As Winston Churchill said, ‘to improve is to change’. Arise West Africa! Endowed with mineral wealth, if it is to improve economically the region must change and begin to aggressively develop and industrialize the sectors at its disposal.
Current economic ramifications in Nigeria are predicated on the 60% drop in the oil price. Sierra Leone too has suffered with the price of its biggest export earner, iron ore, falling 50%. As global demand for iron ore slows, the commodity has traded at record lows and has seen mining companies in Sierra Leone enter administration or close down.
When you consider the dependency these countries have on the resources and the lack of industry to develop them, governments are effectively playing Russian roulette with their economies. How then can countries learn from these lessons? The impact Ebola continues to have on West Africa is still prevalent. The mining sector saw many casualties, both human and economic, with the closure of several mines seen as an effective way to reduce the spread of the disease.
In Nigeria, a lack of refineries operating at maximum capacity proves that even if mineral rich countries are successful in extracting their resources, their ability to develop the infrastructure needs to be made a priority. In order to attain maximum value, every facet of the value chain in the industrialization process must be fully operational. The added value from the finished products made from the mined minerals will be greater, not only in terms of export value but also from the job creation and socio-economic development aspect. There is a widespread belief that the falling oil price makes a mockery of the Nigerian economy. It is rather an opportunity for diversification. However, there is a fervent danger of getting caught up in economic theory without implementing it.
To progress, the mining sector needs to solve infrastructural challenges. West African Exploration, a subsidiary of Sable Mining Africa, recently signed an infrastructural development agreement with the Liberian government. This will create employment, development and significant tax income. We are seeing the inner workings of getting it right. Africa, once seen as blank canvas for foreign companies to paint their pseudo-colonial economic activities, is now beginning to take a stand.
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Mining opportunities in Nigeria are vast. The high costs involved present a barrier to entry and with those high costs patience is required. Exploratory costs are not always recouped. Therein lies an opportunity for any shrewd investor to assemble a team of competent geologists to determine the value of the vast mineral reserves. Notwithstanding the current security issues in the northern Nigeria, there are a growing number of opportunities for investors to pursue. The mining sector is crucial to Nigeria realizing its true economic potential.
Many western mining giants maintain a stranglehold on the continents mineral resources. Ghana’s success with its mining sector is partly due to an effective framework that involves paying a 5% mining royalty to the government. For many other countries in the region, a lack of technical expertise remains the biggest problem, thus there is a tendency to worship Western companies instead of seeing them for what they are; partners in achieving a common goal – economic development. A symbiotic relationship is required between investors and governments. Governments need assurance that investors are ethical and responsible and investors need confidence that governments will provide the necessary support in terms of regulation and licensing as well as attractive tax breaks and more importantly reduce the bureaucratic bottlenecks.
Despite the lack of geological data, there is growing rhetoric from representatives of governments for investors to engage in the development of the sector. Policy reformations are a step in the right direction. However, one sincerely hopes that this translates into practical, hands-on solutions. Only then will we see the sector really take off. If industry is the lifeblood of an economy, the mining sector is the transfusion needed to keep Nigeria PLC going.
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