IFC bullish about Africa’s economic growth prospects
“The core message about the continent today is that Africa is rising.” That is the view of Bernard Sheahan, director of Infrastructure and Natural Resources for Africa and Latin America at the International Finance Corporation (IFC), speaking at the Investing African Mining Indaba™ in Cape Town. Sheahan points out that growth rates in Africa are well above the world average. Africa is expected to growth at 5.5% per annum over the next 5 years, above forecasts for world economic growth.
Investors and other interested parties increasingly cite political risk as a reason for caution when investing in Africa. Sheahan said that there are signs of improvement. “There is increased political stability, we’ve seen positive political transitions in countries like Guinea, Senegal, and Ivory Coast. This means better economic governance, it is not perfect in some countries, but there are improved policy choices which points to progress in investment climate reform. Underpinned by social transformation in Africa, the continent is about to see a demographic dividend. Its population is growing faster than other regions.”
Sheahan cited a recent McKinsey report on jobs and the labour force, which projected that within the next two decades, the labour force in Africa will be larger than those of China and India. Projections also point to rapid urbanisation, and by 2023 the majority of Africa’s population will be living in urban areas.
Sheahan believes that Africa’s mining sector has a huge potential and that a large part of this is due to relative under-investment and the growth seen in investment in exploration. The IFC has taken advantage of this, evidenced by the fact that “Africa accounts for more than half of the IFC’s mining investments.”
He believes that the main opportunities in Africa lie in infrastructure. Africa sits with a huge infrastructure deficit, which the IFC believes will need an annual investment of US $93 billion.
Sheahan believes that the mining industry can play a critical role in reducing the political risk to doing business in Africa through job creation and skills development. He said that “we need more cooperative approaches between companies and other stakeholders and this is where the mining industry can play a role.” He lauded the African Mineral Skills Initiative of the UN, in partnership with Anglogold Ashanti, which is playing a role in skills development on the continent.
In addition to skills and jobs, Sheahan said that local procurement is another area where industry can contribute to reducing risk. He emphasised that a holistic approach is needed to local sourcing.
Sheahan explained that over the last 10 years, the mining industry has made progress in reducing environmental risk, but “how do communities share in the benefits? Industry can create access to infrastructure, jobs, and economic opportunities and make an impact to communities.”
He cautioned, however, that companies must be strategic in community investments and make them a core part of the mine project planning process.
“There are rising opportunities and vast untapped resources in the infrastructure space in Africa”, said Sheahan. However, challenges also abound: there are a limited number of financial solutions available for African countries, and the bankability of mining-related transport assets is difficult to achieve. Sheahan emphasised the importance of the focus on infrastructure: “Africa’s infrastructure deficit is a potential bottleneck for mining development. Multi-user infrastructure can be an opportunity for mining to enhance the developmental impact of mining.”