Africa – a single continent – holds about 30% of the world‘s mineral deposits and this is why mining has been Africa‘s leading economic sector for many decades. While many African countries are trying to move away from mining as a main source of income, the sector remains of great importance to Africa and offers investment and business opportunities for you.
Countries dominating mining are South Africa, Ghana, Zimbabwe, Tanzania, Zambia and the Democratic Republic of the Congo, while Botswana is the world‘s largest producer of diamonds. But many other countries, such as Angola, Ethiopia, Nigeria, and Namibia do also have huge mining reservoirs.
Having said that a mining business can almost work in any African country and what may be of particular importance to you when considering a mining business are a conducive and clear mining law and policy framework to make this already challenging undertaking worth-while.
Some countries have experienced recent set backs: Kenya is struggling with its mining law and has issued a new Mining Bill in 2014, Zambia and Uganda have imposed some restrictions on mining exports, and Ethiopia remains to be a rather closed off market, so be aware of that when choosing your destination. If you are flexible go for a country where the related business environment may be more conducive such as South Africa, Ghana, and Botswana for example.
Starting a mining exploration team or opening a mine usually requires substantial investment. One success story is that of Dr. Mike Seger and his company Injula Mining, which he started in 2004 with little money but a great success portfolio and strategy after intensive research that resulted in his PhD study.
His company now turns over R8-9 million a month (over, US$720,000) employs 160 employees, and mines and delivers 120,000 t of coal on contract for Anglocoal. Its coal resources amount to 120 Mt. Seger explains that you need to go through all the pillars in order to be successful and they include a strong strategic pillar (this is the attractive part that will help you win investors), a legal/financial pillar, an operations management pillar and a risk management pillar.
But we would like to suggest an approach that some of you may find simpler, especially if you are lacking finances, experience, and investor relations. Get into the mining industry first – through the back door. Start organising a very specific annual mining conference, publish a blog for partisan miners and junior miners with a regular newsletter, or start a specialist magazine. Partner with a local stakeholder such as the Chamber of Mines, the Ministry of Energy or the Association of Miners in doing so or simply visit their offices to find out more about certain gaps you may fill with related events and publications.
As an event organizer or publisher in the industry you will now not only understand the industry much, much better, but you will slowly become a part of that community, which allows you to meet representative of mining companies, potential investors, and government stakeholders. Alternatively, link up with small partisan miners and regularly visit mining events in your region (it‘s an investment worth making). You will need these links and partnerships for a successful mining startup.
But there is another angle to mining that you should consider. Most African countries have not developed strong backward linkages in the mining industry, such as engineering, mining related services and supplies, or education and training. These are all areas that are high in demand and where you can relatively quickly build a successful niche.
Or follow the example that a few entrepreneurs have taken in Botswana, a country that agreed to have the large part of their diamonds now cut and polished locally before exporting them. It‘s in this area of local value addition where your biggest chances may lay across Africa‘s mining industry – then selling to various African or other markets abroad.
You will find overall a very conducive business environment for such a business model, because local value addition and manufacturing is precisely what many African governments are trying to achieve.