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How Sub-Saharan Africa mining companies can reduce risk and increase attractiveness to investors

To succeed, mining companies operating in Sub-Saharan Africa must prioritise risk mitigation strategies. Addressing political instability and investing in infrastructure development are crucial steps towards unlocking the region's potential in the green economy.

Sub-Saharan Africa faces a significant need for foreign direct investment, particularly in mining projects, to supplement its development efforts. Investors in this region are typically concerned with three major risk areas:

Political Stability: According 2024’s Global Risk Report, socioeconomic inequality and lack of opportunities can lead to social unrest and political instability. Geopolitical tensions and rivalries between nations can escalate into armed conflicts, posing risks to global peace and stability. Stable political conditions ensure the free movement of personnel and materials, as well as the protection of employees. Political instability, characterised by government shifts, policy changes, and regulatory fluctuations, can negatively impact the investment climate.
Infrastructure Availability: Adequate infrastructure is crucial for operational efficiency. Well-maintained roads, energy security, and reliable water access are essential for ensuring smooth operations and attracting investors.
Security of Tenure: Investors are cautious about investing in areas where permits may be revoked by subsequent governments, especially after incidents such as military coups. Stable political conditions and clear property rights are essential to protect investments and encourage long-term commitments.

These three areas are particularly poignant when considering Sub-Saharan Africa’s opportunity to play a key role in the green economy. While the region has high-quality metals (in terms of deposit and land type), mining companies and investors may opt for projects with lower-quality metals in regions like South America, North America, and Australia that can potentially pose less risk and a quicker return on investment.

Companies can employ various strategies to mitigate individual risk and enhance investor appeal. Collaboration with the risk and insurance sector can assist the mining industry in developing risk financing solutions such as mine rehabilitation guarantees from risk finance insurance markets which can assist with freeing up working capital lines used as collateral for bank guarantees to more comprehensive risk finance solutions provided by captive insurance options. Demonstrating adherence to sound risk management and ESG principles can also strengthen funding and investment proposals.

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Article

How Sub-Saharan Africa mining companies can reduce risk and increase attractiveness to investors

Sub-Saharan Africa faces a significant need for foreign direct investment, particularly in mining projects, to supplement its development efforts. Investors in this region are typically concerned with three major risk areas:

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How Sub-Saharan Africa mining companies can reduce risk and increase attractiveness to investors

Sub-Saharan Africa faces a significant need for foreign direct investment, particularly in mining projects, to supplement its development efforts. Investors in this region are typically concerned with three major risk areas:

Speak to a Marsh expert about how to build resilience within mining

Related insights

A new approach to enhancing tailing dam safety and simplifying the insurer reporting process

Geopolitics and geology: Enhancing mining companies’ resilience amid political risk uncertainty

Navigating shifting threats and emerging trends

Risks and opportunities in Sub-Saharan Africa for mining companies