Exploration dollars are orphans; an interview with John Teeling.

By John Greene

Business success and discovering diamonds rarely happen by accident and it doesn’t get much tougher than navigating the path to profit in Sub Saharan Africa through modern day exploration. But John Teeling, one of Ireland’s most successful investors, UCD and Harvard graduate, university lecturer and resource explorer has found success on this vast continent. It hasn’t been easy or without failure though, as the Executive Chairman of Botswana Diamonds with over 30 years’ experience exploring Africa explained to me from his Dublin headquarters.

We discussed diamonds, gold, whiskey and tick bites throughout his continuing journey, permeated with the optimism of an explorer and pragmatism of a seasoned professional.

As Chairman of Business Ireland Southern Africa in Johannesburg, I want to help promote connections between our members, to learn from each other and grow business between Ireland and Southern Africa. Here, John Teeling brings fascinating insight over his years of experience, across multiple countries in Southern Africa, which many Irish businesses and prospective investors can learn from.

With many entrepreneurs and established businesses looking to enter and grow in Africa, the continent with the youngest and fastest growing populations, we delved into the special and not-so-special success factors facing companies here. Unlocking opportunity here is not without risk and nowhere more is it more pertinent than in the resource exploration industry.

In typical pandemic-era style, our face-to-face interaction was delayed and interrupted by connectivity issues (mostly mine) but true to form John Teeling didn’t give up, I would say he rarely does. Our conversation has been edited for clarity.

JG (me): How did you get involved in exploration in Africa and why Africa?

JT (John Teeling): It was actually serendipity, and I’m calling you from the offices in Clontarf originally the offices of Northgate and Tara; the two Irish companies that found zinc in Ireland. One of the senior execs decided he wanted to go to Africa and went to Zimbabwe where there was a history of gold. They spent some money on a project there and decided in 1986 that they didn’t want to pursue it, so I took on the project and ended up going there. So we’ve been in SSA (Sub Saharan Africa) since then over many countries and we stayed in Zimbabwe until 2011 when it got too difficult for us. We had one or two small hits in a number of small mines there, not wildly successful. Then basically we moved some of our staff and equipment to diamond concessions in Botswana with a colleague we were dealing with there. At the same time in 1986 we spun out to Mozambique, very early on for there when we were Kenmare, the 5th biggest titanium mining company at the time. So we’ve had a long 34-year connection with SSA. Has it all been good? No, it hasn’t. The discovery of the Lucara diamond mine in Botswana was a huge hit for us and very successful. But most of the time as is true with most exploration – you dig holes and you tend to find nothing in the holes. That’s the reason we’re in SSA, ideally you dig holes where the resources are, there’s no point digging them in the countries where they don’t have gold, diamonds, or zinc.

Our second business which you may be familiar with is whiskey (me?!), which is becoming more important to us in Southern Africa, particularly South Africa (SA) which is a huge market for Irish whiskey and in West Africa with the fastest growing whiskey market in the world, Nigeria.

JG: What challenges do you most often face across SSA? Are there more similarities or nuances in each market?

JT: Significant nuances in each market but there are similarities. What we as explorers are looking for is that we can get title to the assets. And that is not true in a large number of countries and secondly that there is the rule of law. So that if you do commit your money to it, you get title to the property and there is some certainty among all the laws from tax to financial to operational laws. It’s certainly true in Botswana, a very easy country to operate in. The other SSA countries are not as clear cut and it’s very difficult to get title in Zimbabwe but until 2010 the rule of law and title was very good there. SA: yes, there are very good rules and laws, applying them and avoiding the bureaucracy, which takes a long time to get anywhere, has been one of the reasons we were reluctant to invest. We changed that in the last couple of years though and started investing in mining in SA in 2016/2017.

JG: Did you look into other countries in Africa where there were opportunities but it just wasn’t viable?

JT: Yes, a number, we have never invested in Nigeria, which is a much larger market than SA. There’s already a massive middle class there and big market for whiskey. On mining it’s very difficult to do business and there was an investment there where the money just disappeared. We’ve done very little North of the Sahara and unfortunately in central Africa; Mali, Burkina Faso, Chad, CAR are looking politically dicey. The infrastructure needs there, lack of power, water and roads, on top of any political instability make a lot of the mining investments nonviable. It’s going to cost you $100m to establish the actual mining project and it’s probably going to cost you another $200m in infrastructure so it’s very difficult to operate in these countries firstly because of logistics. We have the same in the Kalahari in Botswana, one of the projects we have there is 100km from water over sand roads. But that’s mining, you could operate in Donegal and you can’t get in because there’s only 6 hours of light and the farmers won’t let you in because you’ll ruin their fields if you’re drilling. Other parts of the world are even worse but that’s what we do, they’re just challenges.

JG: Have governments ever tried to partner with you to create something where there is nothing and sponsor the infrastructure in some way?

JT: There are ongoing discussions at the moment in Botswana but it’s a bad time to be asking governments to put up money for anything because they haven’t got any. We’ve made a proposal to the authorities in Zimbabwe where we will joint venture in one of the diamond areas with them. There’s a law there at the moment where majority control has to be Zimbabwean, and you can handle that if you’re making money. It’s their first time considering a proposal like this and it takes a long time as they are wary of being exploited. We’ve no objection to having a government as partner, it’s a financial decision and as long as you have certainty that if you do make profits that you can take them out then we’re happy to look at that.

JG: As is a frequent issue for foreign direct investment here, do you find aspects of the employment equity laws’ implementation in SA to be an impediment to growth and investment?

JT: A major impediment; as I mentioned earlier you’re looking for clear title, certainty all the time that when you go in under a set of rules that they’re not going to change. Now that’s na?ve, and in every country, such as in the North Sea where they changed the tax laws 8 times in 12 years. For western investors it’ll be very difficult to get banking finance if they can’t be sure that the laws are not going to change the year after. The bureaucracy around it means it can take up to 3 years to get permits if you’re a junior explorer, making it very difficult when trying to raise funding every year but fine if you’re a huge company with a 30 or 40 year horizon. So South Africa is much more difficult regionally than Botswana because of the off-putting bureaucracy. We do have partners in SA who are capable of navigating the bureaucracy but even then, it can take a lot of time.

JG: It sounds like you get into whiskey maturation-like timelines…

JT: At least the whiskey gets more valuable as time goes on and you’re not losing money on it! Exploration dollars are orphans, they have no loyalty to anybody, anything or any country. If they’re not wanted or they’re afraid, they will go somewhere else. We have about 240 countries in the world where we can lose money but we don’t have to lose it in SSA. Exploration is a negative sum game as we know.

JG: Do you think the business climate in SSA has been improving or stagnating over the past couple of decades?

JT: I’ve always had excellent business relationships in South Africa, people and skills are very good and you would want to do business there. I hope, and this could be the optimist and the explorer in me, that things have gotten a bit better over the last few years. There’s been such an exodus over the last few years of big companies from mining and the politicians may be shocked but I’m not so sure the bureaucrats are. In diamonds all of the big companies are gone, De Beers although they’ve dipped a toe back into the water they basically wrote off SA a number of years ago and gave up on it and went to other parts of Africa like Angola and the DRC – with absolutely no success, spending hundreds of millions. I’m very happy with SA where I have local people who I can trust and who are knowledgeable as it’s very hard to operate something like that from Dublin.

You do worry about the power in SA but at least there is power some of the time, unlike some of the other countries we mentioned earlier where there isn’t any. There everything has to be done using generators, such as in the Kalahari where there’s no power or roads because it’s so remote.

I’ve never had too much trouble getting skilled people though, there are great mining skills there. An interesting problem we had was on a potential project in Botswana where we had water incursion in the desert, and you don’t expect water in the desert so they really didn’t know what to do. Whereas if you’re mining in Ireland there’s water incursion in every part of it so I often thought we should send some Irish miners into Botswana and to the Thorny River Mine where there’s also a water issue as they’re experienced in problems like that. SA has great management skills, great technical skills at all levels down to the miners who are 2nd or 3rd generation miners and the processing skills, electricians, fitters etc. are absolutely top quality – that has undoubtedly improved over the last 20 years. You can certainly get all the people you need there, I’ve no concerns about that.

JG: What advice would you give to Irish businesses entering the SSA resources industry?

JT: The first rule in resources is you go where the resources are, in SSA there are very good gold and diamond resources and most places in the world don’t have any at all.

Secondly, that you need a very good local law firm that can advise you.

Thirdly, you will legally need a local partner in SA and Zimbabwe– but also that you have local employees and management so don’t go in there without a local general manager.

Fourthly, you need to analyse the legal requirements, the commercial requirements and they can take a while. We’re used to registering a company in a day in Ireland but it can take a long time in SSA.

Once you get through that then the skills are available to do the work, you have to get used to the fact that the environment is very different and literally with the climate and temperatures and tick fever, I managed to get that after 30 years and they didn’t know what to do with it in Dublin! But that sort of stuff happens no matter where you go, here you get colds and flus and God knows what else, I don’t mind that.

It’s high risk money, I hope we get something commercial in SA in 2021 and we’ll continue to invest in that part of Africa. I think the opportunities for Irish companies in the really fast growing middle class in SSA and all the way across west Africa are really huge and if you look at the rate Africa is growing by 2040 or 50, which is along way for me – lets say 2030, the middle class that’s going to be all over Africa will be very big. So there’ll be lots of opportunities for commercial goods there. In SA there’s half a million cases of Irish whiskey sold, mainly Jameson of course which is being brilliantly marketed. Once the whiskey market opens up again in SA, and the first half of this year is probably shot, there’ll definitely be big opportunities there. I’ll be looking at supplying own-branded whiskey into the market in SA from Great Northern Distillery, a family company in Dundalk making bulk whiskey, to be shipped in and bottled locally.

At that point our time was up; dictated by a drop in WiFi connectivity, a cordial visit from my 3-year old and John’s wife calling him, and we parted virtual ways. The time flew by and I barely scratched the surface of John Teeling’s vast business experience. No doubt this year will be another challenging year for exploration and whiskey and he wouldn’t have it any other way. 

John Greene

Business Ireland Southern Africa