A model for evaluating risk in Africa : a mining perspective

Erasmus, Lourens J. (2008-12)

Thesis (MBA (Business Management))--Stellenbosch University, 2008.

Thesis

AFRIKAANSE OPSOMMING: Suksesvolle eksplorasieprojekte en die daaropvolgende mynboubedrywighede kan as die stimulus dien vir ekonomiese groei in Suider Afrika deur middel van werkskepping, beter lewensomstandighede, en uiteindelik ekonomiese en polilieke stabilileit. Mynbou het die vermoe om dit te bewerkstellig. Die doel is om uiteindelik 'n langtermyn, veilige, vredevolle en vooruitstrewende oplossing vir die streek te vind, wat volgehoue groei gebaseer op 'n ekonomiese opbloei veroorsaak deur die implementering van suksesvolle mynbouprojekte en vooruitstrrewendheid tot gevolg het. Om dit reg te kry, is 'n deeglike en volledige studie betreffende alle moontlike risiko's, polities, ekonomies en sosiaal, wat sulke bedrywighede kan beinvloed, noodsaaklik. Ongelukkig ly die streek aan 'n gebrek aan buitelandse vaste investering as gevolg van burokrasie, politieke onstabiliteit en 'n onsekere veiligheidsituasie. Die hoof doel van hierdie studie is om 'n model daar te stel wat gebruik kan word om 'n voorlopige ontleding van 'n land se risikofaklore aangaande die algemene besigheids- en beleggingsklimaat te doen, soos gesien uit die oogpunt van beleggers in eksplorasie en mynbouprojekte. Angola en Zimbabwe, waar mynbou 'n groot rol kan speel, is geidentifiseer op die basis van die kwalitiet van hul mineraalafsettings en mynboupotensiaal. Deur gebruik te maak van die model wat in hierdie studie ontwikkel is waar gradering berus op 'Politieke', 'Finansiele', 'Sosiale Risiko', asook 'Eienaarsrisiko' onderskeidelik, gradeer Angola as 'n CBCB land met 'n matig stabiele omgewing om eksplorasie en mynbouprojekte van stapel te stuur. Dit is 'n land met uitgebreide minerale moontlikhede en alhoewel die infrastruktuur op hierdie stadium te kort skiet, het die land drie groot hawens. Geen groot bedreigings of destabiliserende faktore bestaan op die kort- tot medium termyn nie. Dit het die vermoe om tot 'n BBCB status oor die medium- tot lang termyn te beweeg. Zimbabwe verwerf 'n gradering van DDC+C, wat dui op 'n hoogs riskante omgewing om eksplorasie en mynbouprojekle van stapel te stuur. Niemand is seker wat die huidige verkiesing en die toekomstige politieke bedeling sal voortbring nie. Die huidige situasie kan amper net verbeter vir die land en sy mense met die moontlikheid van 'n regering van nasionale eenheid. Alhoewel die land dalk nog nie sy onderste draaipunt bereik het nie, kan 'n gradering van CC+C+C+ 'n moontlikheid oor die medium termyn wees, en selfs beter op die langtermyn. In 'n land met enorme minerale moontlikhede het die tyd aangebreek om te begin soek na geskikte gebiede vir eksplorasie doeleindes. Zimbabwe het die potensiaal om weer Afrika se kosmandjie te word met ondersteuning van die mynboukant. 'n Regverdige demokratiesverkose regering en baie harde werk, toewyding en deursettingsvermoe is nodig om uiteidelik te seevier. Laastens, die belangrikste deel van die risikobepaling van 'n land kom in die vorm van politieke risiko, en meer spesifiek, "leiersrisiko". Ongelukkig is die grootste struikelblok in langtermyn-vooruitskatting die feit dat die status quo vir die volgende dekade geldig kan bly, of amper oornag omvergegooi kan word. Dit kan weer lei tot 'n kettingreaksie reg deur al die sfere van die politieke en sosioekonomiese orde, binne en soms selfs buite die land in die vorm van binnelandse oproerigheid en buitelandse sanksies of ondersteuning. 'n Gevoel van dringendheid om te verander tot voordeel van almal, moet egter nog posvat. Die son wag nie vir Afrika nie.

ENGLISH ABSTRACT: Successful exploration projects and subsequent mining ventures can provide the stimulus for economic growth in Southern Africa through job creation, improved living conditions, and eventually economic and political stability. The aim is to ultimately ensure a long- term, safe, peaceful and prosperous solution for the region consisting of continuous growth and prosperity based upon an economic kickoff sparked by the implementation of successful mining projects. To achieve this, a thorough and comprehensive study of all possible risks, political, economic and social affecting such ventures is of the utmost importance. Unfortunately, the region suffers from a lack of foreign direct investment to make this happen largely as a result of bureaucracy, political instability and an uncertain security situation. The main aim of this study is to create a model for an initial risk analysis by analysing a country's risk factors relevant to the overall business and investment climate as perceived by investors in exploration and mining projects. Two countries, Angola and Zimbabwe, where mining can play a large role have been identified based on the quality of their mineral deposits and mining potential. Using the model developed in this research study where grading is based on 'Political', 'Financial (Transfer)', 'Social', and 'Ownership Risk' respectively, Angola rates a CBCB country with a moderately stable environment in which to launch exploration and mining ventures. It is a country with a vast mineral potential and although the support infrastructure is lacking at this stage, have three major ports. No major threats or destabilising factors exist in the near to medium terms. It has the ability to change to a BBCB status over the medium to long term. Zimbabwe receives a rating of DDC+C with a highly risky environment to launch exploration and mining ventures. No one is sure what the last election and the future political framework will bring. The current status can almost only improve for the country and its people with the possibility of a government of national unity. Although the country might not have reached the bottom turning point yet, a CC+C+C+ rating could be a possibility over the medium term and even better over the long term. In a country with enormous mineral potential, it is time to start scouting for promising regions for exploration purposes. Zimbabwe has the potential to again become the bread basket of Africa with backup from the mining industry. A proper democratically elected government and much hard work, commitment and dedication are necessary to be successful eventually. Finally, the most important/crucial part of measuring the risk associated with a country comes in the form of political risk and more precisely, sovereign risk. Unfortunately, and this is the main stumbling block in long-term forecasting, the status quo can continue for the next decade, or be turned upside down almost overnight. This in turn can lead to a chain reaction throughout all spheres of the political and socioeconomic standing, inside and outside the country in the form of domestic upheaval and foreign sanctions or support. A sense of urgency to change for the better still has to emerge though. The sun doesn't wait for Africa.

Please refer to this item in SUNScholar by using the following persistent URL: http://hdl.handle.net/10019.1/5733
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