The Billion Dollar Map

Better Realizing Africa’s Mineral and Energy Potential

By David Kariuki
Great Quest Metals photo.Despite increasing investment and production growth, most of natural resources in Africa are being under-utilized. Research by 2012 African Development Report, for example, reveals that although 45 out of the 54 African countries possess proven or probable oil and/or gas reserves, most of the resources remain untapped.

Data indicates that Africa has over 132.4 trillion barrels of proven oil reserves and 513.2Tcf of gas reserves, but about 85% of total oil production (over nine million barrels per day [bbl/d]) came from only five of the 54 countries in Africa — namely Nigeria, Libya, Algeria, Egypt and Angola. Likewise, 91% of gas produced in Africa also came from Nigeria, Libya, Algeria and Egypt. Yet more discoveries show promise, especially considering the recent frenzy of oil and gas discoveries in East African region.

Undervaluation of underground natural resources, including minerals and oil & gas, and timber, over the last 30 years has also cost African governments a total of $1.4 trillion in net resource transfers. These challenges call for innovative approaches to maximizing exploitation and valuation of natural resources since they still remain in the present.
Maximizing exploitation and valuation will help Africa gain more from its natural resources since they will produce more and get more from each unit. However, it also helps mining companies reduce related risks in exploration of natural resources.

Why Africa is not fully utilizing its natural resources

Compared to Western countries and China that have national mineral maps, most resources-rich African countries rely on mappings developed over decades by private mining companies when negotiating mining concessions. Lack of detailed, organized and centralized geodata results in under-exploitation since each government cannot know the vast resources they have. It also leads to undervaluation when the government is entering into contract negotiations with mining companies. Innovative approaches such as the centralized Africa geodata to be compiled by the World Bank will not only help accelerate exploitation of minerals and resources in Africa through new discoveries, but also help the governments to correctly establish the value of these resources to get more benefits.
Current Approaches for maximizing exploitation and valuation of natural resources
There have been attempts by some African governments to gain geodata for underground natural resources but there is need for such to come from organizations that have little or no interest to avoid exploitation. Mining companies who carry surveys usually share data with these governments when negotiating. African governments, and related natural resources ministries, often defer to companies to do valuation of the resources and in many cases, contracts have been already negotiated before such valuation information is available. African governments become disadvantaged through this lack of geodata.
Former UN Secretary General Koffi Annan reveals in the 2013 The African Progress Report that African states are to blame for not benefiting from their mineral wealth since they simply sell mining concessions too cheaply. Annan examined Congo data, for instance, to find a $1 billion difference between natural resource selling value and independently assessed value of five mining assets.
Recently, Kenya and other East African countries have been begun reversing this failing by entering into a memorandum that will see their mineral deposits aerial surveyed by China’s Geological Exploration Technology Institute of Jiansu.

Assistance in fair negotiations and the Billion Dollar Map

A 2013 joint report by Global Financial Integrity and the African Development Bank recommended that natural resources-rich countries should source for assistance to ensure negotiation of contracts are fair, in relation to exploitation of natural resources. The report uncovers major cases of illicit financial flows where African governments lost billions of money in dealings related to natural resources. Angola, for instance, was a culprit to losing US$4 billion in 2002 alone, since some oil sales were not reported to the national accounts. A report by NGO Global Witness indicates that Congo undervalued its resources from five mines sold since 2010, amidst issues of accountability and corruption. The Africa Progress Panel report also indicates that DRC lost US$1.36 billion between 2010 and 2012 due to undervaluation of mining assets in relation to valuation done by international groups.
World Bank announced the launching, this year, of a “Billion Dollar Map” that will consist of geodata for mineral deposits across Africa, to equip African governments with actual data and facts about their resources (in quantities and value) so they can avoid undervaluation of resources. The result will be a publicly accessible minerals map and a central database. World Bank will compile historical data from old mining reports and maps for each country. It will also georeference the data using satellites in order to identify proper coordinates for mineral discoveries over the years. The public will then be able to access regions that have not been explored.
The “Billion Dollar Map” is named so because it is expected to cost large sums of money to complete. The Australia, Canada, South Africa and the European Union governments are expected to top up the remaining funds for the project after the World Bank raises an initial capital of $65 million. It is not the first time the World Bank is making such investment,but has so far invested $200 million in only 10 African countries for such initiatives, including the current Malawi geomapping initiative for the country’s Uranium exploration program.
People familiar with the African mining sector posit that the “Billion Dollar Map” will minimize risks associated with exploration of minerals in the continent and thus accelerate mining across the continent. The “Billion Dollar Map” will minimize cases where mining companies drill through the ground only to find nothing. In fact, many companies will find value to invest in the mining industry as many current shy away unsure of whether they can find anything valuable underground on African soils. According to Gerhard Graham, a scientist at South Africa’s Council for Geoscience, the geodata will help increase the value of mining resources for African governments.

Benefits to Mining Companies

Maximization of value of African natural resources is not always a bad thing for companies investing in African mining industry. Such geodata and central database maps could help these companies identify areas they can, through fair play and negotiations, establish long lasting working relationships with government to help them explore natural resources they do not have capability to with minimal risks.

In some cases, companies lose out when there is pressure from World Bank, International Monetary Fund and NGO’s to reveal their deals in natural resource exploitation because government would deny them any permission to exploit resources. So many are loses documented by firms when local stakeholder uproars and political uproars are led to boiling points and wars by reports of overexploitation by these companies.

Resources Quarterly - Winter 2014-2015
This article originally appears in the Winter 2014-2015 edition of Resources Quarterly.

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