Researchers in the mining industry say Africa's plethora of operational risks is the biggest factor reducing the continent's share of global exploration spending in the industry.

According to experts from the MSA Group, while global exploration spending reached US$12 billion in 2008 - a record high historically - Africa's share of this has been declining.

MSA statistics indicate that Latin America is receiving the lion's share of exploration spending (25 percent) while Africa's allotment slid below 15 percent in 2008. This is despite the continent's vast untapped mineral resource base and various initiatives to promote economic development by individual states.

MSA Group Business Development Manager, Christiaan Ndoro says risk is Africa's biggest obstacle."Africa's share of global exploration has been coming down in the last eight years, and this is worrying when you consider the amount of mineral wealth on the continent," Ndoro said. "A lot of money is raised in overseas markets, and while people do prefer to spend in their own backyards, it's all about the location. The reasons for Africa's decline all come down to risk."

Ndoro explained that this risk takes the form of political and economic stability, security of tenure, health and safety concerns and infrastructure. Botswana and Namibia, according to several international reports, are generally insulated from these continent-wide risks."The majority of high risk countries are in Africa, except for Botswana and Namibia," he said. "The high risk in Africa is also linked to the poverty levels on the continent." He said in the MSA Group's 26-year history on the continent, it had noted that the single biggest risk is health and safety.

Another problem, according to the Fraser Institute Survey 2009, is the shortage of skills on the continent," he said. "Africa is right at the bottom of the Fraser Report and Botswana is not doing (any) better either. In South Africa, for instance, 1.2 million positions need to be filled by 2014." Ndoro said Africa had nonetheless witnessed some successes such as Botswana, which rose from abject poverty at independence to the middle-income country it is now. Botswana had swum against the tide due to its conducive legislative, political and economic environment.

For Botswana, the Department of Geological Survey (DGS) had expected exploration budgets to climb from P246 million in 2008 to at least P257 million by end of 2009. DGS' Chief Geologist, Johannes Tsimako, said the global recession had resulted in the early surrender of prospecting licences and made the transition from exploration to mining "very difficult" for mining companies.

The Department is facing difficulties gauging the exact level of exploration currently underway because many companies fail to report their activities and exploration budgets.According to the Mines and Minerals Act, prospecting companies are required to declare their exploration budgets annually and provide information on actual expenditure and technical reports regularly. However, the incidence of non-reportage is high. As at July this year, DGS had received only 60 percent of reports due from prospectors.

Analysts also believe the global financial crisis will stem the incidence of speculative licence holding by some prospectors. DGS investigations have found that some companies hold several licences for speculative purposes only, thus hindering the full economic development of these licences by serious investors. Others hold more areas than they can explore, equally preventing potential benefits to the local economy.

"If you are not in the right place and yet you are enticing investors to that project, it's probably speculative," said Tsimako.

Meanwhile, the MSA Group believes Botswana and other mining economies will benefit, in the long term, from a mining boom that will eclipse the glory days seen in the six years preceding the onset of the global recession. Prior to the onset of the recession, mining was on a boom in Botswana, with exploration budgets reaching P246 million in 2008 and the Department of Geological Services struggling to process a monthly average of 100 new mining applications.

Companies already on the ground were moving rapidly in areas such as copper, coal, nickel, gold, uranium, coal bed methane, silver, zinc and energy. However, beginning last September, the recession lowered commodity prices, dried up credit lines and eroded many companies' operating capital, resulting in the downscaling and even suspension of several mining projects.Even as the recession continues to claim casualties in the local and international mining arena, analysts say in the long term, a mining boom of greater intensity in terms of exploration spending, production and profitability will benefit economies, including Botswana. Ndoro said the next boom will be influenced by the current cutbacks in development spending by mining players and the fact that supply/demand dynamics will persist even after the recession.

"With all the curtailment in exploration, in the near future there's going to be a lot of demand and we see that in the long-term there will be a very severe commodity shortage while presently, few projects are coming online," Ndoro told delegates at the recent Resource Sector Conference.

"In the long term, commodity prices will rise and the next mining boom will be even crazier than the last.

The key for investors is to say 'Next time I know when to cash in and exit.'" The MSA Group expert also cited the results of the 2009 Fraser Survey that showed that the anticipated shortage of commodities due to the curtailment of development spending in the current recession could hinder the global economy's recovery.According to statistics from the MSA Group, the last mining boom (2002 - 2008) witnessed a 42-percent per annum increase in global exploration spending, reaching US$12 billion for non-ferrous minerals, excluding uranium.

Ndoro said exploration budgets for 2009 were expected to be "significantly less"."Exploration is a business whose investors have very different value propositions," he said. "The industry has enjoyed an unprecedented boom in exploration, but the global financial crisis has spared no-one and exploration will be harshly affected.

"It is likely to be some time before exploration activity can fully recover, even after the recovery of world markets. Short term sentiment in the mining industry is negative, (though) the industry has high expectations for another boom cycle."