Australian involvement in African resources

Friday, 14 September 2007

Strengthened Australia-Africa relations underpinned by mining

Australia's growing trade relationship with Africa has outpaced that with any other nation in the world in the past five years.

Since 2001, trade with Africa has grown by 10.5 per cent, compared with 9 per cent for Asia and 6 per cent for Europe, Australia's High Commissioner in Africa, Philip Green, told delegates at the 2007 Paydirt Africa DownUnder Conference in Perth earlier this month.

"Trade typically follows investment," Mr Green said, "and Australian investors tend to contract their services to Australian providers, purchase Australian made and sourced equipment, and hire Australian labour in key positions."

A Department of Foreign Affairs and Trade survey found Australia's involvement in Africa's mining and resources sector is now worth $US15 billion ($NZ21.3 billion).

Also, Australia's exports to Africa have grown by 54 per cent since 2001.

"Its hard to track how much of that is attributable specifically to mining but I'm confident that a substantial share. . . is a result of increasing investment by Australians in the African mining sector," Mr Green said.

"My view is that the growth in Australian mining interests in Africa is now the most important dynamic in Australia's relations with the continent."

When Mr Green began his career as an Australian diplomat in Africa some 20 years ago, Australian-African business relations were sparse to say the least.

"You would have struggled to find half a dozen African countries where Australian firms had a substantial presence," Mr Green said.

"Since then, mining investment has transformed the commercial relationship.

"Now you would struggle to find half a dozen African countries where there is no substantial Australian commercial presence."

Mr Green said the impetus in mining investment has brought new vigour to the relationship between the two continents, has contributed to opening up new strands to bilateral relationships and is delivering additional benefits to the Australian economy.

There are now about 124 Australian mining companies operating in Africa, and investment there is becoming more attractive.

Many miners cite delays in approvals processes Australia-wide as being off-putting, although anecdotal evidence indicates that mines departments are backlogged around the globe.

Moreover, some uranium miners have cited frustration with limitations in Australia as reasons to take on Africa instead.

At least 13 African countries significantly improved their World Bank stability ratings last year compared to their standing in 1996, according to chief economist of the Australian Government's Export Finance and Insurance Corporation Roger Donnelly.

"As well as conflict resolution and better economic performance, debt relief has been a contributing factor to Africa's greater stability," Mr Donnelly said.

"Foreign direct investment (FDI) inflows into Africa are booming, if from a low base, and had nearly tripled by late last year."

He noted Australian-based companies were the third largest spenders on mineral exploration in Africa, totalling $US160 million in 2006.

Conference speakers confirmed that some of the risks of doing business in Africa were indeed lessening, with strife-torn Democratic Republic of the Congo (DRC) a prime contender for the "most improved" award.

The political situation in the DRC improved greatly after it held democratic elections last year – the first since gaining independence from Belgium in 1960.

Its not all roses, however. The north-east of the country and indeed anywhere near the capital Kinshasa is understood to be worlds apart from the mineral rich Katanga Province to the south, where it is much easier for foreign companies to operate.

The Governor of Katanga Province, His Excellency Moise Katumbi, told conference delegates that major changes in his nation's political landscape, higher metals prices and a new mining code introduced in 2003 under the guidance of the World Bank had "tipped the risk/reward balance in favour of investing in the DRC".

Remaining problems, however, include illegal artisanal mining, and the need to develop human resources and infrastructure.

Mr Katumbi congratulated companies such as First Quantum Minerals Ltd, Tiger Resources Ltd and Moto Goldmines Ltd for being pioneering Australian firms in the DRC.

Credit also went to Anvil Mining Ltd, which has weathered tough times since starting operations in the nation in 1995, and its joint venture partner Mawson West Ltd.

Anvil has now cleared its name after being the subject of an ABC Four Corners report in 2005 that alleged the company was implicated in deadly action by rebel military forces at the Katanga village of Kilwa in 2004.

Then, in April last year, an artisanal miner was found drowned at an Anvil concession where the firm's security guards had repeatedly chased off such trespassers.

The company and its employees were acquitted in late June of any involvement in the Kilwe tragedy.

As for the artisanal miner's death, an Organisation for Economic Co-operation and Development audit of the company found it had been tarred with a brush "that might more appropriately have been applied to other far less respectable mineral trading firms whose comportment has been below the standard set by Anvil".

Anvil managing director Bill Turner said artisanal miners remained a challenging problem in the Kolwezi area, "an issue. . . that we hope to solve as time goes forward".

The company now plans to double copper production at its flagship Dikulushi mine and other DRC operations to 100,000 tonnes by 2010.

Despite anecdotal evidence of the DRC's improvements, its OECD risk classification stands at seven, the same rating as Zimbabwe, a country in crisis under President Robert Mugabe.

By way of comparison, high income OECD nations such as Australia and Denmark rank nil.

Namibia, which has attracted the likes of Rio Tinto, Bannerman Resources Ltd and Paladin Resources Ltd with its rich uranium resources, ranks a favourable three.

Neighbouring Botswana, the world's largest diamond producer (by value) and considered Africa's most salubrious nation, ranks two.

Notable Australian exploration here is being undertaken by Bannerman (uranium), A-Cap Resources (precious and base metals, and diamonds) and Albidon Ltd (nickel).

Along with Botswana and the DRC, Paydirt editor Barry Avery singled out Zambia and Burkina Faso as being good choices for establishing a mine.

Mr Avery described South Africa, Angola, Kenya, Uganda and post-Mugabe Zimbabwe as "wait and see countries", while no-go areas were Nigeria, Sudan, Ethiopia, Guinea, Liberia, Sierra Leone and Central African Republic.

Australia Police Inquiry of Mining Firms Should Extend

Garowe Online (Garowe)

3 February 2008
Posted to the web 4 February 2008

A cozy relationship between Puntland administration officials and the Australian company's executives has given local officials unsurpassed political power.

It is with genuine interest that one reads a recent article by major Australian newspaper, The Age, which publicly disclosed an ongoing Australian Federal Police (AFP) investigation into "alleged misconduct and dubious practices in the developing world" by Australian mining firms.

According to The Age, political parties and Oxfam Australia have openly called for the Australian government to create a "mining watchdog" to oversee the activities of these firms in developing countries. The article reveals that corrupt practices on the part of Western firms aiming to exploit poor regions the world over for natural resources is so rampant as to warrant an official investigation by the AFP.

Although the article did not specifically name companies in the AFP's three ongoing investigations, the mere fact that mining firm corruption is getting the attention of Australia's largest law-enforcement organization is a welcome feat. It is also a wonder if Somalia, that troubled Horn of Africa country, is on the AFP radar at all.

Since 2005, a resources debate has raged across Somalia following a controversial agreement between a feeble regional administration, Puntland State, and an Australia-based mining company. That agreement, which drags to this day, has led to bloodshed, political scandal and a deteriorating security situation in one of Somalia's more-stable regions.

A cozy relationship between Puntland administration officials and the Australian company's executives has given local officials unsurpassed political power, which has in turn led to local clans to take up arms. Although the Puntland Constitution does not allow the region's leaders to sell off chunks of Somali territory, regional President Mohamud "Adde" Muse presses on with his unilateral exploration agenda.

Local clans in some of Puntland's regions, including Sanaag and Bari regions, have organized clan fighters to take up arms against Puntland security forces, whose aim is to bring foreign explorers to the region by military force. For example, in March and April 2006, at least ten people were killed in violent clashes between Puntland troops and local clan fighters from Sanaag region.

The Australian firm's relationship with Puntland has led to the appropriation of hundreds of thousands of dollars to Puntland officials. Yet, Puntland civil servants and security forces have not been paid in months and concerned ministries are barely operational. Local sources say that donated money never makes it to Puntland government faults, part of a region-wide financial scandal that has turned Puntland, once strong and stable, as a land of the verge of disorder.

Furthermore, the leading characters behind the exploration push, including President Muse's close relatives, are also board members with the Australian firm in question. This not only creates a conflict-of-interest, but it also reinforces the local clans' entrenched belief that the Puntland leader is attempting to invade and control the resources of other clans by force.

Thus far, the Australian firm and its foreign partners have not succeeded in their scheme to explore Somalia, by silencing the opposition through the implementation of military force. All Somalis know that military force, in its most brutal form, cannot silence whole clans.

We only have to look towards Somalia's capital, Mogadishu, where disgruntled clans have ascertained that the mighty Ethiopian army did not spend a single peaceful night on Somali soil.