JOHANNESBURG (miningweekly.com) – Sub-Saharan Africa’s mining sector will remain the riskiest in the world over the next few years on the back of policy uncertainty, underdeveloped infrastructure and political risk.
BMI Research on Monday said that, overall, sub-Saharan Africa scored 38.9 points out of 100 – behind all other regions – in the global Risk/Reward Index (RRI).
This was a result of low scores in country risk, industry risk and business environment indicators.
The firm pointed out that a series of regulatory changes across major mining countries eroded investor sentiment, leading to policy uncertainty, with the region further threatened by underdeveloped infrastructure and high political risk.
“Policy uncertainty will be a particularly pertinent theme that will hamper growth opportunities in sub-Saharan Africa in the coming years as major mining markets in the region make changes to their regulatory frameworks,” BMI commented.
Despite this, the region performed well in BMI’s mining industry value growth score, which indicates that, despite the high-risk environment, sub-Saharan Africa’s mining sector is dynamic and remains attractive to investors owing to low labour costs and a solid competitive landscape.
Ghana will be the region's best performing country with a strong industry risk profile, surpassing the European average.
“Ghana has improved its score from 53 during the last quarter up to 55.5 currently, allowing the country to leapfrog South Africa and Botswana and come top of our regional scores,” the firm highlighted, pointing out that all three countries were expected to perform well on a variety of business environment indicators.
The three countries obtained an average aggregate score of 54.1 on the RRI, slightly above the Americas region average of 50.1, but still below the Asian regional average of 56.1.
“This score reflects miners' ongoing priorities to tread carefully and avoid overexposure to high-risk environments as they look to improve balance sheets rather than engage in risky growth ventures,” BMI said.
Further, infrastructure deficits and high political risk solidified the position of Sierra Leone, Liberia and Mauritania as regional laggards and the three worst performing countries on the index.
Mauritania, in particular, has seen its score fall from 26.5 during the last quarter to just 20.7 currently, as a result of a less favourable risk outlook.