Report Explores How Political and Economic Developments Will Shape Africa's Mining Sector

"Rich in natural resources, the African continent has attracted a large inflow of investment in recent years," says the Economist Intelligence Unit (EIU) in a report that explores how political and economic developments will shape the future of the mining sector in Africa and their key implications on prospective projects in the region. The report adds that "Although extraction of Africa's reserves has been largely hindered by weak domestic governance structures and policy impediments, the continent is set to remain one of the major supplier of a number of commodities in the coming years."

Focusing on four key themes: (1) the upside and downside of risks caused by elevated commodity prices, (2) how sanctions against Russia will affect mining activities in the region, (3) the effects of exploration activities and prospective project development in the region, and (4) and the future of mining in Africa, the report's key findings include:

• Sanctions against Russia—which have largely been more severe than initially expected—will disrupt Russian mining activities in Sub‑Saharan Africa, without having a serious negative impact on domestic mining sectors themselves.
• African economies will face manageable downside risks, which are markedly outweighed by the risks to the upside that stem from steep commodity price growth. This is due mainly to the insignificance of Russian exports for African economies.
• As sanctions become increasingly severe, the EIU expects that Russian miners will struggle to finance current and prospective operations, and may ultimately be forced to sell their concessions for reduced amounts.
• Russia's mining activities in Africa have been growing in recent years, and are increasingly concentrated in weakly governed and authoritarian states. We expect this to continue as the West continues to exclude Russia from the global economy.
• Although higher prices will benefit current production and operations, inflation will disrupt exploration activities and prospective projects. High energy costs, coupled with heightened global risk and uncertainty, will add to the costs of project development.

The EIU explains that "The African continent is home to substantial reserves of copper and cobalt (in the Democratic Republic of the Congo—DRC—Zambia, South Africa and Zimbabwe), diamonds (in Botswana and Angola), platinum (in South Africa and Zimbabwe), uranium (in Namibia, Niger and South Africa), gold (in Ghana, South Africa and Sudan), iron (in South Africa), manganese (in South Africa, Gabon and Ghana), bauxite (in Guinea), lithium (in Zimbabwe), coal (in South Africa and Mozambique), natural gas (in Algeria, Egypt and Nigeria) and petroleum (in Nigeria, Angola, Algeria and Libya)." Moreover, "Africa contains about 12% of total global oil reserves, 12% of natural gas reserves, more than 80% of platinum group metals and more than 40% of the world's gold. Extraction of Africa's reserves has been largely hindered by weak domestic governance structures and policy impediments, alongside the high risk of investments in Africa and low commodity prices during 2016‑20. This has resulted in a notable shortage of exploration activity in the African mining sector."

The report, however, encouragingly points out that "many African commodity exporters—Zambia and Namibia in particular—have initiated procedures to create a business-friendly environment in order to attract investments into their domestic mining sectors. Elevated commodity prices are fueling an export boom across Africa." What is more, "High prices for copper, oil, iron ore, aluminum and gas will stoke investments and are all helping to reduce external imbalances, stabilize currencies and boost economic growth. However, downside risks abound. The continent depends on energy imports (as net crude exporters have insufficient refinery capacity), and the war in Ukraine is set to stoke strong inflationary pressures."

With respect to the impact of Russia's unprovoked invasion of Ukraine on African economies, the EIU notes: "Total African exports to Russia add up to only about US$5bn, with imports totaling about US$14bn. Total trade between the regions is small, at about US$20bn, and trade disruptions resulting from the Russia-Ukraine conflict will not seriously affect African economies. However, it will affect certain African industries, such as cocoa and tobacco, and textiles and clothing." The EIU expects "the clothing industry in Tunisia, in particular, to be hit by negative impact. The tobacco industries in Nigeria, Tanzania and Mozambique will also be affected by the conflict."

Lastly, the EIU is forecasting "that Africa's mining sector traders will not be heavily affected by loss of Russian exports or activity. The total amount of exports to Russia is relatively small, and the growth in commodity prices will outweigh any marginal loss to total exports." The report importantly notes that "alternative export partners, China in particular, will take up the excess output. Given the strong demand for global commodities, the small amount of lost Russian exports will quickly be taken up by alternative buyers. In countries such as Sudan, Mali and the CAR, discrete Russian mining operations are likely to continue, circumventing sanctions."

What political and economic developments do you think will shape Africa's mining sector?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Understanding How the War in Ukraine Will Change Business

Since Russia's unprovoked invasion of Ukraine on Feb. 24th, 2022, I have held several conversations with colleagues asking how the war will change business. A report published by The Economist Intelligence Unit (The EIU) aims to address this question by noting: "Although primarily a humanitarian disaster, the Russia-Ukraine conflict will also accelerate changes already provoked by the pandemic, US-China tensions and climate change."

The EIU presents five ways in which the war in Ukraine will change business:

1. The war will add to supply-chain disruptions in sectors such as automotive, increasing the pressure for localization.
2. A surge in energy and other commodity prices will hasten public- and private-sector efforts to improve food security.
3. The investment needed to reduce Europe's reliance on Russian energy will affect funding for clean-energy investments in developing countries.
4. Financial sanctions against Russia may accelerate the transition from US dollar-backed financial systems to interoperable central bank digital currencies (CBDCs).
5. Geopolitical tensions over technology (already central to the US-China trade war) will intensify as Russia curbs internet access and faces technology sanctions.

Among the five points presented by The EIU, three are worth exploring more deeply. "Supply chains have already been disrupted by the pandemic, as well as the earlier US-China trade war," the report says. "The difficulties caused by the Russia-Ukraine war will prolong these disruptions and place added pressure on companies in sectors such as automotive to shorten their supply chains and build resilience. This may mean increasing stock of major components, reining in just-in-time production norms or investing in more local suppliers."

As for price increases in commodities driving adoption of sustainable food policies, "The war in Ukraine will keep fuel and commodity prices elevated for much of the year. This will not only raise business costs, but will also heighten existing concerns about energy and food security." Moreover, "The war is already forcing several governments to examine their food and agricultural policies closely, not just in Europe, but also in the Middle East, Singapore and China, among others."

In a separate article, The EIU explains says it expects the "average grain prices to rise by almost a third this year, on top of the 40% increase recorded in 2021" and "prices of sunflower seed oil to increase rather than fall in 2022, as originally forecast before Russia's invasion; prices increased by nearly 60% in 2021."

With respect technology becoming increasingly geopolitical and regionalized, this is happening in two ways. "First," according to the report, "access to technology is seen as a competitive advantage for countries, as evident in US attitudes towards semiconductors. Because the chip sector is fragmented and the product is complex, every actor will need to use US equipment at some point; therefore, any US technology sanction makes a country or company unable to purchase semiconductors."

As for the second way, "the internet is becoming more national and less global. China has driven this change by using a national firewall to restrict access to content that its government deems dangerous—a measure that Russia wants to adopt. The EU, through its values-led approach to data privacy and regulation of artificial intelligence, has also created regional barriers to the internet."

However, the report importantly notes: "This regionalization of the internet will not necessarily lead to a 'splinternet,' where different systems are completely separate and not interoperable. The broader battle is between the US, which wants to retain the multistakeholder governance model of the internet (open, decentralized and industry-led), and China, which wants a cyber-sovereignty model (closed, centralized and country-led). However, the tensions are not just between democracies and autocracies, but also between blocs, as the relationship between the US and EU shows."

The EIU published a subsequent report presenting ten ways the war in Ukraine will change the world:

1. Russia's war in Ukraine will bring about a new division of Europe.
2. Russia's violation of Ukraine's sovereignty signals the end of the post-cold war order.
3. The war in Ukraine will deepen Russia's strategic alliance with China.
4. Russia's actions accelerate the bifurcation of the world into two hostile, competing camps.
5. A renewed focus on European security will constrain the US tilt to Asia.
6. The war in Ukraine will accelerate a global arms race.
7. Germany may begin to play a more assertive role in European security policy.
8. Europe will be forced to decide where it stands in the new global order.
9. The challenge to global democracy will become more pronounced.
10. The war in Ukraine will embolden others and inflame existing conflicts.

With respect to the first point of Russia's war bringing out a new division of Europe, The EIU points out that "Russia's brutal invasion aims to destroy Ukraine's sovereignty and prevent the country from ever joining NATO or the EU. Russia intends to annex at least part of Ukraine, thereby creating a buffer zone between Russia and the West that also includes Belarus and Kazakhstan." Moreover, "Russia's repudiation of the Western-led 'rules based order' signals a turning away from Europe and the creation of a new division of the continent, three decades after the fall of the Berlin Wall."

More troubling is how Russia's actions will accelerate the bifurcation of the world into two hostile, competing camps. As the report explains, "China and the West have been competing for several years to establish dominance in the industries and technologies of the future and to prepare the ground for a future decoupling. The coronavirus pandemic has reinforced this trend, fostering a move towards regionalization and away from globalization." What is more, "By bringing about a decisive rupture with the West, Russia's actions will speed up the division of the world between two rival poles. Some countries will take sides, but many others will seek to maintain a foot in both camps. As time goes on, this balancing act will become increasingly difficult."

I appreciate how The EIU's first report explores the impact Russia's unprovoked war with Ukraine will have on key global industry sectors and the risks these present to businesses. The second analysis also serves as a useful tool in outlining how the conflict will influence the global balance of power and lead to a further unravelling of the post-Cold War order. The situation in eastern Europe has increased several risk factors businesses will need to navigate.

How is the war affecting your business?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

The Commonwealth of Independent States (CIS) Region Will Be Home to More Than 50 Million 5G and Add Almost 330 Million New IoT Connections by 2025

Like most regions globally, "The Covid-19 pandemic has had a profound impact on the digital landscape in the Commonwealth of Independent States (CIS) region and around the world," says a report by the GSMA, a UK-based organization representing the interests of mobile operators worldwide. "The social distancing measures put in place to curb the spread of the pandemic have brought to light the value of connectivity for social and economic wellbeing. The pandemic has highlighted the importance of a robust and inclusive digital economy, underpinned by universal access to fast, reliable internet and a range of digital services for individuals and businesses."

Available in English and русский, the Mobile Economy Russia & CIS 2020 report, which is authored by GSMA Intelligence, GSMA's research and consulting arm, explains that "mobile industry in the CIS region has endeavored to keep citizens connected during the pandemic, despite changes in data consumption patterns and the challenges associated with serving prepaid consumers during lockdowns. Operators have engaged with the public and private sectors on initiatives to alleviate the impact of the pandemic on vulnerable groups and the most affected firms. Measures include zero-rated use of educational services and access to government websites, discounted tariffs for healthcare workers, and free access to online conferencing solutions to enable business continuity and support economic recovery."

In addition to the pandemic highlighting the importance of digital connectivity, the report also produced the following findings:

• 4G became the region's leading mobile technology in 2020 and will account for 65% of total connections by 2025.
• Smartphone adoption is set to reach 81% by 2025 due to the availability and popularity of lower cost handsets.
• The mobile ecosystem employed over 830,000 people in the region in 2019 and contributed $14b to public sector funding.
• The CIS region will add almost 330 million new IoT connections by 2025, with smart home and smart buildings two key growth areas.

While 4G remains a priority in the CIS region, fifth generation technology (5G) will spread in the near future. "Belarus, Kazakhstan and Russia are expected to launch 5G during 2021; networks in the region's other nine markets will be live by 2025," the report explains. The CIS region will be home to more than 50 million 5G connections by 2025, representing an adoption rate of 13%."

What is more, "Despite the economic uncertainty brought about by the pandemic, operators in the region will invest more than $25 billion in infrastructure rollouts between 2020 and 2025, of which 57% will be 5G-specific. Delivering 5G connectivity will increase operators' capital intensity, with initial monetization strategies centered on enhanced mobile broadband (eMBB) and other consumer applications."

With respect to the mobile industry driving economic growth and social development, the report says that "Over the coming years, 5G technologies will drive further contributions to the CIS economy, impacting key sectors such as manufacturing, utilities and professional & financial services."

Furthermore, "Beyond economic impacts, operators are making significant contributions to the welfare of society more broadly. Continued investments in networks are helping bridge the digital divide and drive inclusion across the region. The mobile industry is contributing to progress with the UN's Sustainable Development Goals (SDGs). This includes providing access to life-enhancing educational tools and platforms, delivering the infrastructure to build sustainable smart cities, and supporting efforts to combat climate change."

As for policies to support the region's expanding digital economy, "Access to digital services and technologies has been crucial to keep economies active and mitigate the harms caused by Covid-19. Post pandemic, these same factors will be vital to reinvigorate the CIS economy and rebuild businesses and communities. The rollout of mobile broadband can help spur socioeconomic growth and transform traditional industries. It is therefore more important than ever that governments and regulators implement policies to drive investment in resilient digital infrastructure, enhance access to connectivity and encourage adoption."

The report adds that "5G offers the potential to underpin a range of enterprise and consumer applications. However, uncertainty around spectrum access and returns on investment can be significant barriers to releasing value into the digital economy. A comprehensive national 5G development plan accompanied by the effective management of spectrum resources are key to maximizing the opportunities that next-generation mobile connectivity can bring to the region."

Lastly, "Policymakers must also revise the outdated electromagnetic emission rules that could hinder cost-efficient 5G deployments, as well as rethink fiscal policy to strike the right balance between tax revenue generation and operator investment."

Infographic: GSMA Intelligence

Through my experience working in the CIS region, I have witnessed how mobile technology, starting with feature phones operating on 2G networks, benefited millions of people as information flowed to high density urban areas and the sparsely populated countryside alike. Significant geopolitical challenges exist in many of the region's countries, but I remain optimistic that governments, nongovernmental organizations and the private sector will continue to coordinate on policy reform and allocate investments to modernize the region's mobile infrastructure and increase research and development. Such actions will bring value-added services to the projected 244 million unique mobile subscribers in 2025.

What are your thoughts about the report's findings? Do you see opportunities to develop hardware or applications for enterprises or consumers in the CIS region?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of GT Perspectives, an online forum focused on turning perspective into opportunity.

Driven by Smart Cities and Smart Utilities, Industrial IoT Connections in the Commonwealth of Independent States Will See Strong Growth

"At the end of 2018, the Commonwealth of Independent States (CIS) was home to 235 million unique mobile subscribers, of which Russia, Ukraine and Uzbekistan together accounted for 80%," explains a report published by the GSMA. The CIS (Armenia, Azerbaijan, Belarus, Georgia, Moldova, Kazakhstan Kyrgyzstan, Russia, Tajikistan, Turkmenistan, Ukraine and Uzbekistan) "has a high rate of unique mobile subscriber penetration at 81%, though country-level figures range from 60% in Turkmenistan to almost 90% in Russia. As saturation of the region's addressable market edges closer, future growth will be limited, with less than 9 million new unique subscribers forecast by 2025."

Authored by GSMA Intelligence, the research arm of the GSMA, Mobile Economy: Russia & CIS 2019 adds that "the CIS is now seeing an accelerating shift to mobile broadband. 4G will overtake 2G as a proportion of connections in 2019," excluding licensed cellular Internet of Things (IoT), "and will become the region's leading mobile technology in 2021."

Moreover, "Greater use of data-intensive services and demand for higher speeds will drive further adoption, with 4G accounting for more than two-thirds of total connections by 2025. Only Belarus and Russia are expected to launch 5G by the end of 2020; networks in the region's other 10 markets will be live by 2025. The CIS will be home to around 54 million 5G connections by 2025, representing an adoption rate of 13%."

Source: GSMA Intelligence

On the topic of the mobile industry's significant contributions to jobs and the economy, "In 2018, mobile technologies and services generated 4.7% of GDP in the CIS, a contribution of $101 billion of economic value added. In the period to 2023, this figure will increase to $122 billion (5.1% of GDP). The mobile ecosystem supported 620,000 jobs in the CIS in 2018, either through direct employment or indirectly through activity in the wider economy. Mobile also contributes to the funding of the public sector, raising $12 billion in 2018 – mainly via general taxation. 5G technologies are expected to contribute $34 billion to the CIS economy over the next 15 years, impacting key sectors such as manufacturing, utilities and construction."

Regarding regional innovation being underpinned by mobile connectivity, the report points out that IoT "is an area where mobile operators can grow their business beyond traditional communications. Industrial IoT connections in the CIS will see strong growth out to 2025, driven by increased interest in smart cities and smart utilities. With IoT revenue set to reach $26 billion in 2025, operators are implementing strategies designed to capture opportunities at the applications, platforms and services layer."

Source: GSMA Intelligence

The GSMA further says "operators are seeking to invest or formalize partnerships in the e-commerce market, particularly as smartphone and mobile broadband adoption rates grow. The industry is also exploring potential applications of, and devising solutions based on, artificial intelligence (AI) and blockchain technologies, and injecting greater funds in the start-up ecosystem to protect itself from disruption and diversify revenues."

I concur that "5G mobile networks offer the potential to underpin a range of solutions for enterprises, in addition to serving the consumer market." I also agree that "[p]olicymakers should consider the rollout of 5G a vehicle for driving socioeconomic growth and the transformation of traditional industries. The regulatory framework should foster the mobile industry's development within an environment that is conducive to investment. Launches of 5G networks in other markets indicate that key factor behind their successful deployment and operation is the creation of a comprehensive national 5G development plan."

Infographic: GSMA Intelligence

What investment or business opportunities are you seeing in the CIS' mobile industry?

Aaron Rose is a board member, corporate advisor, and co-founder of great companies. He also serves as the editor of Solutions for a Sustainable World.