A recent study by South African bank Absa highlights the challenges facing African miners in the face of Western environmental, social and governance (ESG) requirements. According to this analysis, several mining projects could be abandoned because of the high cost of compliance.
Dean Hack, head of resources and energy at Absa Securities UK, says African mining companies must adapt to the green energy era or risk extinction. Although global demand for critical minerals such as copper, cobalt and lithium is driving decarbonisation, the cost of complying with Western ESG criteria could hold back investment.
"Africa has a very limited responsibility for historical carbon emissions, but it bears a significant burden for decarbonisation," Hack emphasised at the Investing in African Mining Indaba in Cape Town.
In countries such as South Africa, environmental regulations have become stricter in recent years. However, ESG standards designed for developed economies can represent a major hurdle for African mining companies, particularly the smaller ones, which face high compliance costs.
Absa has already financed sustainable development projects to the tune of 115 billion rand ($6 billion) since 2020. Chetan Jeeva, head of corporate lending at Absa CIB, explains that tailored financing can reduce costs and improve credit profiles.
"If an investment in renewable energy is measurable, we adjust financing rates by three to five basis points," says Jeeva, stressing the importance of encouraging green investment.
The experts present at the Indaba stressed the need for governments, investors, communities and companies to work together to ensure the sustainability of the mining sector in Africa.
Marna Cloete, President of Ivanhoe Mines, highlights the continent's mining potential and the strong demand for these resources as part of the energy transition. However, she questions Africa's ability to take full advantage of this opportunity.
Caroline Donally, Managing Partner of Sprott Streaming and Royalty, stresses the need for regulatory stability to reassure investors. "They need to be sure that legislation will remain constant over the long term," she explains.
In addition, several experts stressed the importance of local processing of raw materials to reduce the carbon footprint and strengthen local economies. Martina Biene, President and CEO of Volkswagen Group Africa, says that this approach benefits both the environment and the African economy.
The mining industry must go beyond traditional ESG criteria, in particular by investing more in human capital and community development. Zenzi Awases, President of the Association of Women in Mining in Africa, stresses the importance of companies actively engaging with local communities. "Successful mining is sustainable mining," she says.
Absa's approach, which combines appropriate financing with measurable investment, represents a pragmatic way forward for the sector. However, Jeeva warns that if ESG criteria continue to be applied without adaptation to African realities, this could hinder investment and the development of the mining sector in one of the world's most strategic regions.
"By aligning ESG objectives with appropriate financing models and strong local partnerships, the sector can attract the necessary capital while promoting job creation and sustainable development," he concludes.
