Covid-19, a Litmus Test

Regional strategy replaced with a country-by-country focus

A regional focus has conferred dexterity in the face of country-specific challenges and shifting patterns in the gold mining industry. Such a strategy proved effective during the pandemic, when countries like Ivory Coast took a milder hit compared to Ghana or Cameroon. This pan-African approach is possible due to the good level of regional integration: 14 countries use the CFA currency, 15 countries belong to ECOWAS (Economic Community of West African States), and 17 subscribe to the ODAHA treaty (Organisation for the Harmonisation of Corporate Law in Africa). Leveraging on these common frameworks, Senegal-based law firm Geni and Kebe goes by the motto “Africa is our home:” “Although our headquarters are Senegalese, we take a regional view when it comes to assisting clients in dealing with the challenges of operating in different West African countries,” said Mouhamed Kebe, Partner.

Even when a direct physical presence is not possible, service providers have created networks with other institutions to leverage every opportunity. Geni and Kebe collaborates with DLA Piper, an integrated network of 20 law firms with a pan-African focus. Local Ghanaian logistics company Greenline Logistics relies on its membership to the African Freight Reach Network and the World Cargo Alliance (WCA), which, according to its CEO and founder Soraya Anglow, allows the local firm to act globally: “These days, clients look for a door-to door service, a complete chain, and it is our priority to be able to complete that chain. If you cannot tap into one particular transportation leg, whether it is Europe or Asia, then you need to recur to someone else that can help, which is both expensive and difficult.”

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“The countries in the region have established a good level of integration whereby common rules are adhered to. We have noticed major improvements through such integration which is enhanced by the digitalization revolution taking place.”

Dolores Biamou, Mining Projects Director Africa, Bolloré Logistics

Africa is also very close to achieving a milestone in terms of regional integration by becoming the world’s largest free trade zone through the AfCFTA (African Continental Free Trade Area Agreement), that was scheduled to be enacted by July this year, yet was postponed for six months because negotiations were not possible during lockdown.

Creating the single market between the 54 countries is becoming more challenging due to an inward-looking trend towards national development, while major negotiations are not recommended by the WTO to take place digitally. Adding to the diplomatic questions, there are also issues regarding the hardware of integration, or the infrastructure to allow the movement of goods and people. “What should be a two hour drive from Lagos to Accra takes seven hours”, Osam Iyahen, senior director of natural resources at the Africa Finance Corporation (AFC), told GBR.

The AFC was created in 2007 to address the infrastructure gap that holds back economic development, social progress and regional integration. Infrastructure projects, such as investments in the railway system in Ghana and the Plan Sénégal Emergent rolled out in Senegal, are to face big drawbacks due to increasing budgetary deficits and governments justifiably focusing more on social and healthcare spending rather than heavy infrastructure.

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Suppliers are receptive to opportunities in new geographies. For instance, Alfreg, a consultancy company helping foreign companies to set up base in Ghana, is seeing increased demand from Burkina Faso: “Alfreg is assessing the possibility of opening another office in Burkina Faso. In as much as we have been hit by the pandemic in 2020, the mining sector has been resolutely going through all the challenges and there is still substantial potential for the industry to grow,” said Regina Ofori-Twumasi, managing consultant.

Ivorian consultancy MS&C is looking to expand to Guinea, Mali and Burkina Faso: “If Covid-19 is either eradicated or under control by 2021, I believe we can move ahead with these plans next year, starting with Guinea and later moving to Mali and Burkina Faso, depending on how the security situation progresses there,” detailed Eric Kondo, managing partner.

While the traditional bases for service providers have been Ghana and Senegal, Ivory Coast is also developing its own home-grown services sector, which, as exemplified by players like MS&C, is starting to look beyond the borders. With the region’s largest port, the port of Abidjan, Ivory Coast is already a getaway to Mali and Burkina Faso. DRC-based NB Mining has also been tendering for contracts in Guinea, as well as looking at other more saturated markets: “We also have our eyes on Ghana and we are already registered and have people on the ground in the country, but we have not been advancing at the pace we intended to, due to the pandemic,” said Samuel Opare, managing director.

In the context of struggling oil and construction sectors, mining has become the principal focus for service and equipment providers, which is leading to increased competition. Service provider Quantum LC has developed a diverse offering to increase its chances in the competitive Ghanaian market: “Competition between local contractors has become very tight, and flexibility, as well as price, are crucial,” said Joseph Titus Glover, managing director.

To protect local businesses, most governments are re-evaluating their local content laws, which may make it more difficult for foreign companies to obtain contracts. The expectation of this tightening of restrictions is already forging the first JVs to incorporate foreign players locally. This year, Quantum LC entered a JV partnership with WBHO, a South African civil works and earthworks service provider, forming WBHO-Quantum LC, owned 51% by Quantum. Also, Quantum LC formed a JV with Portuguese company Motor Engines, tendering together for a project at the Iduapriem mine in Tarkwa, Ghana.

The availability of a strong services and equipment sector can determine the very existence of a mine. For instance, Chad is overlooked in terms of gold mining despite the government’s effort to bring in investment, and that is broadly because of the lack of in-country expertise and soft infrastructure. The first mover in the country, AIM-listed Iron Ridge Resources, made a significant discovery, which CEO Vincent Mascolo said could rival some of the largest open pit gold mines in the world. However, the project is currently on hold due to the associated costs. The same happened in previous years when juniors adventured to Liberia or Mauritania only to discover that the costs related to importing knowledge and equipment were insurmountable.

Image courtesy of Roxgold