Potential for business and development in southern Africa

1. Enterprise
around Mining
potential for business & development
in southern Africa
Dr. Sven Renner
Program Manager ‐ Extractives & Development

2. background
markets
business partnerships
Enterprise around Mining – potential for business & development

3. background
markets
business partnerships
Enterprise around Mining – potential for business & development

4. ca. 85% of global mineral value production
> 30 bn USD / year
> 10 bn USD / year
> 5 bn USD / year
background
global mining production value

5. mining products >20% of Exports
background
economic dependency on mining

6. „The primary orientation of the strategy is the necessity for the
structural transformation of the SADC region by way of
industrialization, modernization, upgrading and closer regional
integration.
The essence of transformation is diversification via upgrading and
climbing the technology ladder. Successful industrialization will be
achieved (…) by doing different things, implying industrialization is
achieved through diversification.“
*SADC Industrialisation Strategy and Roadmap
background
diversification ‐ a political priority

7. background
markets
business Partnerships

8. 2.000
3.000
4.000
5.000
6.000
7.000
8.000
9.000
10.000
11.000
12.000
500
700
900
1100
1300
1500
1700
1900
2100
2300
2500
01.01.2006 01.01.2008 01.01.2010 01.01.2012 01.01.2014
Cu prod. In Africa (t) Cu price US$/t
*data: SNL, 2016
markets
price and production
copper price and production in Africa*
price (US$/t)production (kt)

9. 0
20
40
60
80
100
120
140
160
180
200
0
10
20
30
40
50
60
70
80
90
100
01.01.1996 01.01.2000 01.01.2004 01.01.2008 01.01.2012
Fe‐ore production in Africa (mio.t) Fe‐ore price (US$/t)*
*data: SNL, 2016, China import iron ore fines 62 % Fe, spot (cfr Tianjin port)
price (US$/t)production (mio t)
iron ore price and production in Africa*
markets
price and production

10. 400
600
800
1.000
1.200
1.400
1.600
1.800
2.000
400
450
500
550
600
650
700
01.01.2006 01.01.2008 01.01.2010 01.01.2012 01.01.2014
Au prod. In Africa (t) Au price US$/oz.
price (US$/oz.)production (t)
*data: SNL, 2016
gold price and production in Africa*
markets
price and production

11. S‐UG M‐UG L‐UG S‐OP M‐OP L‐OP Total
South Africa 785 3.926 14.135 524 1.571 5.235 26.175
Zambia 160 481 1,890 64 128 481 3.204
Mozambique 11 76 133 8 38 114 379
Madagascar 27 27 ‐ 54 432 ‐ 540
Total 984 4.510 16,158 649 2.169 5.829 30.298
*incl. costs for labour and energy – ca. 40 % of the total value
potential for development
market size
OPEX* 2014 in million USD – Study Focus
small markets require a regional approach

12. South Africa $M
Expenditure Category S‐UG M‐UG L‐UG S‐OP M‐OP L‐OP Total
Geological and exploration services 20,6 97,2 300,2 10,0 28,7 89,5 546,3
Geological equipment and supplies 2,1 11,4 37,5 1,5 5,1 15,8 73,4
Analysis and testing 12,4 68,6 238,4 9,0 30,4 100,4 459,2
Supply chain services 1,4 8,4 34,0 1,0 3,7 15,0 63,5
Environmental services 13,7 76,3 294,4 10,0 33,8 123,9 552,0
Feasibility, design and engineering 3,4 19,1 73,6 2,5 8,4 31,0 138,0
Construction, and related materials and services 5,1 24,3 79,8 3,0 8,6 26,9 147,7
Contract mining 0,0 0,0 0,0 0,0 0,0 0,0 0,0
Equipment & Plant maintenance & repair 34,3 162,0 531,7 24,9 71,7 223,9 1048,6
Equipment rental 2,7 13,0 42,5 2,0 5,7 17,9 83,9
Drilling equipment and services 3,4 19,1 73,6 2,5 8,4 31,0 138,0
Plant and equipment ‐ mining / general 6,9 38,1 147,2 5,0 16,9 62,0 276,0
Heavy transport equipment 1,4 7,6 29,4 1,0 3,4 12,4 55,2
¬ estimation of market size
¬ 36 product categories
¬ 6 mining categories
¬ variable level of detail –
from a single mine to the
regional level
potential for development
market analysis

13. Bindura Nickel Mine, Zimbabwe / image credit BGR, VDMA 2015
¬ cheap products / high logistics costs
¬ low‐medium tech
¬ high wear
¬ critical factor in the production flow
potential for development
case: light machinery / spares

14. background
potential for development
business partnerships

15. business partnerships
constraints and opportunities
international companies
find themselves confronted with new challenges:
¬ cost pressure
¬ trend to outsourcing in mining companies
¬ local content requirements (regulation)

16. business partnerships
constraints and opportunities
local companies in need for an upgrade
in southern Africa, SMEs hardly participate in the extractive
sector.
they usually lack
¬ technology
¬ investment capital
¬ reputation
¬ product certification

17. business partnerships
constraints and opportunities
Local SME Constraints
¬ technology
¬ investment capital
¬ reputation
¬ product certification
int. SME challenges
¬ cost pressure
¬ local content
requirements
¬ trend to outsourcing
Mutual
Benefits
through
Business
Partnerships

18. outlook
while the sector remains in a price downturn
¬ increased selling of less profitable assets to smaller
companies. operations continue producing
¬ potential for local local SME supply industry through
partnerships is not affected

19. thank you