Buoyed by successes forged in mines and oil sands at home, Canadian companies are moving steadily into Africa. The government, meanwhile, is making sure that aid and private sector activities benefit each other. After decades honing skills at home, Canadian mining companies are on the march. Toronto has established itself as a major fundraising destination for African mining exploration. Canadian oil and natural gas interests in Africa are small but growing, while Canadian firms are winning infrastructure management contracts.
While China may need to nudge its companies to seek natural resources abroad, what is clear is that Canadian mining companies have not waited for the government policy to shift before investing in Africa. "Canada is a pretty large outward investor," says Pierre Gratton, president and chief executive of the Mining Association of Canada. "We're one of the larger players on the continent." According to Natural Resources Canada, a federal ministry, there were 155 Canadian companies with cumulative mining assets totalling more than C$31.6bn ($30.5bn) operating in 39 countries in Africa in 2011, the latest available figures. That was up from $26.9bn in 2010.
This is not to say that government has stayed idle. Conservative Prime Minister Stephen Harper has negotiated investment promotion and protection agreements with a number of countries, including Benin, Cameroon, Mali, Nigeria, Senegal, Tanzania and Zambia. At the 2005 Gleneagles G8 summit in Scotland, Canada pledged to double its annual aid budget for Africa. It met that commitment in 2008-2009 and has since surpassed it, with assistance to Africa rising to C$2.4bn in 2011-2012. But, openly sceptical of aid, his government has attracted praise and criticism for the extent to which it has matched international development with foreign policy and private sector interests. In March 2013, Canada's government amalgamated the Canadian International Development Agency (CIDA), the arm of the government responsible for international aid, into the rebranded Department of Foreign Affairs, Trade and Development. "Imagine the uproar that would have ensued if Barack Obama had folded USAID," one former CIDA official remarked.
Polishing the image
Private sector groups have applauded the new institutional framework. "I think we are moving beyond aid," says Lucien Bradet, president of the Canadian Council on Africa (CCA) [a business lobby that claims to be about aid]. "That's why we have to be more strategic in our approach." But [in Killing CIDA: the wrong solution to real problems] Stephen Brown, an associate professor of political science at the University of Ottawa, recently criticised the Harper government's move against the development organisation, which includes policies that see dollars marked for foreign assistance go to Canadian mining companies funding training programmes. "It does nothing to improve aid effectiveness," Brown argues. "It's really about rehabilitating the image of Canadian mining companies, distracting public attention away from their practices ... and transforming their image from resource extractors to humanitarian actors."
Brown points out that 20 CIDA "countries of focus" have among the top 12 largest reserves of the six most important metals in the world. The Toronto Stock Exchange (TSX) and the TSX Venture Exchange for venture capital firms are the primary destinations to raise capital for mining exploration worldwide. During the first nine months of 2012, 89% of all global mining equity financings occurred on those markets, according to a TSX report from December 2012. Bruce Shapiro, president of MineAfrica, a Toronto-based marketing company, says "there is an appetite for risk because people are used to mining and are used to the risks involved."
Lack of transparency
Some African companies seek listings in Canada because of poor liquidity at home. Oando Energy Resources, a leading Nigerian oil and gas company, began trading on the TSX in July 2012.
South Africa's Delrand Resources, which mines diamonds in the Democratic Republic of Congo, and Rockwell Diamonds, which mines in South Africa, both listed on the TSX in 2008. A number of measures, including favourable tax regimes and investment agreements, make Canada an advantageous base for a mining company. In March 2013, the federal government extended a 15% federal mineral exploration tax credit that was due to expire. Junior firms involved in exploration abroad praised the decision.
Yet Mining Watch Canada, an independent watchdog, cautions that there are very few laws governing the conduct of Canadian companies operating abroad. "In many instances, local governments simply do not have the capacity," Jamie Kneen, a coordinator for MiningWatch says. "There are serious risks for the environment and health of the nearby communities." [World Vision's deal with Ottawa and Barrick Gold to reduce Peruvian peasant protest is a notorious example, despite its expensive TV campaigns asking donations to help "child miners"].
A recent court decision may change the legal dynamics for companies operating abroad. On 22 July 2013, a provincial court ruled that a lawsuit against Hudbay Minerals concerning human rights abuses in Guatemala could proceed to trial in Canada. International investors including pension funds and global asset management companies are also urging Harper to make good on a pledge at the G8 meeting in June to introduce more stringent transparency rules for extractive industry companies listed in Canada. While the Dodd-Frank legislation in the United States and the European Union's Accounting and Transparency Directives have put pressure on companies to disclose payments made to governments, no such legislation exists in Canada. [See our previous post, Canada: the Liberian flag of mining].
|AOC-Tullow in Kenya|
For now, Canadian oil operations by firms including Canadian Resources and Sunco Energy in West and North Africa have remained largely below the radar. However, junior explorer Africa Oil Corporation's finds in Kenya and Ethiopia have fed the oil rush in East Africa. In September, the firm increased the estimate of the contingent oil reserves in the South Lokichar Basin in Kenya, where it operates with Irish firm Tullow, by 557% to 368m barrels after an independent assessment. In addition to natural resources, the training and services sector is a profitable one for Canadian companies. "We don't export a lot of goods, but we do export a lot of know-how," says the CCA's Bradet. "I would say that every major Canadian engineering firm is present in Africa."
CRC Sogema president and chief executive Michel Côté boasts that his firm's SIGTAS financial software and information systems are running on the computers of eight African governments. Today, the Quebec-based firm is developing taxation management systems in Nigeria, Senegal and Algeria. "Nigeria will now be managing its federal taxes through our systems," he notes. "Bilingualism is an advantage for sure because, for a company like us, it lets us deliver in Nigeria like we can deliver in Senegal," he explains. Yet Peter Kieran, the president and chief executive of CPCS Transcom, wants the Canadian government to act more like China's: "The Chinese government plays such a strong coordinating role that their companies are able to offer projects that go all the way from conceptual design through to financing, engineering and construction." CPCS Transcom is involved in the privatisation of Nigeria's electricity network, acting as the lead transaction adviser for privatisation of generation and distribution companies. The company is also active in railway planning in the East African Community.
Suits and Sandals
David Baron, chief executive of Cowater International, an Ottawa-based management and consulting firm, says Canadian companies lag behind their Australian and American counterparts when it comes to acting as engines for development. Baron says Cowater's business model is made up of projects he calls "suits" and "sandals". A new high-level "suits" project in Malawi — helping the government build internal audit systems — is expected to turn a decent profit. Meanwhile, a "sandals" project building water and sanitation services in northern Mozambique will earn the company less. For now, trade volumes have taken a back seat to investment. Canada's trade minister Ed Fast cautions that the country is not looking to significantly strengthen trade ties just yet. "We'd like to establish a foothold in Africa when it comes to trade," he says. "But right now, most of our focus is on the investment front."
Other examples of Canadian mining ventures in Africa
Endeavour Mining - Mali
|open-pit gold mine, Côte d'Ivoire|
|The company claims Mali mine production |
almost doubled last year
|Allana's 312 sq.km Dalol project|
Allana Potash plans to make $642m in capital expenditures for four projects in Ethiopia's northeast. It expects to make good on that investment in just 3 years, with a projected production rate of 1m tn per year of potash, a potassium-based mineral used in fertilizer.
First Quantum Minerals' Kansanshi mine opened in 2005 and has since expanded to make it the largest copper mine on the continent. Further developments are projected to increase its production of 340,000tn of copper per year to an estimated 400,000tn by 2015.
Platinum Group Metal - South Africa
South Africa's Bushveld Complex is estimated to contain 90% of the world's platinum resources. Platinum Group Metals's project there will not enter the production phase until 2015. It holds 74% of its joint venture and Wesizwe Platinum holds 24%. [Nothing is said about the indigenous San Bushmen, forced out into squalid "resettlement camps".]
Sherritt International's Ambatovy open-pit mine located 80km east of Antananarivo became fully operational in 2012. It has an annual design capacity of 60,000tn of nickel and 5,600tn of cobalt. It has a projected lifespan of 27 years.
[Sherritt calls this Ambatovy tailings pond "sustainable"-- like it called the one that just broke in Alberta, releasing a billion tons of toxics into the Athabasca River headwaters]