Many of the 7,500 delegates at the recent Investing in African Mining Indaba in Cape Town City said investors are starting to look elsewhere in Africa for new opportunities, as the future of big mining in South Africa seems shaky due to the issues in 2012 that negatively affected production.

Lucy Hall, an associate at law firm Mayer Brown International concurs that investors are exploring deals in other countries because there is general nervousness, and the market in South Africa is mature.

“Whilst December saw an end to long-standing talks on possible nationalisation, investors will still need reassurance and clarity regarding policies moving forward and this could impact on how the market develops,” says Lucy, whose UK-based firm has experience advising investors in Africa’s mining sector.

Competition among countries for dwindling investment is rising. Government representatives at the Indaba spoke about political stability and attractive mining codes in their respective countries.

Says Lucy: “We are seeing a lot of interest in West Africa (Nigeria) and eastern Africa (Kenya and the Democratic Republic of Congo). We have just completed a very important financing project in Kenya, which will really open up the sector there so it could be one to watch.”

She says a stable tax regime is imperative for any country aiming for competitiveness.

While many countries are trying to simplify their mining codes and welcoming investors, it is challenging to promote the sector in South Africa due to reported uncertainty.

“The government in South Africa recently announced that mining taxes will be reviewed later this year. This move could in fact renew uncertainty in the sector. So, we are looking at these developments and developments across a number of other countries to see how they will affect current and future projects,” says Lucy.

She says that even though those looking to invest in projects will pay more attention to the hard figures, current political situations will also play a role.

“That said, we are still seeing clients investing in countries that are deemed somewhat hostile or unstable as the opportunities are still there,” says Lucy.

Despite the attractive opportunities on the continent, mining companies find the lack of infrastructure daunting. The Standard Bank estimates that US$50-billion of infrastructure investment is required over the next 10 years to exploit the resources effectively.

According to Lucy, although the infrastructure in South Africa is better than some other African countries it is not always at the top of the list for mining investment.

Governments have made significant inroads to develop infrastructure. But finding financiers for big projects is challenging and there are several reasons for this.

“The lack of equity to support debt and other financing is a key factor. We are seeing a trend towards creating alternative financing solutions or looking at alternative sources for financing projects. Another trend we may see is small to mid-cap mergers and acquisitions with consolidations of the smaller firms,” says Lucy.

Source : abdas.org