Can you provide an overview of Absa Group and its role in the South African mining industry?

Absa Group Limited is a leading financial services group in Africa, listed on the Johannesburg Stock Exchange (JSE). We operate in 10 countries across the continent and have representative offices in Nigeria and Namibia, as well as international offices in London and New York. Our range of products includes investment banking, corporate banking, and risk solutions, with a strong focus on execution capabilities and establishing critical relationships.

In the South African mining industry, Absa plays a vital role as a financial partner. We understand the complexities of the sector and recognize that investors are increasingly interested in diversified portfolio investments with a clear strategy for decarbonization and a commitment to transparency on economic impact, communities, and the environment. We believe that sustainable practices and initiatives will attract capital and contribute to the growth and development of the mining industry.

How did the COVID-19 pandemic impact the Southern African mining industry, and to what extent are countries on their journey to recovery?

The COVID-19 pandemic had significant adverse effects on various sectors, including mining. However, it also accelerated the energy transition from fossil fuels to greener and more sustainable energy sources, particularly in Africa. The continent is rich in natural gas and energy minerals/metals like copper and cobalt, which will ensure that economic growth continues and that governments promote the use of greener energy technologies.

During the lockdown period, many African countries temporarily closed mines, leading to a halt in production. However, the mining industry has shown resilience and a rapid recovery. Precious and base metals maintained stable price levels, contributing to the industry’s rebound.

What recommendations do you have for South Africa to regain its position as the mining giant of the region?

To regain its position as a mining giant, South Africa needs to focus on several key factors. Firstly, a stable political environment, regulatory certainty, labor peace, and democracy are crucial to maintain the country’s attractiveness as an investment destination. The recent mining charter in South Africa was a positive regulatory milestone for the industry, and such stability should continue with consistent monetary and fiscal policies.

Furthermore, the government’s behavior during election years will impact investment decisions. It is essential for South Africa to embrace sustainability and environmental protection, ensuring responsible mining practices and effective rehabilitation.

How is Absa assessing opportunities in the renewable energy space?

The renewable energy sector offers significant investment opportunities across Africa. In South Africa, legislation has evolved, allowing mining companies to apply for their own power plants with increased capacity limits. We have witnessed a surge in requests from mining companies seeking financing for such projects. Absa considers various options, including balance sheet funding or funding through an Independent Power Producer with an offtake agreement.

Water reuse is another crucial aspect of green mining, and many mining companies are actively recycling water to ensure sustainable extraction processes. As part of our commitment to responsible banking, Absa signed up to the United Nations Principles for Responsible Banking in 2019. We aim to align our business strategy with society’s goals and support environmentally, socially, and economically viable projects in the renewable energy space.

Which countries pose the highest and lowest risks in terms of mining investment?

Rating agencies generally place African countries on a relatively high risk scale when it comes to investment. At Absa, we are more comfortable lending in countries where we have a physical presence, as we can assess the local conditions and mitigate risks more effectively. However, when lending in countries where we do not have a physical presence, we consider additional factors to ensure responsible lending practices.

Adequate electricity supply is a crucial aspect that impacts the extent of investments in mining. As financiers, we also need to start considering non-traditional commodities such as energy minerals and metals to support the energy transition. From a commodity perspective, platinum and palladium show promising prospects for the future, along with the rising demand for energy minerals and metals.

Overall, the mining industry in Africa presents opportunities and challenges, and Absa aims to navigate these complexities while contributing to sustainable and responsible growth in the sector.