While global geopolitical risks have battered corporate planning, supply chains, and profits, Africa’s mining sector has been one of the winners in the current global climate. With this has come an uptick in resource nationalism, pushing miners to prioritize community benefit to secure and sustain license to operate.
On the geopolitical level, Africa’s mineral wealth is a focus for the full cast of global players. Chinese companies continue to invest heavily across the continent; the ongoing focus of the U.S. on securing access to critical minerals is one of the only remaining proactive elements of its Africa strategy under President Trump; and Middle Eastern actors are increasingly active in Africa’s mining sector via powerful state-backed investors. The European Union is also making efforts to play a role in Africa’s minerals space (albeit in a more limited fashion) through bilateral critical minerals agreements with countries including the DRC, Namibia and Zambia, and support for the Lobito Corridor, connecting mining centers in Zambia and the DRC with the port of Lobito in Angola. Finally, Russian actors continue to focus on extractive resources where they operate, particularly in the Sahel and Central African Republic. Highlighting the impacts of this trend, FDI in Africa in 2024 increased by 75% to US$97bn, accounting for 6% of global FDI, up from 4% in 2023.
While mineral-rich countries have generally been focused on stressing their investor-friendly approach, mining investors should be aware of an evolving resource nationalism that is playing a growing role in national policy-making across the continent. The most acute example of this can been seen in the Sahel, where Mali and Burkina Faso have both acted unilaterally against international mining companies, using tactics such as claiming back taxes. However, the shift in this direction can be seen in more moderate regulatory environments as well. For example, Zambia is currently in the process of implementing more stringent local content requirements for mining projects, while Cote d’Ivoire is updating its mining code, with the expectation being that it will seek to increase profit share from gold mines, capitalizing on elevated gold prices, in line with its decision to increase the mining royalties rate by 2% in the 2025 Finance Act.
The drive to unlock minerals opportunities in Africa, and national governments’ efforts to realise maximum domestic benefit from investment, are often framed in grand geopolitical and ideological terms. The reality is that in many cases, resource nationalism and demands for increased local benefit are driven from the bottom up, at the community level, with national government reacting to domestic political pressure rather than taking proactive initiatives. Approximately 85% of jobs in sub-Saharan Africa are in the informal economy, and the continent’s average age is 19. These two basic statistics highlight the crux of the challenge: the need for mining companies to ensure that the benefits of mining investment reach a young population, hungry for economic opportunity, in order to gain political and community support. Given these dynamics, political license to operate is increasingly inextricably linked to local community support and social license to operate.
Against this backdrop, it is critical that mining companies develop a granular understanding of the concerns and priorities of their key stakeholder groups at a community level, as well as the interplay between these local concerns and national political considerations, and that they adopt a strategic approach that supports wide-reaching and sustainable community economic development. In simple terms, often the missing component in any strategy to secure and maintain license to operate is an overreliance on top-down engagement with national government, rather than a bottom-up approach focused on developing and maintaining community support. The benefits of the latter approach include building sustainable support that can endure over the life of a mine project, past changes in government, and a related reduction in the risk inherent in reliance on political bargains.
In the current investment context, it is also essential to take a broad-reaching and creative approach to domestic value creation. Domestic leaders are increasingly demanding downstream economic development – creating finished products from domestic minerals resources. This is an area where much of the continent has yet to unlock value potential, which has led to ongoing import reliance and trade deficits. Zambia serves as a case in point. Despite being one of the world’s largest copper producers, industrial capabilities for processing copper into finished products are limited to producing copper wiring and cables. On a macro level, it is telling that between 2016 and 2022, 73% of greenfield FDI went towards mineral extraction, while 26% went towards processing and manufacturing. For countries with growing youth populations and a dearth of formal employment opportunities, this imbalance is increasingly politically and economically unpalatable. This creates a key emerging area for mining companies to consider in their investment plans in order to secure favourable investment terms and ensure operational sustainability.
The forecasted demands for mineral resources and the need to ensure resilient supply chains for critical minerals suggest that investment in the mining sector is unlikely to decline in the short-term. Against this increasingly competitive backdrop, miners should expect growing demands that their projects bring increased local economic benefit. Navigating this environment will requires a highly localised and creative approach that goes beyond a traditional CSR playbook.
Conclusion
The forecasted demands for mineral resources and the need to ensure resilient supply chains for critical minerals suggest that investment in the mining sector is unlikely to decline in the short-term. Against this increasingly competitive backdrop, miners should expect growing demands that their projects bring increased local economic benefit. Navigating this environment will requires a highly localised and creative approach that goes beyond a traditional CSR playbook.
