Send this article to a friend
Print this page

» Some commodity prices yet to peak, says Rio
» Global context for commodity fund-buying
» Demand for commodities to continue - Con Fauconnier CEO Exxaro


$100bn coming Africa's way
Julie Bain
Posted: Mon, 21 Apr 2008

[miningmx.com] -- More than $100bn of investment in natural resources could be headed for countries such as the Democratic Republic of Congo (DRC), Zambia, Angola and Sudan during next five years.

A recently published report from Credit Suisse said the $100bn is a "ball park estimate", but it was clear Africa was firmly on the investment map.

China was highlighted for paying the most attention to the mineral wealth of many African countries in recent years given the opportunities which remain because of a lack of investment over the last four or more decades.

"DRC hosts some of the world's richest known copper, zinc and cobalt ore-bodies but only produces 5%-10% of their potential on our estimates.

“Zambia is rich in copper and appears to be quickly returning to its former productive capacity but is still only operating at 60% of its potential by our estimates.

“Mozambique hosts an estimated 10% of global coal resources, according to consultants Brook Hunt and accounts for less than 2% of world coal production. Angola has significant copper, diamond and oil prospects that are attracting attention from China," said the report which is titled, "Africa: The commodity warrant".

The Credit Suisse report said the economic growth of countries on the continent was more sustainable than it has been in the past, lifted by the higher commodity prices, but commented much more reform was needed.

"The outlook for commodities still appears to be key to African growth performance over the next five years. We remain positive on commodity prospects. Forecasts for aggregate growth in Africa remain well above expectations for average global growth. We forecast average African growth of 5.5% pa between 2008 and 2011 compared to 3.4% at the global level."

According to Credit Suisse, Botswana, Nigeria, Angola and Zambia will show sustainable growth. There is also significant potential in DRC, Equatorial Guinea, Libya and Mozambique but the bank noted that the risk may be higher in these countries.

Other countries which are winning investment are Namibia, Mali and Sudan. Credit Suisse said Sudan's oil reserves, if developed, could one day rival output in Angola and Nigeria.

"DRC currently produces only 150,000 tonnes of copper in the Katanga copper belt… although production appears to be delayed for now due to poor infrastructure, we think the region could host an industry of 1.5m tonnes of copper by 2021," the report said.

It added that for a significant proportion of the DRC's mining potential to be realised the country will have to move forward with the much-heralded Inga hydro electric project.

Click Here to subscribe to our daily newsletter
Mozambique was highlighted for its extensive coal reserves and Credit Suisse predicted spending on the development of coal and power projects in the country could reach $30bn during the next ten years.

"Government's official statistics indicate a resource of over 25bn tonnes in the country situated in the four coal basins including Tete (Moatize), Mefedeze, Mucanha-Vusi and Cahora Bassa North," says the report.

Turning to South Africa, Credit Suisse said the expected growth potential was not as great as some of its neighbours given that the country has already made "straight forward changes and improvements in terms of political and institutional reforms.”

"South Africa's growth prospects are somewhat lower than for other parts of Africa since the current account deficit (6.4% of GDP) is a more difficult financing proposition than the surpluses recorded elsewhere.

“ Indeed the apparent lack of choice for the electorate in the forthcoming 2009 presidential election is a concern. In addition the severe ongoing power shortage is already undermining output in key parts of the economy," said the report.

The reported pointed out IMF data showed that, historically, African growth has lagged the global average.

"Between 1960 and 2001 average African growth was 3.2% compared to the global average of 4.1%. In the last few years, however, IMF data shows an improvement. Aggregate regional GDP growth looks likely to exceed 5% for four years in a row to 2007," said the report.

Despite the good growth news Africa still has a lot of developing to do. "Last year Africa accounted for 13% of the global population - 857m out of 6.5bn - but only 2% of GDP, said the Credit Suisse report.

GDP per capita was $1,215 compared to the global average of $8,183," according to IMF data the report added.