Strength in numbers: Regional action for Africa’s positioning in critical minerals

In this final blog of a three-part series, we examine the advantages of regional action in better positioning Africa in the global race for critical minerals. In our first two blogs, we discussed the benefits of a strong partnership between the U.S. and individual African countries, providing specific recommendations for each. In this third blog, we present areas where regional cooperation on the African continent can lead to even better solutions than those achieved through separate country actions alone. The ideas in this blog benefited from two roundtables organized by the Africa Growth Initiative of the Brookings Institution. The advice of African, American, and global experts provided insightful recommendations that influenced the options presented in this blog.

Insufficient regional cooperation is a drag on the potential of critical minerals in Africa

Most developing regions suffer from inadequate regional coordination in infrastructure, energy, and standards, resulting in suboptimal trade levels and missed opportunities for faster growth. The IMF has reviewed the opportunities offered by regional integration in Latin America, Asia, and Africa. The IMF estimates that with lower barriers to intra-African trade, real GDP per capita could increase by over 10%, and up to 50 million people could be lifted out of extreme poverty. Enhancing regional integration can produce similar opportunities in the development of the critical minerals processing sector.

For example, mining is an industry that requires lots of energy—it accounts for about 38% of global industrial energy use. Furthermore, mining is a “hard-to-abate” industry, one that can only be decarbonized with major advances and technological innovation. The limited integration of electricity markets in Africa currently makes it difficult to tap into cheaper and low-carbon energy sources for mining operations.

Transportation is a significant barrier to trade in Africa. According to the Infrastructure Consortium of Africa, inadequate road, rail, and port infrastructure adds as much as 30-40% to the cost of intra-regional trade in Africa. The lack of a dense network of regional transportation corridors makes mining and processing operations less attractive and lowers the economic potential of cities and growth poles.

Companies potentially interested in the value chain production of critical mineral derivatives face a diverse array of national regulations in Africa, including local content, taxation, and environmental standards, making it challenging to optimize the potential of production centers across different countries.

What can African countries do to leverage regional integration and coordination efforts for their critical mineral value chains?

There is a clear regional political will to coordinate on critical mineral actions. The African Union’s Green Minerals Strategy calls for African countries to move up the value chain of critical minerals. The third pillar of this strategy expressly calls for governments to use the AfCFTA to build regional and continental markets. Intra-African trade can enable the development of “mineral value-chains to achieve equitable resource-based industrialization. The third pillar of this strategy calls for developing “mineral value-chains to achieve equitable resource-based industrialization (ERBI) through supply chain development, beneficiation, and value addition and access wider regional and continental markets through the African Continental Free Trade Area (AfCFTA).”

In our second blog of this series, we proposed five recommendations for individual African governments and the private sector to capitalize on the demand for critical minerals and transform it into economic growth and job creation. However, individual, uncoordinated action will not be sufficient to achieve the full potential of the mining sector and the critical minerals value chains. We offer five suggestions for specific regional actions.

First, in our previous blog, we suggested the need for a high-level coordinating authority with sufficient standing to mobilize the numerous government agencies involved in mining, infrastructure, energy, and international investment agreements. These “czars” need to coordinate across countries on a wide range of issues, from trade facilitation to cross-border energy and infrastructure projects. A possible committee, under the auspices of the African Union, can bring these special envoys together for action-oriented engagements that advance the critical minerals agenda and adjacent regional investments.

Second, the cross-border connectivity transport infrastructure (roads, railways, and ports) needed to transport critical minerals and processed materials requires agile negotiations on investments, concessions, fees, regulations, and border trade facilitation agreements. Between 2004 and 2022, the African Development Bank financed over 18,000 km of road for $13.5 billion. But Africa still faces an infrastructure finance gap of up to $108 billion per year. Energy projects to supply the mines and adjacent cities, as well as economic activity centers, should be developed with a regional perspective. Single-country plans and decisions can be sub-optimal or insufficient for the development of the critical minerals value chains.

Third, developing transportation corridors without complementary investments to support market and job creation is a missed opportunity. Vibrant cities connected to these corridors are a vital element for sustainable economic development. The OECD has provided recommendations for good practices in urban development around mines. Furthermore, according to the World Bank, African cities, when compared to urban centers in other regions, produce few goods for trade on regional and international markets. This is in large part because, despite growing populations, capital investment in African cities has stagnated. African governments can leverage new transportation corridors developed for critical minerals to transform African cities into hubs for tradable production, including goods along the minerals’ value chains. Regional economic corridor investment plans focused on exports can be a valuable complement to mining developments.

Fourth, coordinated action under the AfCFTA to expand markets for the integrated development of critical minerals value chains is indispensable. For example, national regulations on issues such as local content differ significantly and were designed with a national perspective in mind. Bringing consistency and having an “accumulation” strategy for local content can benefit several countries by leveraging local capacities and industrial advantages. Furthermore, AfCFTA can be extremely helpful in achieving greater harmonization of licensing requirements, standards, and regulations to facilitate business across borders.

Fifth, the African Union’s Green Minerals Strategy emphasizes the urgent need to scale up skills across the continent, particularly in the critical minerals value chains. A Pan-African Institute of Mining is an initiative that could be explored. Additionally, the decades of mining experience in some African countries offer invaluable lessons to their neighbors in exploration, investment planning, integrated mining, infrastructure, and energy development, as well as related issues.

The global landscape of critical minerals is fiercely competitive. The natural tendency to establish country-to-country transactions for mining development can be suboptimal for individual African countries. Complementary regional actions can further enhance the attractiveness of the African critical minerals sector and lay the groundwork for rapid, sustainable development, growth, and job creation.