Africa’s Fabulous Mineral Wealth that isn’t ALL there – By Bright Simons
So let’s assume for one moment that you are an international corporate executive responsible for your company’s emerging market strategy. You are hearing a lot more about Africa of late, and feel strongly that your organisation needs a well-researched and informed strategy on a continent that has for so long evaded your radar.
Be careful though how much store you place on stock wisdom about Africa packaged as authoritative.
You may find that such commentary does not always enlighten, so that, in a paradoxical sort of way, the more you read the less truly educated you become.
Before you begin to ponder what avenues may be available to your company as it seeks to escape this information trap, let me illustrate what I mean with a classic example.
There is a near-universal belief that Africa is the richest continent on Earth from a natural resource point of view. This belief is most strongly associated with mineral wealth, which is the form of natural resource endowment easiest to measure.
In what has become the accepted narrative, Africa is poor both because of and in spite of its fabulous mineral wealth. The logical implication of such a view is clearly then that Africa has to do little more than just chuck out “its greedy dictators” and/or “incompetent governments”, for its natural endowments to translate into economic and financial wealth. Obvious enough.
But is Africa that super-endowed?
Even economic analysts who have covered Africa for a great many years are sometimes tripped by simple questions like: which country is the world’s largest producer of gold? Many of them rush to say South Africa, and are puzzled when they learn that it is indeed China.
The impression has been so often created that China, like much of Asia, have developed economically “despite” great natural resource poverty, when the truth is that countries like China, Indonesia, India, Malaysia and the Philippines are indeed amongst the world’s most wealthy nations from a natural resource point of view.
Indeed, many analysts are often surprised to learn that South Africa is fourth down the list of major gold producers and may soon be overtaken by Russia and Peru, if its remarkable decline continues unabated.
The same confusion registers on the faces of even supposedly well-informed observers when they learn that comparing energy resource management models in the OECD to those in Africa can be very misguided because of the huge gaps in resource per capita levels. The most famous illustration of this situation is the belaboured “˜Norwegian model’.
Not quite Norway
When the point is explained that Norway, according to the World Bank, has less than one-thirtieth of Nigeria’s population and yet (according to the International Energy Agency) produces roughly the same amount of oil as the latter. Let me illustrate what this means in clearer economic terms.
At May 2012 benchmark prices, each Nigerian would receive $460 if the country’s annual oil output was shared equally. The average Norwegian, would, on the other hand, receive $15,000 under the same method of distribution. I need not add that if oil was the only thing both countries produced, and there was zero mismanagement in either country, Norway would still be a much wealthier country today than Nigeria. This analysis remains valid even after you account for production and related oil industry costs.
The point of the selected illustrations above is to underscore the lack of perspective that usually attends the evaluation of Africa’s natural resource endowment in a global context. To strengthen the point, one needs to conduct a more comprehensive and in-depth analysis.
The importance of data
So I have intermittently, under the aegis of a think tank I am affiliated with (www.imanighana.org), been poring over geological survey data from some of the world’s leading depositories, especially the British and US geological Surveys. I have also looked at secondary analysis of mineralogical datasets held by local agencies in Africa, in such countries as Ghana, Nigeria and Tanzania.
The results are breath-taking. Both on a per-square mile and a per capita basis, Africa lags behind the global average in mineral production and reserves.
Of a hundred minerals considered highly important to industrial production, Africa features strongly in only about ten.
This result obviously flies in the face of the opinions usually shared in reference to Africa’s mineral wealth, like this one:
Africa is the richest continent in the world, in terms of its natural and mineral resources…Africa supplies up to 31 percent of the world’s demand for bauxite, cobalt, gold, manganese, phosphate and uranium. Additionally, it supplies 57 percent of the world’s need for chromium and diamonds, and the hydrocarbon deposits are immense [the continent produces 12 percent of the world’s oil and has about 8 percent of reserves].
The African Union Chief in June 2010, who made the above statement, mentions 9 of the minerals produced in significant quantities in Africa. To round off the list, platinum should have been added.
There are, however, a number of filters one can pass this type of information through.
Firstly, with the exception of bauxite and petroleum, these minerals are not as widely used in industry (or in the same considerable volumes) as a number other minerals, such as tin, copper, nickel, zinc, iron, coal, and lead, that Africa does not produce in sufficient quantities. Indeed, of the top 5 metallic minerals which constitute 62 percent of the total value of global production, Africa is only a significant producer of one of them: gold. Africa has 8 percent of the world’s copper, 4 percent of aluminium, 3 percent of its iron ore, 2 percent of lead, less than 1 percent of zinc, and virtually no tin or nickel. To put these figures into perspective, recall that Africa has about 14.5 percent of the world’s population.
The case of bauxite (which is processed into aluminium) is interesting. Guinea, which ranks fifth worldwide, is the only significant producer among the world’s top 15 countries, producing 18 million tons per annum, compared to Australia’s 70 million.
Guinea does hold the world’s largest estimated reserves of bauxite (7.2 billion tons), with Australia closely following (6.2 billion tons). This fact brings the other filter into play: reserves or untapped mineral deposits and their distribution across Africa.
Of those few minerals that Africa is believed to hold globally significant or dominant reserves, nearly all of them are concentrated in 4 countries: South Africa, Angola, Democratic Republic of Congo and Guinea. When one computes the level of inequality of mineral distribution across different continental regions, Africa pulls up strongly, showing a far higher than average level of distribution “˜imbalance’ per capita or square mile. In very simple terms, it means that mineral wealth is more concentrated in a few countries in Africa compared to other continents. We will return to this point.
How valuable are Africa’s natural resources?
But let’s pick up again the earlier point about the minerals Africa produces in prominent quantities being less valuable compared to those that it does not produce.
Take gold, one of the main jewels in Africa’s crown. The total value of known reserves is roughly $2.6 trillion in May 2012’s historically high prices. The total value of global gold production in 2011 at May 2012 prices is $138 billion. Africa’s share of the reserve value of gold is $1.3 trillion. Its share of 2011 production value was $30 billion.
Now, let’s take iron ore, a mineral that Africa lags behind the world in both reserves and production.
The total value of known reserves is roughly $128 trillion. The total value of 2011 production is roughly $475 billion, with the largest producer, China, bagging over $200 billion of this. China’s share of reserves can be valued at nearly $4 trillion.
Lastly, look at coal, a fuel mineral that accounts for about 50 percent of the value of all non-petroleum mineral production worldwide. Last year, $650 billion of the substance was produced. Africa’s share of worldwide output of coal however totalled less than 4 percent.
If these examples are generalised, one realises immediately that Africa’s low production of the “˜hard minerals’ minerals most intensely used in industry compared to the less widely used “˜soft minerals’ reduces its total take from the global mineral trade. But it also makes a nonsense of fashionable policy prescriptions that emphasise import-substitution strategies based on value addition to minerals, rather than export competitiveness through smart trade strategy and the deepening of the financial system to support entrepreneurs.
Furthermore, this is why one needs to be cautious when taking in information about Africa’s reserve position in respect of some minerals. Take cobalt. Some commentators tend to use the fact that Africa produces nearly 60 percent of the world’s cobalt as a perfect illustration of mineral wealth. Yet, the total value of cobalt consumed worldwide last year amounted to $380 million, meaning that Africa’s earnings came to $228 million. Compare this to roughly $50 billion in value of Chilean copper production.
This point is of course secondary to the more fundamental one made earlier: that Africa produces fewer minerals overall compared to the global average (in both per capita and per square mile terms), and that production is super-concentrated in a very few countries.
Indeed, the residual value of Africa’s mineral wealth is not only concentrated in a very few countries but also in a very narrow mineral base.
For instance, South Africa has 92 percent of its reserve wealth concentrated in platinum group minerals, while at the same time it has 90 percent of Africa’s coal and 95 percent of its chromium. Guinea mines 90 percent of Africa’s bauxite. Congo mines 90 percent of the continent’s chromium. Ghana and South Africa accounts for 60 percent of Africa’s gold. South Africa, Gabon and Ghana produce virtually all the manganese.
The state of affairs described above is compounded by the fact that Africa is witnessing a decline in the production of most minerals, such as gold, petroleum, and uranium, with new discoveries failing to offset falls in production in key countries.
A conspiracy against Africa?
I put this point to a number of experts and economists during a conference in Addis Ababa recently.
A major Ethiopian industrialist was of the opinion that a conspiracy may be afoot to marginalise Africa’s mineral holdings. The truth though is that Geological survey data are composite, making use of information provided by local mineralogical agencies and international organisations.
There is also another one strong reason why it is unlikely that reserve information in Africa is being “˜gamed’: investors. Investors have some incentive to mask production data to evade or avoid taxes, but they have just as much incentive to exaggerate reserve estimates in order to raise money. Indeed, nearly every single oil deposit discovered by mid-cap exploration companies in the gulf of Guinea in the past decade was significantly exaggerated upon find.
I was also told that the continent’s low mineral reserve base is due to the low intensity of exploration. In fact, I was pointed to a 2010 book by Professor Paul Collier in which he makes this exact point. Curiously, the concession is made to look like a belated acknowledgment based on new work. My 2007 comment on the subject for OhMyNews and a 2010 co-authored piece with Professor Lehmann of IMD however indicate clearly that Africa’s relative resource-poverty is a fact that jumps up at even the casual observer cursorily browsing through geological survey data.
In actual fact, Africa’s mineral exploration intensity can be measured by the amount of exploration dollars Africa attracts. Fifteen percent of all global exploration capital is taken by Africa, higher than its per capita entitlement. It cannot therefore be true that the search for minerals in Africa, dating from colonial times, when colonial powers highlighted this resource and marginalised most others, has been patchy.
If you are one of those relatively well-informed international executives and yet you find the message in this article perplexing and the conclusions novel, then you are justifying the original premise of this article: relying solely on stock wisdom, regardless of the source, can never match using primary data and first-hand research in effectiveness.
Your business should benefit greatly from using as much primary data and as little stock wisdom as possible when and wherever critical aspects of the African economy are being examined to guide your entry strategy.
Bright Simons is a Social Entrepreneur and Public Interest Researcher. He invented the mPedigree anti-fake drugs system (www.mPedigree.Net), and is a Fellow at IMANI, a think tank in Ghana.
Very very troubled by the conclusions of this article. Can’t argue with the facts but I am deeply unhappy about the political implications.
Truth! Great Work! it is very useful to make these points and highlight these issues. It will be surprising to many because we rarely look at the facts. Africa will have to develop by the ingenuity and entrepreneurial spirit of its people not its Natural resources nor Aid!
Nice pithy and cogent analysis,mate.We will need more of such pieces pointing the way forward if we are not to fall into the usual aid-dependent cycle of uselessness.Cheers!!
Great post Bright but I raise one issue which you fail to account for in the argument, that is, the role of technology and information (geological data) in bringing the as yet untapped or unproven reserves. I remember vividly your post on the HBR blog about the need for big data to serve as the basis for analytics to support decision making. I would thus argue that the level of exploratory activity to unlock the deposits in Africa relative to that of China or other economies remains scanty for many of these industrial minerals due to the many lost years of high political risks and lacklustre economic performance which failed to draw in the needed technologies and investments.
The dynamics, however, are changing now as many governments have realized their economic follies of the 60â€™s through to the 80â€™s by embracing market based principles. For example, thereâ€™s currently talk about the pre-salt basins along the Africa transform margin of the Atlantic coast (Angola, Namibia, Gabon and Congo) mirroring that of huge finds offshore Brazil. These frontier deepwater pre-salt basins along Africa’s South Atlantic coast with an estimated 75 billion barrels have attracted majors and independents alike. East Africa is also another case in point where the role of technology and stable political climate has helped unlock billions of potential hydrocarbon reserves. Mozambique’s Rovuma Basin was exploited in the 80â€™s all to no avail but a string of technological developments over the last decade led to the discovery of close to 100 trillion cubic feet of gas (enough to provide Americaâ€™s daily natural gas consumption needs for almost 5 years). Tanzania, Uganda, and Kenya have all made vast discoveries in the last 2 years alone.
The problem hasnâ€™t been about the amount of reserves or geological potential. It is widely known and acknowledged that there large untapped reserves (at least from primary data) yet to be proven for many of these deposits as economic advancement becomes standard in Africa. Granted that the mineral deposits may be concentrated, I also think we must also pay much more attention to the revenues these minerals bring into the coffers. The nationâ€™s get some revenue inflows irrespective of the amount produced. Therefore, much more effort should be made at making sure transparency permeates all levels of the value chain from revenue mobilization (design of fiscal regimes, negotiation rounds) to effective utilization of funds (proper fiscal tools, oil funds, etc) to spur development that bridges the poverty gap by allowing individuals to take control of their own destinies in the longer term.
That Africa has relatively low mineral reserves is no surprise, however, it does relate to the quality of the geological data available. As more and more exploration takes place, the reserve figures are shooting up. The recent huge oil and gas finds off the coast of Mozambique are a case in point. When hydrocarbons are taken into account, the restriction to four resource-rich countries on the continent Simons makes starts to look arbitrary. I’d also like to know where the “15% exploration capital” figure comes from.
Consider and perhaps call this the “resource curse” whereby nations which may be well endowed with natural resources are socially and economically deficient primarily attributed to a fundamental lack in prescriptive good responsible governance which indeed is the imprimatur to ensure that all citizens are beneficiaries. Unfortunately this is not the situation found in many resource affluent nations. Prescriptive governance may not be the only response however governance does have impact.
[…] not so, writes Bright Simons in “Africa’s Fabulous Mineral Wealth that Isn’t all There,” published in African […]
The African proverb says this: â€œUntil lions have their historians, tales of the hunt shall always glorify the hunterâ€
You say: “So I have intermittently (…) been poring over geological survey data from some of the worldâ€™s leading depositories, especially the British and US geological Surveys.” How much can we rely on them to tell us exactly how much we worth?
Today, geological studies are very expensive to conduct. I came across hundreds of thousands of owners of mining certificates in Congo, Zambia, Angola who have no idea how much the certificate worth. These owners are ready to sell the land for few hundreds dollars. As far as we do not have our geological studies (and historians) who tell us the truth about our wealth, our history, our culture, as far as we will still rely on “Paul Collier, etc” (by the way, these guys’ book cost 5$ each when African authors’ book are 100$ each… because the printing companies are also western)…
Anyway, I believe Bright is a bright man and understands what I mean.
Provocative thesis! but as it is a VERY technical subject I will wait for other experts weigh in. btw this site is great keep ideas flowing!
It feels great to go against the cenventional wisdom but the author has obviously been quite generous with innuendo. The subject of mineral deposits is very technical and complicated, that is why after spending millions of dollars on a potential oil well, oil companies with vast oil intrests and experience have 0.2 chance of flowing oil.
I KNOW Africa has vast mineral resources because Somalia my country is endowed with untapped coal deposits in Ras Hafun and Qandala, that nobody knows about. 30 million dollars woth of Tin was exported from Somalia in the 80s by a Bulgarian companies in a mine in western Puntland and yet this is never mentioned in any Tin related mining reports. There is over hundred kilometer long stretch of land between qardho and garowe where iron ore was discovered by never tapped. Ras Hafun had the worlds largest salt factory in the 30s, you can imagine the spin off industry in lithium and pottasium production from such a huge factory. Africa is RICH.
Let’s assume for argument’s sake that everything you are saying is true and accurate. So, Africa’s share of the world’s natural resource wealth is far less than previously assumed. My question is, so what? We know already that it is not the quantity or the relative size of the share of the natural resources that determines the economic fortunes of a people or country but rather their ability to turn that resource no matter how small, into an economic advantage.
For that we need to focus on probably the single most important natural resource that Africa has in abundance (15% of the world’s total) but has so far woefully managed, namely the African human resource. We need people who can transform a block of silicon glass into fibre-optic cable and raw copper ingots into high-voltage transmission cables. As long as we continue to ship out millions of tonnes of unprocessed natural resources to the rest of the world due to lack of skills, no amount of gold, nickel, bauxite, copper, oil or gas will free Africa from the shackles of poverty.
Thanks for such an informative article. In the interest of promoting Afrikan heritage, I challenge the Afrikan author Bright Simmons to get Afrikan names as opposed to his European names.
Otherwise, as Afrikans we are challenged to work harder and smarter.
That was a good piece, but further information gathering is needed, in relation to how much resources we really have in our reserves, further more there is enough indications that more is taken out than is reported. Education, I mean meaningful practical Education is needed to grow our Human Resource, the best resource that we still have.
The westerners carved up and dominated Africa from the 1600s until the 1960s because there was nothing there or maybe they took it all already (smile)
Mineral wealth or not, unless Africa focuses on (and she is) the “right” and competitive education for her children she will never achieve her potential. Competitive education for the masses will allow Africa to exploit all of her resources for herself and for benefit to the world (juxtaposed to being continuously exploited by the world))
As an individual investor, one of the things I look for in African countries (an any other emerging market) is not mineral wealth but GDP growth, human development growth and education index for her general population; these are the places I want to put my money.
Finally, sub-Saharan Africa don’t judge yourself so harshly after all you were handed a rough few hundred years but you will regain your strength and be stronger for it; don’t judge yourself so harshly because the world already does and never confuse wealth with riches: be wealthy with material things but always keep your riches in your heart for it is a rich heart that shows the human compassion.
By the way, God willing, I canâ€™t wait to see Africa in about 20 years!
Great analysis, that should go a long way in helping align Africa’s mineral and investment policies to ensure that we get maximum benefits from our mineral resources.
Good article and thought process, I live in Namibia and I am foreigner here.M trying to study and under a lot of factors and may be what the author says has some valid point , but largely I would still love to believe what Theo Acheampong has commented .Exaggerating data by the investors ALWAYS does not happen, secondly the new techniques used in exploration has proved that where previously ,there were not potential of a particular mineral wealth,had been found in abundance.case in point is oil and gas in Namibia.I firmly believe that Africa still has TREMENDOUS POTENTIAL IN TERMS OF MINERALS.
Great work sir!
Your analysis is first class; your conclusions, seemingly unimpeachable!
The above sentiments notwithstanding, something is not sitting well with me, and it has to do with the lack of citation for the sources of your data support. Yes, you rattled off figures in an authoritative fashion, but you have not let us in as to where those figures came from, and sir, please, anecdotal evidence is highly unacceptable here.
But, once again, I say great intellectual output; yes, your piece bucks traditional wisdom and officially sanctioned and accepted narrative about Africa’s wealth; yet, in this your classic iconoclastic masterpiece, you seem to mock our intelligence! You see, I share your sentiments, but I cannot go to the bank with your insights, if the substructure for those pillar-like, epiphanic insights–cited data sources, is lacking or not provided, which, unfortunately, I may have to conclude, is the hara-kiri sword of this your honor-worthy article.
Uncle Bright, please make me whole; the provenance of your data is all I need!
I love your piece sir!
I’m from South Africa and I don’t think you understand what is going on in Africa. The continent is indeed blessed with great mineral and metal resources. Unexplored and unmined. But minerals and metals is not oil, which is worth far more, 10x and which helped countries in the Northen Hemisphere develop. Trust me when I say that Africa has 3x the natural resources the West imagines exist. But the exploration has been hampered by lack of infrastructure, roads, corruption, electricity, no ports, few navigable rivers, lack of mining exploration companies, lack of exploration budgets, hospitals, lack of computers and database modelling, water network, etc. The countries are broke. Business taxes is 2x times that of the rest of the world, exploration is super expensive because of the lack of infrastructure. There’s a lack of skills. There’s immense undiscovered opportunities: look at the oil and gas discoveries that are being made right now. Africa was connected to Brazil. It was one continent. Gondwanaland. If you criticize Africa, you criticize Brazil. But because exploration is so time, energy and financially consuming and the topography so difficult to travel through, the minerals and the metals must never be nationalized: private businesses must discover and develop them and the entire world must have access to those business opportunities and only then will industrialization follow and African countries improve their local and foreign investment, savings and wealth. Never ever trust the governments with any exploration budgets, always trust the private sector’s competition and skills.