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The political risk associated with African countries is well documented in the media. Only five countries in Africa have a rating of medium risk, while the remaining countries are rated as medium - high or high risk.

Although the majority of African countries are identified as high risk, we have seen a large number of recent developments by local and international governments to ameliorate the political situation, encourage foreign investment through favourable tax and import/export regimes as well as implementing advanced mining codes to ensure security of tenure and repatriation of profits. All these have renewed international interest in the continent as a source of raw materials and exotic goods.

PDF’s assets are spread across the range of political risks with South Africa having the lowest relative risk while the CAR and DRC having the higher relative risks. It is also apparent that the state of a country’s infrastructure and the ease of doing business appears to be inversely proportional to the assessed political risk.

Risks associated with legal tenure are an important consideration prior to investment into a mineral project. In recent years this risk has been significantly reduced as a result of the implementation of new and advanced mining and investment legislation in many African countries. Therefore, barring an overthrow of the current governments in these countries, the risks associated with tenure are relatively low in the DRC, CAR and Angola.

There is some uncertainty in South Africa, however, with the implementation of the country’s new mining legislation and the related conversion of rights. Over and above this act, other new bills have been proposed which will affect the mining industry. These include the Royalty Bill and Diamond Amendment Bill. The implementation of these also sheds some uncertainty on the economic framework associated with the minerals industry. It is for this reason that the risks associated with the South African projects may be considered slightly higher than that of the other countries.