Mining is one of the few sectors where the continent of Africa holds its own globally in economic terms. Some 13% of the global mining sector’s economic activity takes place in Africa, comparable to the continent’s percentage of the global population.

For many countries, such as Zambia and Botswana, not to mention Mali and Burkina Faso, governments rely disproportionably on revenue from the mining sector. Even in South Africa, which is to Africa what America is to the world, mining indirectly contributes 17.2% of GDP. This goes up to 33% if the metallurgical industries are included, and it goes up to 50% for export earnings.

The defining feature of the mining industry this year is how it has been affected by the global financial crisis. And perhaps the most succinct contextualisation given on this much discussed topic was the talk Russel Mead, senior fellow for US foreign policy, gave at this year’s Mining Indaba in Cape Town. He reminded us that bubbles and crashes have been a consistent part of the last 300 years of humanity’s progress up the curve of freedom and prosperity.

He said there are two types of crisis, the most common being those he termed stupid banker crises, where bankers lend money unwisely. More serious are the second type of financial crisis which result from a mismatch in the structure of the global financial system. This financial crisis is one of the latter; large pools of capital have been created by export oriented Asian economies with much lower rates of consumption at home compared with those countries being exported to. In a nutshell, that and the creation of other large pools of capital, such as those held by OPEC oil producers, saw money spent on expansion of manufacturing capacity in places like China based on predictions of rates of demand that are not sustainable.

Mead said that the excess manufacturing capacity will have to work its way out of the system and this means a substantial period of weak demand for commodities in general. The upshot is that it is now very important to be a low cost producer.

Thus, while the continent’s banks a long way from the global financial crisis’s epicentre, turned out to be well insulated, the continent was always going to feel the effects. How badly, factors in what minerals various countries were most strongly reliant on.

Taking Mead’s overview into account, base metals were always going to take a knock as the world went into its first global recession in decades. It is also clear that diamonds, the commodity whose biggest market lies close to ground zero of the financial meltdown, the North American luxury goods sector, and lacking the underpin of being useful to infrastructure projects, was going to be the hardest hit.

Juniors, which rely on steady injections of venture capital, were always going to suffer, and a number of them have started to go under. More interestingly, majors once seen as masters of long term planning turned out to be particularly oblivious to the pending financial storm. As a result of its top of the market purchases, Anglo American failed to produce a final dividend for the first time since WWII, rushed to sell the last of its holding in AngloGold Ashanti, and rushed to the bond market, to reduce debt. Rio Tinto is said to be planning a rights issue, while shareholders of BHP Billiton are very grateful its arrogant bid to buy out for Rio Tinto at the top of the market was rejected. It does not hurt, though, to dispel any illusions that the majors, whose management are driven by their own motives, are the vestibule of vision and leadership in the mining sector.

For the most part, and without trivialising the pain being felt directly through loss of jobs in the sector, I continue to believe that the global slowdown has not been a bad thing for the mining sector, if you take the long view. That the slowdown came from the banking sector and affected the mining sector before it could create its own crisis through unsustainable overcapacity based on unrealistic speculative commodity prices, is something the mining sector will be thankful for in a few years. It also relieved pressure on suppliers and skills, and allowed space for important introspection on mining legislation and policy.

It has given the industry the time and space to regroup, and prepare for what I still believe is the continuation of an ongoing supercycle of demand to be measured in decades. The reality underpinning this, that billions of people are undergoing major industrialisation will not change. It may stall for a few years, but ultimately, failing disastrous policies by governments, the bubbling power of people’s desire to move up the curve of freedom and prosperity is strong enough to overcome great obstacles.