfully contributing to the economic prosperity of countries hosting their operations. ESG is mandatory, and is elegantly written about in multiple pages of all mining companies’ annual reports. But – remembering that an uplifted local community, a higher-performing region, and a stronger national economy grows the economic pie, benefitting the mining industry – can more be done?

Here, it is opportune to cross-refer to the role of the financial sector. Its ambit includes assisting with compliance issues. Mining companies understandably face rigorous scrutiny by governments and regulatory authorities. Banks, in collaboration with auditors and legal, can help to ensure full and proper compliance, thereby smoothing processes. Governments do understand the importance of industry growth. Zambia is a case in point: President Hichilema has laid out his government’s target of three million tonnes of annual copper production by the early-2030s.  A partnership approach will best enable the industry to achieve this; if mining houses demand policies that raise investor confidence, they must hold up their end of the
compliance deal. 

From that foundation, finance has a further, fundamental role: capital. “The capitalist revolution Africa needs,” blared the headline of a recent feature in The Economist. Some of the article’s statistics and projections are worrying, painting the picture of a continent-wide lag in education levels, digitisation and infrastructure, and corporate scale. Governments are at fault for much poor policy that has contributed to this. But two things can be simultaneously true: the global financial architecture has largely been prejudicial, and the UN’s 4th International Conference on Financing for Development, scheduled for June this year, is overdue. In the spirit of optimism, systemic change is hopefully around the corner. After all, for capitalism to thrive, capital is needed!

In the interim, the green shoots of mining industry expansion in Africa are clearly visible. The banking and financial sector is positioned to encourage and facilitate investment. We see ourselves as partners to one of the continent’s key engines, and feel certain that decisionmakers in both industries are asking the same primary question: “Where can we add value to the country’s economy, and contribute to greater prosperity, by catalysing growth?”