As the global shift towards clean energy accelerates, the demand for critical minerals is poised to soar. Sub-Saharan Africa, home to approximately 30 percent of proven critical mineral reserves, stands at the forefront of this transition. However, the region’s potential to capitalize on this opportunity hinges on effective management and strategic action.
The International Energy Agency predicts a significant surge in demand for key minerals like nickel, cobalt, and lithium by 2050, driven by the burgeoning electric vehicle and renewable energy sectors. Sub-Saharan Africa’s prominence in critical mineral production is underscored by the Democratic Republic of Congo’s dominance in cobalt output and South Africa’s leading role in manganese production, among others.
With global revenues from key minerals expected to reach $16 trillion over the next 25 years, Sub-Saharan Africa stands to gain substantially. Leveraging these resources could potentially increase the region’s GDP by over 12 percent by 2050. However, to fully realize these benefits, the region must move beyond raw material exports and invest in local processing industries.
The value-added potential of processing minerals locally is immense. For instance, while raw bauxite commands a modest price, processed aluminum yields a significantly higher return. Yet, limited local processing options hinder the region’s ability to capture this added value. By investing in local processing industries, Sub-Saharan Africa can create higher-skilled jobs, increase tax revenues, and reduce dependency on volatile commodity prices.
Foreign direct investment is crucial for developing mineral processing industries, but the absence of a substantial regional market poses a challenge. Regional coordination and collaboration are therefore essential to create a more attractive investment environment. A regional strategy, supported by cross-border collaboration and integration, can stimulate investment and facilitate the development of regional value chains.
The African Continental Free Trade Area (AfCFTA) presents a significant opportunity to reduce trade barriers and develop infrastructure, fostering regional market integration. Additionally, countries must harmonize mining regulations and simplify bureaucratic procedures to create a stable and predictable investment climate.
Domestically, countries can undertake structural reforms to support domestic mining and processing sectors. Caution should be exercised in applying local content requirements, while inward-looking policies that distort markets should be reevaluated. Strengthening domestic financial markets and improving access to finance will also be crucial for supporting local businesses in the mining sector.
Ultimately, responsible management of new resource windfalls requires transparent institutions, sound public financial management, and appropriate tax regimes. By embracing these reforms and working collaboratively at both regional and domestic levels, Sub-Saharan Africa can maximize the potential of its critical mineral resources and pave the way for sustainable development.
