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Unlocking Profit from Raw Materials: Africa’s Challenge in Establishing Local Refineries

John D. Cooper, director of research at Sierra Leone’s Ministry of Mineral Resources, has to postpone our video conference. He apologized a few hours later and said he was discussing with his boss, “how to go beyond just extracting metals and minerals and selling them in raw form, and take a step forward instead.” Cooper mentions plans that are still being finalized to maximize the potential of Sierra Leone’s rich natural resources — the West African country has significant deposits of gold, iron, and bauxite. Approximately 70% of the country’s exports come from its extractive sector. However, most minerals are currently exported in raw form and then refined overseas.

“There’s still a lot to do to move forward, but the need for change is front and center. Until recently, we were asleep, but now we’re waking up,” said Cooper about the entire continent. Last August, he and other experts attended a meeting of the African Development Bank (ADB) in Abidjan (Côte d’Ivoire) to discuss possible ways of reaping greater rewards from Africa’s natural resources. They discussed sustainable development and energy transition, significant challenges that can only be met by the continent if it shifts away from exporting inexpensive raw materials that other countries leverage due to their technological advantages. “This is an opinion shared by experts that, bit by bit, is seeping into the political sphere,” said Cooper.

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Certain African countries are moving from vague intentions to taking concrete action. Last December, Zimbabwe banned exports of raw lithium (a key component of electric batteries) and Namibia followed suit in July. They also banned exports of other raw materials like dysprosium and terbium, which are essential for decarbonizing the planet. These minerals are used in wind turbines and electric vehicles.

To the south of both countries lies South Africa, a prominent player in the continent’s extractive sector. Endowed with most of the world’s platinum reserves, the country refines a large part of it in the Implats, Anglo-American and other multinational plants. Moving further north to Africa’s Great Lakes region, countries like Tanzania, Rwanda, and Uganda have recently established ambitious public-private gold refineries. The objective is twofold: maximize profits from precious metals and eradicate illegal refineries.

The aspiration to establish a solid African value chain extends beyond luxury metals or green mining, valued for its role in combating climate change. Aliko Dangote, the wealthiest man in Africa, has set out to rectify Nigeria’s long-standing paradox of being both a major oil producer and gasoline importer. His massive, new oil refinery near Lagos (Nigeria’s economic hub) will cater to the domestic market and export any surplus gasoline. Experts foresee that this initiative will indirectly contribute to the rejuvenation of Nigeria’s four struggling, state-owned refineries.

The electricity challenge

Silas Olang, the Africa advisor for the Natural Resources Governance Institute (NRGI), emphasizes the need for a regional transformation driven by a strategic perspective. Close collaboration between African governments and private capital is key. However, Olang cautions that weak governance increases the risk of perpetuating the “resource curse” in Africa, leading to armed conflicts, corruption, and inequality.

In order to achieve positive action, Olang emphasizes the importance of transparency and new financing mechanisms. He makes a distinction between “resource nationalism” that benefits the citizens of resource-owning countries and the misguided nationalization of entire sectors. Olang recognizes that African companies, with a few exceptions like the Dangote Group and Implats, currently lack the capability of driving significant change. As a result, investments should come from foreign capital, African governments and regional organizations such as the African Development Bank.

To establish Africa as a refining center, it is crucial to prioritize building stable energy systems. Andrew Gulley, a researcher with the United States Geological Survey and an expert on cobalt in the Democratic Republic of the Congo (DRC), explains that refining requires substantial electricity.

Cobalt, known as the “gold of the 21st century” alongside coltan, is crucial in the manufacturing of mobile phones and electric cars. The Democratic Republic of Congo (DRC) contributes 70% of the global production, yet 80% of the refining takes place in China. It wasn’t always like this, though. Until the 1970s, the DRC handled most of its own cobalt refining. However, years of war, destruction, nationalization, and neglect changed the landscape. “The country hasn’t been able to establish a reliable energy infrastructure that generates and transmits power efficiently,” said Gulley.

At Eurasian Resources Group (ERG), a company controlled by the government of Kazakhstan and its oligarchs, they understand the difficulty of processing metals and minerals in certain parts of Africa. The group is engaged in cobalt or copper extraction in the DRC, Zimbabwe and Zambia. “The electrical systems are highly unstable,” said ERG’s CEO, Benedikt Sobotka. “If the power goes out occasionally, it’s not the end of the world because we have powerful generators. But if it’s out for days on end, that’s when we feel the impact.”

Sobotka says there are other obstacles that scare away the financial investment needed to turn Africa into a refining powerhouse. “Better transportation infrastructure, stable regulatory frameworks and political stability are needed.” Despite that, Sobotka says ERG is constructing a new facility in the DRC for cobalt hydroxide production, which is highly sought-after by battery manufacturers due to its low environmental impact. He points to Indonesia as a role model for Africa, which has export restrictions on unrefined materials and measures to attract foreign investment. As a result, a significant portion of extracted nickel is now refined within Indonesia, and the country is on its way to manufacturing cars and electric batteries.

Regional collaboration

John Cooper firmly acknowledges the imperative of resolving the energy issue before African countries can progress. “Sierra Leone currently meets 35% of its energy needs. To ensure the long-term viability of the metallurgical industry, we must aim for 80% energy coverage.” Cooper suggests that factors such as political will and regional collaboration can encourage the establishment of more refineries in Africa. Negotiating conditions that benefit Africa’s interests in retaining value from its subsoil resources is important. Cooper also notes that the fear of companies turning to other countries can limit demands. Lastly, he emphasizes the importance of promoting training in the scientific-technological disciplines that are essential not only for refining metals and minerals, but also for manufacturing products that use them.

In 2022, Zambia and the DRC signed an agreement to manufacture electric batteries in a special, shared economic development zone. It is a comprehensive project, with a supply chain that begins at the mine and ends with the final product ready for sale.

In December 2022, the United States signed an electric vehicle batteries agreement with the DRC and Zambia, and promised generous funding. The Carnegie Endowment for International Peace analyzed the geopolitical significance of this deal in a recent article by Folashadé Soulé, who says the U.S. involvement is driven by its competition with China for access to crucial elements of the energy transition. Soulé stated that if the project is implemented, it would signal a significant change — a new Africa that can effectively navigate superpower competition.

Sobotka is skeptical about the prospects for the trilateral deal. “In order to be competitive, the plant located between Zambia and the DRC would require stable electricity, efficient logistics and reliable delivery times. However, it is worth noting that long-lasting traffic jams of up to 80 kilometers [50 miles] long happen at the border between the two countries.” He contrasted this chaos with “the perfect ecosystem in the city of Ningde in southern China, the world capital of battery production.” It’s a mechanism that would be difficult to replicate anywhere in the world, not just in Africa, says Sobotka.

Despite the challenges, Cooper remains enthusiastic. While acknowledging the obstacles Africa will face in its industrialization, he believes there are no other alternatives and emphasized the need to progress gradually and steadily. “Until we break this dependency and start living off what we produce, we won’t truly be free.”


Source: EL PAIS


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