Infrastructure Spending in the Developing World

Readers will be aware that it was argued that the Global Financial Crisis would herald a new approach to many industries and in fact almost our way of life.  Many argued that this new way of doing business would affect the resources industry greatly.  A casual observer might conclude that has not happened but that the opportunity is still there. 

If we take for example, West Africa, there is enormous interest from both global and small/mid tier mining companies to capitalize on the natural resources of the region. This is a logical step in satisfying global commodities demand and provides a mechanism of spreading risk of assets out of countries such as Australia, Brazil or Canada to give more balanced portfolios.

These emerging nations have a great need for prosperity, stability and opportunity for their people.  Modern society is underpinned by strong infrastructure and this is certainly one asset the broad Africa region does not have.

We can see the impact of infrastructure development in China over the last three decades. The Chinese government has pursued a relentless policy of building national infrastructure and now the nation as a whole is reaping the rewards. Fast tracking infrastructure expenditure was a core strategy for the Chinese response to the GFC.

In terms of building infrastructure what then is the role of mining companies in Africa, often in the absence of strong centralized governments?

First of all there has been much good work and that should be acknowledged. This aspect has come along in leaps and bounds over the years and effective CSR programs that include on the ground local infrastructure, for example, will often be the difference between success and failure in  some regions.

Having said that, it would seem clear that companies, that are guests in the backyards of developing nations, should do all that they can to improve the sustainability of the life style of the owners of the region. Quite often this will mean building infrastructure, not just in terms of logistics but also schools and hospitals.

Perhaps the major companies could adopt a collective approach to the development of infrastructure, consolidating the money they were already going to spend This may be money spent more effectively.  

Furthermore, this could also be partnered with the World Bank and other similar bodies to maximise the value of the dollar being spent and the returns for the country in which this infrastructure is being built. 

Some might argue that this is a government responsibility whilst others would argue for the benefits of exposing everyone to economic prosperity and increased stability.  If there is one thing we have learnt from the lessons of the BRIC economies over the last decades it is that an increase in GDP per capita leads to increased national security and stability – both highly advantageous conditions for mining companies to operate under.

There may be other issues such as anti-trust matters that may be raised, but surely these could be overcome by the "common good "argument.  The benefit of anti-trust law is the protection afforded to society: an industry-led group approach to infrastructure development could provide huge benefits in a real and positive manner.

John Murray, Managing Director