The world is transitioning away from oil after years of climate change skepticism. The war in the Persian Gulf can only catalyse this shift to green energy as oil supply chains break down with the closure of the Strait of Hormuz.
This puts Africa in a particularly enviable position, as it holds over USD 30 trillion worth of rare earth minerals required for batteries and other equipment necessary for a complete green energy transition. The continent also has about 48% of the world’s manganese, 22% of natural graphite, 55% of the world’s cobalt deposits, and notable shares of nickel and lithium.
The Democratic Republic of Congo is responsible for 70% of global cobalt production. South Africa, Gabon, and Ghana produce 60% of global manganese.
But the arrangements from its colonial past still linger on in the African economy, as Western governments and corporations still view the continent as a mine to extract resources from rather than a genuine partner who can add value and create industrial products useful for the global economy.
No major international player is speaking about Africa using its wealth for internal economic transformation. Most just see it as an ore supplier. And though ore supplies will create a few jobs, it will continue to be an aftermath of colonialism. Africans desperately want to be a part of the refining, processing and manufacturing side of the supply chain.
Domestic plants could create thousands of jobs as opposed to the few hundred jobs offered through traditional resource extraction. Policymakers in Africa have long called for local beneficiation (value addition done on African soil). They want the critical minerals to be used for industrialisation at home and not just for global decarbonisation.
For example, Africa has $2.8 trillion worth of iron ore, which could be worth $25 trillion in steel if it adds value. The USD 834 billion in bauxite could be worth USD 15.4 trillion in aluminium with full processing.
Industrialisation is a matter of urgency for the continent as its population is exploding, with 30 million people born annually. Without manufacturing jobs, most of these young workers wouldn’t be able to land their first job. Building a mineral-to-manufacturing corridor will reduce Africa’s import bill by USD 16 billion annually.
Mining jobs in the DRC support over 100,000 people. In Namibia, there are 20,000 workers, and in Zambia, there are over 70,000. With value addition, millions more can enter the workforce.
The myriad nations of Africa cannot hope to bargain with the great European and American powers alone. It’s only through a grand union that they can even hope to negotiate a fair deal.
This is exactly why African Continent Free Trade Area (AfCFTA) is an important part of this equation. Without the AfCFTA coordinated policies on taxes, prices and beneficiation will be impossible. The exploitative bilateral deals which have stolen wealth from African mines will no longer hold in front of a unified front.
Africa has over 1.4 billion people, and the vast continent with so many people can make value addition seamless as opposed to a single country taking this route. For example, cross-border power grids could supply energy to all plants and make African companies competitive and sustainable.
This grand ambition is constrained by persistent challenges, including governance risks, infrastructure deficits, global resistance to domestic processing, and regulatory inconsistencies. But there is hope left, as reforms in Ghana (bauxite), Zambia (copper), and Kenya (digital licensing) indicate policy progress. America and Europe prefer or even incentivise processing on their own turf. But Africans must negotiate fair inclusion in the value chains if they are going to remain relevant in the 21st century.
Energy and sustainability are also a big headache. No mineral-based industrialisation is possible without reliable and clean power. Africans can explore several options for sustainable power refining, including green hydrogen, hydropower, and geothermal energy. Clean energy can be combined with mineral processing, particularly in East Africa, for a competitive edge.
The IEA says that lithium demand would be fivefold in 2040, and demands for cobalt and rare earth may rise by 50%-60%, with copper by about 30%-50%.
A deal without technology transfer, skill development, and joint ventures is not in Africa’s interest. According to AfCFTA, if the strategy is effective, African nations could increase their bargaining power to a level comparable to the GCC’s bargaining power at the height of oil production in the 20th century.