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South Africa surpasses Botswana in attractiveness as a mining investment destination

March 04, 2020

by nfdeklerk 0 comment

South Africa surpasses Botswana in attractiveness as a mining investment destination

South Africa last year surpassed Botswana as the most attractive mining investment destination on the African continent, the Fraser Institute’s latest ‘Annual Survey of Mining Companies’ shows.

Guinea topped the list of African countries included in the institute’s Investment Attractiveness Index (IAI), while Tanzania was last in Africa, as well as globally.

The Minerals Council South Africa told Mining Weekly that while perceptions of South Africa have not deteriorated in this regard, it is disappointing that they have remained stagnant. “A new phase of growth in mining investment will require, among other things, South Africa to enter the top quartile of attractive investment jurisdictions in measures such as these. This remains the industry’s aspiration, which we hope government shares.”

The survey was sent to 2 400 respondents to assess how mineral endowments and public policy factors such as taxation and regulatory uncertainty affect exploration investment.

The Fraser Institute, according to the responses received, had sufficient data to evaluate 76 jurisdictions in 2019, compared with 83 jurisdictions in 2018. The research firm said the number of jurisdictions that can be included in the study tends to wax and wane as the mining sector grows or shrinks, owing to commodity prices and sectoral factors.

The IAI rates regions based on their geological attractiveness, mineral potential and policy perception. The IAI combines the institute’s policy perception index (PPI) and its best mineral potential index.

The PPI in the survey measures the effects of government policy on attitudes toward exploration investment.

The Fraser Institute explains that while it is useful to measure the attractiveness of a jurisdiction based on policy factors such as onerous regulations, taxation levels, the quality of infrastructure and the other policy-related questions that respondents answered, the policy perception aspect alone does not recognise the fact that investment decisions are often sizably based on the pure mineral potential of a jurisdiction.

In fact, respondents have consistently indicated that only about 40% of their investment decision is determined by policy factors.

The top jurisdiction in the world for investment, based on the IAI, is Western Australia, followed by Finland, Nevada, Alaska and Portugal.

When considering both policy and mineral potential in the IAI, Tanzania ranks as the least attractive jurisdiction in the world for investment, replacing Venezuela as the least attractive investment destination in 2018.

The survey found the order in which African countries ranked on the IAI from best to worst was Guinea with a score of 76 out of 100; South Africa, with 64; Botswana, with 63; Burkina Faso with 61; Namibia with 58; Zimbabwe with 44; Mali and the Democratic Republic of Congo, with 39 each; Zambia with 37; and Tanzania, with 32 out of 100.

In terms of ranking on policy perception specifically, Namibia scored highest of the African countries at 87, followed by Botswana, at 83, and South Africa, at 59.

The institute said the increase in Namibia’s PPI score in 2019 reflected decreased concern over the availability of labour and skills, socioeconomic agreements and community development conditions, regulatory duplication and inconsistencies, as well as the legal system.

In Botswana, respondents indicated increased concern over labour regulations and employment agreements, political stability and the availability of labour and skills.

The African countries with the best mineral potential were found to be Guinea, scoring 100, and South Africa, scoring 68.

Guinea was included in last year’s survey for the first time since 2015. When considering only mineral potential practices, Guinea ranks as the most attractive jurisdiction in the world.

However, if one considers policy alone, Guinea ranks sixty-eighth out of 76 jurisdictions, with a PPI score of 41.

“This gap between its mineral potential and its policy environment means that it has room for policy reform,” the Fraser Institute said.

Meanwhile, the median score for Africa on the IAI showed a decrease of five points in 2019, compared with 2018.

Additionally, Africa’s median PPI score decreased by almost 18 points, making it the worst performing region in terms of policy environment for mining activities.

In terms of overall investment attractiveness as a region, Africa ranks as the least attractive jurisdiction for investment with a median score of 51.