The International Monetary Fund (IMF) has unveiled a promising forecast for Sub-Saharan Africa (SSA), highlighting the region’s pivotal role in the global critical minerals market.
With vast reserves of copper, nickel, cobalt, and lithium, SSA stands poised to reap significant economic benefits from the surging demand driven by the energy transition towards clean technologies.
According to the IMF’s latest regional economic outlook report, Sub-Saharan Africa already accounts for 30 percent of the volume of proven critical minerals reserves worldwide. Over the next 25 years, the region is projected to capture 10 percent of the global revenues from the extraction of these key minerals, totaling a staggering $16 trillion.
The transition to clean energy, encompassing electric vehicles, solar panels, and future innovations, is expected to exponentially increase the demand for critical minerals. The International Energy Agency (IEA) forecasts a doubling in demand for nickel, a tripling for cobalt, and a tenfold rise for lithium between 2022 and 2050. Given SSA’s significant share of proven critical mineral reserves, this transition holds immense potential to transform the region’s economic landscape, provided it is managed effectively.
Key countries set to benefit from the upcoming surge in global demand include the Democratic Republic of Congo (DRC), which dominates global cobalt output and holds substantial reserves. Additionally, South Africa, Gabon, and Ghana collectively contribute over 60 percent of global manganese production. Zimbabwe, the DRC, and Mali boast significant untapped lithium deposits, presenting lucrative opportunities for exploration and extraction.
Moreover, Guinea, Mozambique, South Africa, and Zambia are identified as countries with substantial critical mineral reserves, positioning them as key players in the global market. With growing demand projected over the next two decades, proceeds from critical minerals extraction are expected to soar, potentially contributing to a significant increase in SSA’s GDP by 2050.
However, the IMF acknowledges the inherent volatility of commodity prices and the uncertainty surrounding technological advancements, which could impact future projections. Despite these challenges, the overall outlook remains optimistic, signaling a promising trajectory for SSA’s economic development.
As SSA navigates the opportunities and challenges associated with the critical minerals sector, strategic planning, sustainable practices, and prudent governance will be essential. By harnessing its rich mineral endowment and leveraging global demand trends, SSA has the potential to unlock new avenues for growth, job creation, and socio-economic advancement.
Beyond Extraction
The region can generate even greater windfalls by not only exporting raw materials but processing them as well. Raw bauxite, for instance, fetches a modest $65 per tonne, but when processed into aluminium it commands a hefty $2,335 per tonne, in end-2023 prices. Yet the thousand trucks a day that carry unprocessed lithium from Zimbabwe to ports for shipping to China show that local processing options for critical minerals are too often limited.
Analysts say when it comes to the processing of raw bauxite into aluminium, Nigeria’s sordid journey in that direction calls to question the lost economic gains from Nigeria’s sole aluminium smelter (Aluminium Smelting Company of Nigeria – ALSCON) in Ikot Abasi, Akwa Ibom State, with an investment of $3.2 billion by the Nigerian federal government at commissioning in October 1997. The aluminium smelter suffered from mounting litigation, cannibalisation, and asset-striping.
At commissioning in October 1997, ALSCON’s ownership structure was: 70 percent by the Nigerian federal government, 20 percent held by Ferrostaal AG of Germany, the plant’s equipment installer, and 10 percent by Reynolds of USA. By this tally, Nigeria held the responsibility of chalking up majority of its funding for operations, as well as the biggest revenue earner.
Regionally Coordinated Policies
According to the IMF, a regional strategy built on cross-border collaboration and integration can create a larger, more attractive regional market for much-needed investment. A regional strategy is also essential to fully leverage the diversity of critical minerals — clean energy technology requires combining multiple minerals scattered across the region.
Sub-Saharan Africa’s anticipated population boom, coupled with rapid urbanisation and industrialisation, will likely increase demand for renewable energy and expand the market for processed minerals. The African Continental Free Trade Area (AfCFTA) can play a key role in reducing trade barriers and developing infrastructure, potentially uniting fragmented critical mineral markets for larger-scale operations and forming regional value chains that draw on both raw and processed mineral inputs.
Coordination can also start on a smaller scale, paving the way for larger regional hubs. For example, the Democratic Republic of the Congo and Zambia are collaborating on battery production for two- and three-wheeled electric vehicles popular in African markets, the IMF report said.
Countries also need to collaborate on policies to create more favourable investment and business environments. Simplifying bureaucratic procedures and harmonising mining regulations across borders would foster a stable, predictable investment environment.
Efforts to minimise the environmental impacts of mining and processing will help unlock new funding and investment opportunities in green finance. Strengthening the Africa Mining Vision, launched in 2009 by the African Union, could serve as a key framework for these regional efforts.
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