Africa has been encouraged by World Bank affiliate, the Multilateral Investment Guarantee Agency (MIGA), to “stay the course” on mining reform to stem a growing tide of investment uncertainty about development of the continent’s mineral and energy resources. Addressing the first day in Perth of the Paydirt 2008 Africa Downunder Resources Conference, MIGA’s Acting Head, Mamadou Barry, said a number of African countries had successfully engaged in mining reform. As a consequence, they were attracting investment and were being viewed as posing less sovereign risk.

“However, Africa needs to stay the course as there is evidence of growing instability, there is a growing list of vulnerable countries,” he said. “In addition, many of these countries face considerable governance challenges and deteriorating business climates. Emerging within this environment is resource nationalism where there is increasing government involvement in mining contract reviews and renegotiations long after an exploration or mining company has entered a country and taken the initial risk.”

Barry said the resource nationalism evident during 2008 was being fed by the unprecedented commodities boom of high prices and high demand which had allowed previously ‘high risk’ African mining environments to become ‘attractive’. “As a result of these investors willing to take more risks, host governments have acquired greater leverage to demand more favourable terms as most existing mine contracts in Africa were negotiated during low commodity prices with no allowance for renegotiation.

“So we are seeing African governments revisiting old contracts and this presents a new environment in which to manage new risk factors which can help turnaround emerging international perceptions that Africa is posing greater mining risk.”