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Risks and opportunities in Sub-Saharan Africa for mining companies

As was noted in the annual meetings of COP27 and COP28, in order for there to be a true global energy transition, billions of dollars will need to be invested into Sub-Saharan Africa’s transition to renewable energy and into the strengthening of infrastructure across the region.

A young Black African mining construction worker with a digital tablet in an open pit quarry

Energy security remains one of the biggest risks for mining companies in Sub-Saharan Africa — particularly in countries like South Africa, which is not only a key mining hub for the region, but also an energy provider for a number of neighboring countries. However, energy is also unearthing significant opportunity in the region, and the transition to a green economy may see the rise of new mining hubs in Sub-Saharan Africa. To capitalise on these opportunities, the region needs to double down on attracting investment.

South Africa does not sit alone in the region when it comes to issues with energy security, though state-owned energy provider ESKOM’s continued use of load shedding is well documented. As well as impacting South Africa, countries such as Zimbabwe and Namibia are also impacted as they utilise the South African energy supply.

The drive for energy security has given mining companies the impetus to generate their own power through renewable means, mainly via solar power. The burgeoning mining hub of Namibia will likely benefit from its vast amount of land and huge coastline, as mining companies in the country buttress their energy security with solar and wind power.

Currently, South African mining companies are under regulation and are able to supply up to 100 megawatts of renewable power for their operations to supplement their substantial energy needs.

Developing additional power supply, however, does bring with it new and increased risks – from construction considerations, to operations and maintenance challenges. Working with third parties to support in this endeavour can also present contractual risks. Also, while mining companies transition to renewable energy, their use of diesel generators and other forms of alternative power to reduce reliance on the grid infrastructure will add greatly to their risk profiles. It is essential to ensure there is appropriate risk transfer and that current insurance programmes are adjusted to account for the additional risk.

As well as introducing renewable energy, Sub-Saharan Africa stands to play a key role in the green economy. Many of the metals needed for the global energy transition will be supplied for Sub-Saharan Africa. The Democratic Republic of Congo (DRC), for example has large deposits of copper and cobalt, both of which are used in the renewable energy technology. Namibia has uranium, which is used in nuclear power, and lithium – fundamental for batteries and the shift to electrification.

As was noted in the annual meetings of COP27 and COP28, in order for there to be a true global energy transition, billions of dollars will need to be invested into Sub-Saharan Africa’s transition to renewable energy and into the strengthening of infrastructure across the region. While financial promises have been made by various countries, this investment has not materialised at the same rate as the growth in need for these metals and materials.

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