Africa’s role in the global race for critical minerals

The transition to renewable and low-carbon energy sources requires a significant increase in demand for critical minerals, such as lithium, cobalt, graphite, copper, nickel, rare earths, etc., which are essential for the production of a wide range of technologies essential to combating climate change, such as wind turbines, electric vehicles, solar panels and smart grids.

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African countries have high potential to contribute to the global supply of critical minerals, as they are home to approximately 30% of the world’s critical mineral reserves. The continent is home to approximately 30% of the world’s cobalt reserves, 15% of the world’s manganese reserves and 10% of the world’s rare earth element reserves.

The DRC dominates the cobalt market with over 70% of global production and approximately 50% of the world’s proven reserves. South Africa, Gabon and Ghana together account for over 60% of global manganese production. Lithium is produced in Zimbabwe, South Africa, the DRC and Namibia. Ghana and Mali will soon begin producing lithium as well.

For Africa, the challenges are economic, environmental and geopolitical.

Regarding the economic challenges, the opportunity for Africa lies in the added value that these critical minerals can bring.

This begins with a good understanding and development of deposits, which must be backed by a policy that encourages the creation of national champions in the extractive sector.

The majority of Africa’s critical minerals are intended for manufacturing industries located outside the continent. Only 2% of exports of these minerals are destined for other African countries. The development of Africa’s critical minerals on the continent will create higher value-added products, generate additional jobs, promote industrial diversification and stimulate the growth of other sectors of the economy.

China enjoys near-monopolies in the refining of a number of critical minerals: 85% of rare earths, 70% of the world’s lithium, 84% of its nickel and 85% of its cobalt are refined and processed in China.

To build local processing capacity for critical minerals, African countries need to work on improving their business climate for capital-intensive industrial investments.

Investments in infrastructure development, including transport networks, energy infrastructure and industrial parks, should also be boosted to facilitate the movement of minerals within Africa and their export to global markets. This will reduce production costs and improve the competitiveness of the industry.

Africa will need to invest in research and innovation to be at the forefront of the latest technologies, as it is difficult to predict future demand for some critical minerals, as new technologies can emerge and completely change requirements.

African governments should encourage technology transfer and knowledge sharing to ensure that the industry creates employment opportunities and builds local technical capacity.

On environmental issues, the extraction of critical minerals can have significant environmental and health impacts, including the risk of diseases such as cancer, ulcers, associated with dust released during the mineral extraction process (e.g. cobalt in the DRC).

Implementing sustainable development practices in their extraction and processing will mitigate environmental impacts and position African critical minerals as responsible and sustainable sources for global markets.

The geopolitics of critical minerals is complex. Increasing geopolitical fragmentation has prompted developed economies to secure new reliable supply chains.

The growing demand for critical minerals makes Africa a crucial player in the global supply chain. However, Africa’s agenda and goals are not taken into account in discussions around critical minerals, which have so far focused only on how Western countries can access these minerals or on countering China’s global influence.

The ongoing US-China rivalry, technological competition, and national targets to achieve net-zero emissions are fueling a new scramble for Africa. China alone accounts for 60% of global production and 85% of processing capacity. In 2019, it imported nearly $10 billion worth of minerals from sub-Saharan Africa. China dominates the global supply chain for renewable batteries and electric vehicles through its mining monopoly in the African Copperbelt (DRC and Zambia) and its investment in lithium production in Zimbabwe, which holds the largest lithium reserves in Africa.

Despite its hegemony, China continues to consolidate its position, with three Chinese rare earth production giants (Minmetals Rare Earth, Chinalco Rare Earth & Metals Co, and China Southern Rare Earth Group Co) recently merging into a single company, strengthening China’s grip on global rare earth prices. This significant advance by China in the field of climate security technologies is of concern to the United States, which is striving to be more active on the continent to secure its supply chain. The European law on critical raw materials, adopted in March 2023, also reflects this new strategic imperative.

Faced with this desire of global economic powers to secure their interests, Africa must ensure that the exploitation of these resources has a positive impact on local populations and helps generate economic growth. This situation should allow African states to redefine the framework for collaboration with China, negotiate agreements on critical minerals (CMA) with the United States, but also integrate multilateral initiatives such as the Sustainable Critical Minerals Alliance (SCMA) and the Minerals Security Partnership (MSP) in order to attract good investors and have sustainable and equitable alternatives.

Whether it is China or the West, what must remain constant for Africa is the establishment of mutually beneficial agreements that allow the development of innovative partnerships and that strengthen the capacities for local value creation of critical minerals.

Regional cooperation must be encouraged in order to strengthen the leverage effect of negotiations and facilitate the integration of the value chain for African stakeholders. Also, the establishment of preferential trade agreements between African countries should ensure the exchange of critical minerals between them and their competitiveness in the clean energy market.

The critical minerals industry in Africa must contribute to regional development, energy security and the energy transition on the continent. To do this, African countries must focus on global market dynamics and regional development priorities to contribute to the security of global supply of critical minerals and promote the continent’s transition to cleaner and more resilient energy systems.

Source: Ndiack Lakh