Ensuring the Sustainable Journey of Africa’s Critical Minerals

Africa is home to around one-third of the global critical mineral reserves and half of the world’s platinum group metals, cobalt and manganese. Critical minerals are needed in the manufacturing process of energy transition equipment and tools, and in the technology, telecommunications, pharmaceuticals and defence industries. Current geopolitical challenges, the urgent need to address supply chain decarbonisation and growing demand for clean energy have led the major players to assess how they can build and finance sustainable supply chains along which Africa’s critical minerals could travel. There have been several strategic agreements with African countries that contain stipulations that critical minerals be mined, processed and moved in a way that considers environmental, social and governance factors.

In 2023, the European Commission adopted the Critical Raw Materials Act to secure the EU’s access to minerals and metals critical for net-zero technologies, including by strengthening international engagement and facilitating sustainable extraction, processing and recycling. The EU recently announced it was negotiating to source critical minerals from the Democratic Republic of the Congo (DRC) and that it intended to do the same with Rwanda, Gambia and Zambia. The EU already has an agreement with Namibia.

The USA implemented the Inflation Reduction Act (IRA)in 2022. Among other things, the law only permits subsidies for electric vehicles if 40% of their critical minerals were mined or processed in the US or a country with a free trade agreement with the US. The US recently signed a Memorandum of Understanding (MoU) with the DRC and Zambia to support the sustainable production of electric vehicle batteries and there have also been suggestions that its trade preference programme, the African Growth and Opportunity Act, could be amended to include preferential tariffs for sustainably mined and processed African critical minerals.

The UK and South Africa recently signed the Partnership on Minerals for Future Clean Energy Technologies to promote responsible exploration, production and processing of critical minerals in Southern Africa. In 2023, the G7 issued a Five-Point Plan for Critical Minerals Security, including a focus on supply chain “friend-shoring”. The plan outlines ways to assist developing countries with value-added processing and manufacturing, supply chain integration, sustainable mining practices and facilitation of local procurement and shared use of infrastructure.

At present, many of Africa’s critical minerals are exported in the form of ores or concentrates, with some African countries noting they plan to develop the capacity to process minerals locally. Nigeria, the DRC, Namibia and Zimbabwe have implemented trade restrictions limiting the export of unrefined minerals. The countries plan to implement public-private partnerships to process raw critical minerals locally, maximising profits by trading in more lucrative processed products. African countries are developing infrastructure, improving manufacturing capacity and scaling up production and export, including strengthening domestic and regional supply chains, to maximise critical mineral returns. Most have implemented local content policies that favour domestic suppliers and workers.

The use of local content policies aligns with the Africa Mining Vision (AMV), adopted by the African Union in 2009. One of the aims of the AMV is the “transparent, equitable and optimal exploitation of mineral resources to underpin broad-based sustainable growth and socio-economic development.”

The AfCFTA has acted as a strong impetus for African governments in addressing infrastructure gaps, streamline supply chains, boost manufacturing capacity and overhaul regulations covering trade, cross-border initiatives, investment policies and capital flows. The trade in sustainably mined and processed critical minerals will benefit from the free flow of trade that AfCFTA is beginning to facilitate.

Once critical minerals are mined and processed, they must be priced and volumes accurately measured. The Organisation for Economic Co-operation and Development and the Intergovernmental Forum on Mining, Minerals, Metals, and Sustainable Development are developing tool kits to support developing countries to address base erosion and profit shifting risks when pricing minerals and increase policymakers’ knowledge of the price determination process of exported critical minerals.

According to S&P Global Market Intelligence, another challenge for African countries is that mining exploration budgets globally are focusing on lower-risk investments, with investors favouring more advanced rather than greenfield projects, threatening near-term investment in the sector.

Afreximbank is facilitating African critical mineral projects, acting as a financial and technical partner to ensure that African countries move up the critical mineral value chain.

According to the United Nations, Afreximbank and the United Nations Economic Commission for Africa (UN ECA) recently signed a Framework Agreementwith the DRC and Zambia to establish Special Economic Zones to facilitate the processing of critical mineral resources for battery precursors, batteries, and electric vehicles. 

Last year, the US and the EU announced their role in developing a USD1.6 billion railway linking critical mineral mines in Central Africa, from Zambia to Angola, with Africa’s Atlantic Coast ports, creating a new trade route – the Lobito Corridor. The US and EU signed a MoU with Angola and the DRC, with financial backing from the African Development Bank, and the African Finance Corporation acting as project developers.

African countries also need to retain some of their critical minerals to address their own energy demands, considering the need to diversify their energy mix to address climate risks and policy changes in export countries regarding decarbonisation and sustainability. A green energy transition is essential for Africa, which, according to the UN ECA, accounts for 80% of the 733 million people without electricity access. Development in the energy, mining and infrastructure sectors must also be sustainable, considering issues such as deforestation and the impact on rural communities, wildlife, water and renewable energy implementation in mining and production facilities.

As the world turns its attention to Africa’s critical mineral supply, it is their sustainable and responsible journey from the ground to their final destination that will allow the continent to arrive at a net-positive outcome for all Africans.