Cape Town (South Africa) - SPEAKER after speaker at the recent Mining Indaba emphasised the need for governments, especially in Africa, to support mining with infrastructure investment and investor-friendly policies.
The current world population is around 6.5 billion people, against two billion in 1929, almost half of whom live in cities. That requires upgrading infrastructure, including housing, schools and roads.
By next year, whereas China was expected to account for about 39% of global spending on infrastructure, South Africa would account for just 5%.
Investment in infrastructure created demand for commodities such as copper, aluminium, coal and steel. US Global Investors CEO Frank Holmes said that pent-up demand meant the world was still in the midst of a commodities super-cycle, albeit one with tremendous volatility.
Holmes said politicians should pursue policies that encouraged prosperity, which ultimately would be the sole source of leaderships' popularity and therefore political power. In contrast to peace and prosperity, some leaders - such as Robert Mugabe of Zimbabwe or Muammar Gaddafi of Libya - pursued policies of poverty and punishment. As a result, their cost of capital had soared.
Randgold Resources CEO Mark Bristow said the search for new gold deposits was driving companies into new, less-developed regions. As development took place in such emerging economies, what was typically found was a lack of infrastructure, poorly trained workforces and governments that sometimes had unrealistic expectations of what mining could do for their economies.
Africa was believed to contain around 30% of the world's mineral resources, Bristow said. While the world was experiencing an unprecedented boom in metals prices and conditions for creating prosperity had never been better, the emphasis had been misplaced on exploitation and unsafe mining practices rather than development.
Bristow advised governments to share revenues equitably with their people by ensuring these were channelled towards infrastructure development and the upliftment of communities where mines operated. Governments weren't always transparent about the amount of money they were earning from mining, Bristow said.
According to Randgold Resources' analysis, in most cases about half of the profits made from mining went to companies' shareholders in the form of dividends, with the remainder going to governments in a number of ways. That lack of transparency caused the misperception that mining companies were greedy exploiters of their host countries, he said.
Anglo American CEO Cynthia Carroll was bullish about the long-term prospects for commodities, describing urbanisation in Asia as the key driver of economic growth in Africa. Carroll said there would be peaks and troughs in commodities. To be competitive, producers had to focus on keeping costs low. Structural changes in the world economy would underpin prices.
"With improvements in areas such as safety in mining and governance, growing investment in infrastructure and an increasing focus on the role of business in development, I believe the mining sector will play an increasingly important role in poverty alleviation and the development of the African continent. The extent of that would depend on the buy-in from a variety of stakeholders, especially governments," Carroll said.