Processed critical minerals as an opportunity for the industrialization of Africa

The global run towards a low-carbon economy has brought to the fore the importance of several minerals judged critical to this transition. These minerals include lithium, cobalt, graphite, manganese, and others essential to producing clean energy technologies, including solar panels, wind turbines, rechargeable batteries for electric vehicles (EVs), and grid battery storage. Developing countries hold large reserves of these minerals, about one quarter of them being concentrated in Africa. Among the countries that are rich of such minerals, there is the Democratic Republic of the Congo, which produces about 70 per cent of cobalt ore worldwide, mainly directed to China, that is particularly voracious of such material. According to the UNCTAD technical note on critical minerals, the demand for some of such minerals is expected to increase rapidly. The estimates are a 115 per cent growth for the cobalt and 454 per cent for lithium in the period from 2022 to 2030.

However, what the UNCTAD note does not say is that global lithium prices plummeted by 70 per cent this year, after a more than tenfold increase in value between 2020 and 2022. Similar price reductions also affected nickel and cobalt, albeit to a lesser extent.

Notwithstanding this, there is an opportunity for African countries that are rich in such minerals to develop a transformation and processing capacity for exporting them in a refined form, instead that raw, profiting from the increasing demand at global level. In order to do that, targeted industrial and tax policies are necessary to promote structural change, which include the offer of tax incentives, credits and deductions. In this regard, there is no one-size-fits-all solution. Every country has to develop the appropriate mix between such measures based on its internal capacity. As professor Dani Rodrick says, it is not a matter of 'why', but of 'how'.

Developing such refining and processing capacity would allow African countries to enjoy significantly higher earnings from the export of these minerals. In fact, raw critical minerals need to be processed and refined to increase purity, enhance their performance characteristics, and increase suitability for specific applications. Such operations, unfortunately, are still carried outside the continent, with the consequence that, at present, African countries export critical minerals mainly in raw form. Despite the enormous reserves of such minerals, the UNCTAD technical note reveals, no country in Africa is a major participant, for instance, in the global trade of manufacturing cathodes or battery materials, which is still dominated by the Organization of Economic Cooperation and Development (OECD) countries.

It's now time to change the narrative...