Mining a rich seam for the Saudi economy
Saudi Arabia has vast mineral resources which, due to the ready supply and market for its oil, remained largely untapped for decades. However, as the government attempts to diversify its revenue stream away from its reliance on oil, mining has taken on more importance as a driver of economic growth.
As part of the Vision 2030 reform plan, the Ministry of Energy, Industry and Mineral Resources seeks to increase mining’s contribution to the gross domestic product (GDP) from $17 billion currently to $64 billion by 2030.
Last week, Saudi Arabia announced it would invest around $3.8 billion to enhance access to geoscience data and reduce regulatory red tape as it looks to boost mineral exploration.
Efforts to encourage greater private sector participation have coincided with strong growth in Saudi Arabia’s mining sector.
The government recently announced the completion of the adjusted mining investment system, which will allow investors and the public sector to benefit from the promising investment opportunities in this vital sector. The government plans to attract private sector investments worth SR1.6 trillion ($426 billion) over the next decade.
The strategy seeks to increase mineral production and to make mining the fourth pillar for Saudi industry in addition to the petroleum, gas and petrochemical sectors.
Moreover, the government is banking on small and medium companies to develop the domestic mining sector with the support of public funds which can contribute significantly to the development of the industry.
While the Kingdom is pushing the development of the mining sector as a way to diversify revenue streams, it is also promoting mining as a means of increasing employment opportunities and developing regions.
Gold, phosphates and bauxite are found in Saudi Arabia’s western and northern regions, which are far less developed than the eastern and coastal areas. Mining now accounts for 265,000 to 300,000 jobs. By 2030, the government wants to increase that number to more than 400,000 jobs.
I believe there are huge investment opportunities in the mining sector. However to thrive in the industry’s boom and bust cycle, and capitalize on new opportunities, companies must rethink the traditional mining model and leverage transformational digital and technology strategies.
In addition, the mining industry’s continued expansion will present firms with growth opportunities, as the expected quadrupling of mining’s economic output will require significant investment in dedicated infrastructure, equipment and technology.
Basil M.K. Al-Ghalayini is the Chairman and CEO of BMG Financial Group.