East Africa – the next frontier for mining in Africa

  

East Africa has in the last few years attracted a lot of interest from investors in the mining and oil & gas industries.

Uganda is expected to begin with small-scale crude oil production later this year, while oil has recently also been discovered in Kenya although commercial viability is yet to be proven.

Tanzania is Africa’s fourth largest gold producer behind South Africa, Ghana and Mali with production of 40.4 tonnes in 2011. Tanzania earned US$2.2 billion last year from gold exports, making it the country’s biggest foreign exchange earner.

Other than gold and oil, east Africa also has resources like gemstones, coal, iron, diamonds, natural gas and limestone.

Monica Gichuhi, executive officer of the Kenya Chamber of Mines, a body whose mandate is to lobby for favourable legislation and showcase Kenya as a viable mining destination, argues that although the region is traditionally known for agriculture, it is emerging as a new hub for mining in the continent.

“East Africa is the next frontier for mining in Africa. In the rest of Africa mining is a key contributor to the individual countries’ GDPs,” says Gichuhi.

Several discoveries have been made in the region this year, yet there is still more room for exploration and multinationals like Tullow Oil, Ophir Energy, Camac, Jacka Resources and Base Resources, to name a few, are either investing or eyeing opportunities.

“In Kenya, we have world class deposits of titanium and we have just discovered oil in Turkana. East Africa is in the stage of discovery. This is the place to invest in,” adds Gichuhi.

She argues that the region is in a good position to attract foreign investment given that infrastructure, which has been a challenge for a long time, is improving by the day.

Several major infrastructure projects connecting the five East African Community (EAC) member states are currently being planned, such as the multi-billion dollar Lamu Port-South Sudan-Ethiopia Transport Corridor (LAPSSET), a road, port and oil refinery project that will link Kenya to South Sudan and Ethiopia. The project is expected to ease the transportation of minerals and equipment within the region.

Although foreign companies have shown keen interest in east Africa’s mining potential, local investors have been more reluctant.

“Local investors are not aware of the industry and the potential it holds. Raising money locally to invest in projects has been a challenge in the past. A lot of big deals are being brokered, but local investors are missing out on these opportunities,” says Gichuhi.

Investors have complained of facing challenges in acquiring mining licences and landowner consents.

“We would like to see the laws become more favourable and attractive to investors. When investors bring several millions of dollars they should be assured of security of tenure and have clearly defined restrictions and benefits. They should be able to reap benefits from their investment,” says Gichuhi.

In Kenya, for instance, stakeholders argue that the current mining laws, which were drafted in the colonial era, are prohibitive to investment. There is also a need for harmonisation of mining laws across east Africa.

“We (Kenya) would like mining to contribute between 4% to 6% of the GDP. The potential, however, is even bigger than this,” says Gichuhi.

Mining is currently contributing less than 1% to the GDP in Kenya. Stakeholders have been lobbying the government to fund a geophysical survey to map out all resources and their locations.

Uganda and Tanzania both took this road and are steps ahead in the industry since most resources have been indentified and their locations mapped, paving the way for investments.

With the new discoveries in the region, a new debate has emerged on whether mineral resources should belong to the entire region in the spirit of the EAC integration.

“I think we would attract more investments if we market the region and not individual countries. We should talk about how much oil or gold east Africa has rather than each country declaring its resources,” says Gichuhi.



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