5 steps for closing the “expectation gap” around Africa’s resources

5 steps for closing the “expectation gap” around Africa’s resources

Resource-based industries are not entirely about resources. They are, in large part, about people, and how effectively people from all sectors work together. In this article I will outline why collaboration is vital to growing our African resource industries.

Firstly, we must face the fact that African countries are now competing for a smaller pool of global investment capital, amid investors’ suspicions that Africa has not delivered. The “hidden costs” of doing business in Africa – costs related to weak infrastructure, corruption and political instability – have taken their toll on returns to shareholders.

Africa’s “expectation gap” – and five pragmatic steps to close it

In our discussions with resource-focused government departments across Africa, we are seeing a refreshing openness. The ideological paradigms of the previous century – labour versus capital, government versus multinational – are falling away, replaced by concern that national resources are not bringing the rewards that everyone (regardless of their ideological disposition) had expected.

There is an “expectation gap”, and as ideologies give way to a new pragmatism, five pragmatic steps to closing this gap have become apparent.

Step 1: understanding our resource base

Step one requires that we thoroughly understand each national resource base – scientifically, environmentally, socially (with special reference to communities that live close to the resource) and in global market terms. Incentives for geological exploration need to be created; so do centralised, cross-disciplinary repositories for all research into the resource base.

Step 2: creating a supportive regulatory environment

The second step is to create a supportive regulatory environment. The tax and administration policies that apply to a national resource have to be friendly to capital (whether local or international), and they have to be clear. Training for government officials – in drawing up clear regulations, and interpreting regulations consistently – is among the vital solutions. Government departments will also, ideally, become embedded with a client-service culture (as is being accomplished, with great success, in Botswana and Namibia).

In the governmental client-service arena there are strong international benchmarks; investors are keenly aware of these, and every investment-hopeful government needs to measure itself against them.

The onus is not only on the public sector. The private sector can assist enormously – by sponsoring educational programmes that will provide a flow of highly skilled graduates to government departments, to give just one core example.

Step 3: developing labour

Third, we need to develop labour holistically to achieve a healthy, stable workforce. This step goes far deeper than the obvious demand for education and training; it requires that we attend fully to the rights of the communities around the resource base. We need to consult with them about their real needs and sensitivities, and then make meaningful, lasting social investments. Here, green innovation – in food-security and sustainable energy technologies, for example – can play a vital role.

Step 4: integrating vital infrastructure

Fourth, our vital infrastructure components need to be integrated at all levels – local, national, regional and continental. Resource-extraction depends on transport lines and power lines, and all the stakeholders need to share an integrated resource and infrastructure beneficiation plan.

Transfrontier agreements can smooth the passage of resources from mine to port, to the benefit of all the governments involved – and the same applies to the transmission of power across our continent. Transfrontier agreements should not, incidentally, imply any form of monopolisation by government-favoured suppliers.

Africa’s transport and power markets must inevitably open, and independent rail operators and IPPs (Independent Power Producers) are set to play an increasingly important role.

Step 5: aggressive marketing

Fifth, we need to aggressively market our resource bases, attractively packaging the geological and other research referred to under Step 1, along with solid proof of the reforms suggested under Step 2.

The question of marketing underlines the power of collaboration. African governments often perceive themselves to be in competition with each other – but generally, for all parties, far more stands to be gained from regional or transfrontier-based marketing initiatives. It is in the very nature of resource extraction, with its need for wide infrastructural networks, to demand more than a narrow national scope.

Above all – collaborate at every level

In every step described above, the question is not whether Africa has the resources. The sheer immensity of Africa’s resources is the continent’s inbuilt advantage. The question is whether African administrations have the will to collaborate at every level, externally and internally, in understanding their resources, creating supportive regulatory environments, integrating regional infrastructure, and so on. Collaboration will in turn require tremendous leadership – and this is well on its way. Throughout Africa, in both the public and private sectors, we are seeing talented, pragmatic leaders prove their worth.

In an Africa empowered by leadership, collaboration and cross-sector synergies, the treasure-chest of Africa’s resources will be opened wide – for the prosperity of all her people.

About Wayne Jansen

Wayne has 25 years of audit and advisory experience across a broad range of South African and global mining and natural resource clients. Recent assignments he has been involved include cost optimisation projects within the African Platinum and Gold industries strategy development specialist input into internal risk management and assurance assignments on global and regional clients.

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