The African continent holds substantial reserves of critical minerals that are key to the global energy transition. Where do you see the main opportunities arising in African mining for these materials?
Africa is at a very exciting point in its history, having learned crucial lessons about how to engage in the extractives sector — along with the emergence and importance of critical and rare earth minerals.
It is important for Africa to maintain a robust strategy and investment drive, bringing value, but also ensuring that it does not come at the expense of its population. Africa is blessed with a plethora of critical minerals, including cobalt, lithium, nickel, and copper, to name a few. Many are vital for the production of lithium-ion batteries, wind turbines, laptops, and mobile phones, among other technologies.
The clear opportunity for Africa lies in the added value that these critical minerals can bring — namely mineral processing, manufacturing, and the production of batteries for electric vehicles (EVs), solar home systems, and more.
Job creation is of vital importance for a continent that will see a population boom by 2030 which will take it from about 18% of the globe’s population to nearly a third. Now is the time to pre-emptively ensure that these minerals can be developed in Africa.
Excitingly, we are already witnessing memorandum of understandings (MOUs) and off-take agreements between mines and EV auto assemblers. I believe this indicates that no industry should look at itself in a silo; there are many opportunities for collaboration, as we have recently witnessed with the DRC and Zambia signing an off-take agreement to manufacture lithium-ion batteries for Southern Africa’s auto sector.
The global re-routing of supply chains, resource nationalism, and ‘friendshoring’ for critical minerals were key considerations over the past year. How do you see these relationships developing as the role of critical minerals grows?
Supply chain resilience and considerations have never been more important. In recent years, we have witnessed what can happen when supply chains are disrupted — this includes the UK’s supply chain following Brexit, the COVID-19 pandemic, the Russo-Ukraine war, and the Chinese container ship that ran aground for six days in the Suez Canal in 2021. All of these are examples of why resource nationalism is now at the top of the agenda for many nations. And after all, it does make sense — heavy reliance on one country or continent can have major repercussions on economies and, in turn, global stability. In the critical minerals space, 80% of the world’s critical and rare earth minerals processing takes place in China. There is a clear opportunity for Africa to capture some of this market, and from a sustainability perspective, keep processing closest to where the minerals are found.
Where do you see the financing opportunities for Africa’s critical minerals projects?
Financing of critical minerals projects in Africa presents opportunities for both major international investors and regional investors, with several factors to consider:
International investors, such as large mining companies and global financial institutions, often have significant capital and expertise in developing and financing large-scale mining projects.
They can bring technical know-how, access to capital markets, and experience in navigating complex regulatory and geopolitical environments.
They can also bring advanced mining technologies, best practices in environmental and social governance (ESG), and adherence to international standards, which can contribute to the sustainable development of critical minerals projects to the continent. In addition, international investors often have access to global markets for off-take agreements, project financing, and strategic partnerships, which can assist in the marketing and distribution of critical minerals.
Regional investors, including African governments, sovereign wealth funds, and local private investors; possess valuable local knowledge, relationships, and understanding of the regulatory and social landscape. This can be crucial for navigating local regulations, community engagement, and stakeholder management. These investors are often motivated by the potential for economic development, job creation, and infrastructure improvement within their countries or regions. They may prioritize projects that have a positive impact on local communities and contribute to sustainable development goals.
They may also have a better understanding of regional geopolitical dynamics, cultural nuances, and local risk factors, which can help to mitigate certain project risks.
Opportunities for financing
Given the complementary strengths of both types of investors, international investors may have opportunities to partner with regional investors, governments, or development finance institutions to co-finance and develop critical minerals projects in Africa. Tailored financing structures, such as public-private partnerships, joint ventures, or project finance arrangements, can be explored to leverage the strengths of both international and regional investors while addressing the specific needs and risks associated with critical minerals projects.
The most significant opportunities for financing African projects may lie in a balanced approach that recognizes the strengths of both types of investors and leverages their respective expertise, resources, and motivations to drive sustainable development and economic growth in the region.
Transparency and good governance are key priorities in the management of mineral resources
What role do you see for governments across Africa in the growth of this industry?
Governments should create an enabling environment for investment, promote sustainable development, and ensure that the exploitation of mineral resources benefits both the economy and the local communities. There are several key areas where governments play a crucial role:
Policy and regulatory framework
Clear and consistent government policies and regulatory frameworks are vital for the exploration, extraction, and export of critical minerals. This can help provide certainty to investors and reduce investment risk. They can also promote responsible mining practices by implementing and enforcing ESG standards, as well as health and safety regulations. This is essential for mitigating the environmental and social impact of mining activities.
Authorities in the region should invest in infrastructure development, including roads, railways, ports, and energy infrastructure, to facilitate the transportation and export of critical minerals. This can lower the cost of doing business and improve the overall competitiveness of the industry.
Local content and community development
The participation of local businesses and labour in the critical minerals industry could be boosted through local content requirements, skills development programmes, and capacity-building initiatives. This can create employment opportunities and enhance local workforce skills.
In addition, meaningful stakeholder engagement and community development initiatives would ensure that local communities benefit from mining activities. This can involve revenue-sharing mechanisms, infrastructure development in mining-affected areas, and social investment programmes.
Investment promotion and incentives
It is important for African governments to actively promote their countries as attractive investment destinations for critical minerals projects by providing investment incentives, streamlining permitting processes, and offering fiscal stability. They could also consider public-private partnerships to develop projects, leveraging private sector expertise and capital while retaining an equity stake or royalty interests.
Transparency and governance
Transparency and good governance are key priorities in the management of mineral resources to prevent corruption and ensure that revenues from mining activities are used for the benefit of the entire population.
International cooperation and partnerships are a potential strategy for governments to share best practices, attract foreign investment, and access markets for critical minerals.
If these roles are carried out effectively, governments can help create a conducive environment for the sustainable growth of the critical minerals industry in Africa, maximizing the economic benefits while minimizing the social and environmental impacts.
How can African nations best capitalize on the growth of its critical minerals industries? What does it mean both for the global community and across the continent?
Africa must leverage its natural resource endowment to drive sustainable economic development, industrialization, and technological advancement. The benefits of its critical minerals industries can be maximized in several ways:
Value addition and downstream processing
Value can be added to Africa’s critical minerals by promoting local processing and manufacturing of intermediate and finished products. This would create higher value-added products, generate additional employment, and foster industrial diversification within the continent.
Investment in infrastructure development, including transportation networks, energy infrastructure, and industrial parks, would all boost the efficient extraction, processing, and export of critical minerals. Improved infrastructure has the benefit of lowering production costs and enhancing the competitiveness of the industry.
Human capital development
Significant African investment in education and skills development is very important for the creation of a skilled workforce capable of contributing to the technical, managerial, and entrepreneurial aspects of the critical minerals industry. This would ensure that the industry creates sustainable employment opportunities and fosters local expertise.
Sustainable development and environmental management
It is crucial to implement sustainable development practices in the extraction and processing of minerals, including environmental protection, resource conservation, and the adoption of clean technologies. This will mitigate environmental impacts and position African critical minerals as responsible and sustainable sources for global markets.
Partnerships with private sector investors, technology providers, and off-takers have the potential to attract investment, transfer knowledge and technology, and access global markets for critical minerals.
In answering the second part of the above question – in regard to the global community – Africa’s growth in the critical minerals industry will contribute to worldwide supply security, particularly for minerals that are essential for emerging technologies, renewable energy, and advanced manufacturing.
Importantly, increased production from the continent would help diversify global supply of critical minerals, reducing reliance on dominant producing countries and enhancing supply chain resilience.
As for Africa itself, the growth of the industry will support economic diversification beyond traditional sectors, thus increasing export earnings and GDP growth. Participation in the critical minerals industry will also facilitate technology transfer, innovation, and knowledge spillovers, supporting the development of a knowledge-based economy.
However, there are several challenges to consider. The most important is for African countries to manage the environmental and social impacts of the industry, ensuring that local communities benefit from economic activities, and that environmental sustainability is prioritized.
In addition, ensuring good governance, transparency, and the effective management of revenues from the industry is essential to avoid the “resource curse” and promote inclusive growth.
The growth of the critical minerals industry in Africa must also help with regional development, energy security, and the energy transition across the continent. What are some ways that we can maintain both a global and regional focus?
Balancing global and regional considerations is essential to achieve the abovementioned goals while also meeting global demand. There are several factors to consider:
Regional infrastructure development
Investment in regional energy infrastructure (such as power generation, transmission networks, and renewable energy projects) will boost the growth of the critical minerals industry as well as the broader energy transition across the continent. Alongside this, development of regional roads, railways, and ports, would facilitate the movement of minerals within Africa and their export to global markets.
Technology transfer and capacity building
Encouraging technology transfer and knowledge-sharing must be encouraged. This will build regional capacity for sustainable extraction, processing, and utilization of critical minerals, while prioritizing skills development and education in mining, engineering, and renewable energy technologies will foster a regional workforce equipped to drive the industry’s growth and the energy transition.
Harmonized regulatory frameworks
Regional coordination on mining policies, regulations, and standards is also important, enabling a consistent and predictable investment environment for companies operating across multiple African countries — and aligning regional efforts with sustainable development goals, such as the African Union’s Agenda 2063 and the UN’s Sustainable Development Goals, would ensure that the growth of the critical minerals industry contributes to broader regional development objectives.
Regional public-private partnerships and investment promotion initiatives attract capital and expertise to support critical minerals projects and energy infrastructure development in multiple countries. In addition, collaboration between governments, industry stakeholders, and development partners across borders would foster regional economic integration and cooperation in resource development.
Global market access and collaboration
International partnerships and alliances with global industry players, off-takers, and technology providers are crucial to helping African countries access markets worldwide and in leveraging international expertise. Also, the promotion of sustainable and responsible supply chains would encourage alignment with global best practices and responsible sourcing initiatives, enhancing Africa’s overall reputation as a reliable and ethical supplier.
By maintaining a dual focus on global market dynamics and regional development priorities, African countries can position themselves to not only meet global demand for critical minerals, but also to drive sustainable regional development, enhance energy security, and support the continent’s transition to cleaner and more resilient energy systems.