Prospects for U.S. Minerals Engagement with Africa

Audio Brief

A short, spoken-word summary from CSIS’s Gracelin Baskaran on her commentary, Prospects for U.S. Minerals Engagement with Africa.

Audio file

In the race to secure critical minerals for the energy transition, the United States is looking abroad to counter the dominance of China. Even if the United States were to dramatically improve prospects for domestic mining, there is no way to meet growing global demand without a larger and more diverse supply chain. That is why the United States has begun to form plurilateral and bilateral partnerships and extended tax credits and subsidies for mineral development in closely allied countries.

But one region—one of the most well-endowed with critical minerals—has been left out of the partnerships, trade deals and other discussions.

Africa’s exclusion is a key shortcoming in global critical minerals efforts. According to internal calculations, the continent has roughly 85 percent of the world's manganese, 80 percent of the world's platinum and chromium, 47 percent of cobalt, 21 percent of graphite, and 6 percent of copper. Despite such reserves, the mining exploration budget in Sub-Saharan Africa was the second lowest in the world—roughly half that of Latin America, Australia, and Canada.

Strengthening U.S. commercial diplomacy with the African continent should be a key priority in a minerals strategy. Historically, the United States has not maintained strong commercial diplomacy ties with the continent, with Kenya and South Africa being the exceptions—this stands out in contrast that with Chinese efforts that began decades ago.

Here are three recommendations for strengthening the U.S.-Africa partnership on the critical minerals agenda:

  1. Collaborate with African Countries through the Minerals Security Partnership

    MSP countries need to work with producers to ensure that collaboration will create socioeconomic benefits, including infrastructure investments, employment generation, and fiscal revenue. Ideally, the MSP will expand to include producing countries to create a more equal partnership. At present, the MSP only includes Western countries, India, and two high-income and advanced East Asian countries. Bringing African countries into the MSP can encourage investments in their extraction, processing, and value-addition capacity by other MSP countries.

    Existing MSP countries are likely to lose access to African critical minerals without building domestic mineral processing capacity in these countries. This is because an increasing number of resource-rich African countries are banning the export of raw critical minerals.

    In the last 9 months, Namibia, Ghana, and Zimbabwe have banned the export of unprocessed critical minerals, including lithium. Zimbabwe has the sixth-largest lithium reserves in the world and largest in Africa. Namibia has a heavy rare earths operation that produces 2,000 tons per year of rare earth oxides and has rich deposits of two of the most valuable heavy rare earth metals—dysprosium and terbium. Ghana recently discovered commercial quantities of lithium. These countries also have quantities of cobalt, manganese, nickel, and graphite.

    It is likely other African countries will follow suit. There is precedent for it. For example, Tanzania—which is home to the fifth-largest reserve of graphite in the world—imposed an export ban on gold ore in 2017.

    Bringing resource-rich African countries into the MSP enables them to come to the critical minerals tables as equals and can create a conducive environment to investment and trade.
  2. Expand Trade Agreements

    The United States should consider extending the Inflation Reduction Act (IRA) benefits to resource-rich African countries. The IRA sets a market value-based target for battery critical mineral content. In 2027, for an electric vehicle to be tax-credit eligible, 80 percent of the market value of critical minerals in its battery must be sourced domestically or from U.S. free-trade partners.

    The lithium-ion batteries that are used for nearly all electric vehicles use five critical minerals: lithium, nickel, cobalt, manganese, and graphite. Africa has approximately 21 percent of graphite reserves; 47 percent of cobalt reserves; and 85 percent of manganese reserves. It currently has 4 percent of the world’s lithium—but this is expected to increase to 12 percent over the next decade owing to discoveries of new reserves. The continent has 5 percent of the world’s nickel reserves.

    If African minerals could contribute to IRA-backed deployment in the United States, it can significantly improve their commercial attractiveness and incentivize investment in exploration, production, and processing.

    There is a good commercial case for it. Exploration has yielded good returns on the continent. Africa was home to 40 percent of the world's gas discoveries between 2010 and 2020.

    A specific agreement could be signed, similar to the bilateral agreement that was signed earlier this year with Japan to develop a supply chain for critical minerals required in electric vehicle production. In the longer term the United States could sign a free trade agreement (FTA) with the African Continental Free Trade Area (AfCFTA).

    An FTA could replace the African Growth and Opportunity Act (AGOA), which went into effect 23 years ago. AGOA is a unilateral trade preference program that gives African countries a competitive edge by providing duty-free exports for 6,500 products from Africa to the United States, and is up for renewal in 2025. Replacing it with an FTA makes trade between Africa and the United States mutually beneficial—it allows African countries to benefit from the IRA and strengthens the United States’ critical minerals security.

    Replacing AGOA with an AfCFTA can also incentivize bypassing China as an intermediary. Most African commodities are exported to China before being processed and exported to the United States and other MSP countries. In 2021, the Democratic Republic of the Congo (DRC) exported $4.4 billion of cobalt—and 100 percent of it went to China. It then processes it, manufactures goods using it, and sells a share of it to the global market. Cobalt is a key input for lithium-ion batteries and China is the biggest exporter of these batteries. China exports 19.8 percent world’s lithium-ion batteries—twice as much as the second-largest exporter, Singapore.

    This poses a significant risk to the United States, as China's use of export restrictions is rapidly rising. When looking at the latest available data from the Organization for Economic Cooperation and Development in 2021, China had 35 natural resource export restrictions, compared with 17 from Russia and zero from the United States, Australia, and European countries. The rapid acceleration of export restrictions is concerning. From 2009 to 2020, China increased its export restrictions on critical minerals by a factor of nine, including nonautomatic licensing, export taxes and export bans. Thus, reducing and eliminating China's role as an intermediary is a key step to strengthening critical minerals security.
  3. Leverage Economic Diplomacy Instruments

    The United States will need to develop a suite of economic diplomacy instruments with African countries. U.S. financing and de-risking can mobilize investments needed to increase production. One fact bears repeating: in 2021, the mining exploration budget in Sub-Saharan Africa was the second lowest in the world. Significantly increasing exploration is critical.

    Good economic diplomacy is mutually beneficial. U.S. financing upstream and downstream value chain development can increase fiscal revenue and generate jobs in African countries, both of which are critical development objectives for a continent that’s experiencing a simultaneous debt crisis and population boom (by 2050 Sub-Saharan Africa's population is forecasted to approximately double from 1 billion to 2 billion).

    The private sector has a critical role to play in scaling up extraction, processing, and manufacturing. At the Africa Business Forum in 2022, a California-based exploration firm, KoBold Metals, which uses artificial intelligence and machine learning to identify battery metal deposits, announced a $150 million investment to explore and develop a copper mine in Zambia.

    It will use artificial intelligence tools to cost effectively process drilling data and optimize copper and cobalt exploration at Mingomba Mine, which is on track to be a top-tier copper mine. KoBold is seeking to apply these tools to additional mines in the region.

    The U.S. ambassador to Zambia, Michael Gonzalez, even called this “investment a “perfect example of the United States’ efforts to catalyze investments in strategic, critical-minerals projects to build more transparent, predictable, secure, and sustainable critical-mineral supply chains.”

    The private sector will need to work hand in hand with the U.S. government and a coordinated government approach, similar to Power Africa, is key. Power African is the U.S. government initiative to double access to electricity in Sub-Saharan Africa and brings together 12 U.S. government departments and agencies to bring energy projects to fruition by providing financing, insurance, and technical assistance.

    A coordinated public-private approach can advance the memorandum of understating that the United States signed with the DRC and Zambia to promote a regional mine-to-assembly EV battery value chain. A memorandum of understanding requires investment to bring it into action.

Conclusion

The unprecedented rush to create a secure supply of critical minerals has put the African continent on center stage. Given Africa's wealth in key resources, it will be difficult to reach net zero without it. The circular economy alone will not meet demand.

This necessitates the United States creating a more strategic and fair partnership with the continent, which will require leveling the playing field and engaging with African countries on equal terms.

As is the case with any new relationship, there will be things that need to be ironed out. The United States will need to provide technical assistance to governments on regulations and oversight for good environment, social, and governance practices in the critical minerals value chain.

Africa is perhaps the last frontier of mineral development, and the United States has a powerful opportunity to be a part of it.

Gracelin Baskaran is research director and senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies in Washington, D.C.

Image
5Baskaran
Director, Project on Critical Minerals Security and Senior Fellow, Energy Security and Climate Change Program