Global Courant 2023-04-11 20:53:08
The African Export-Import Bank (Afreximbank) and the United Nations Economic Commission for Africa (ECA) signed a framework agreement with the Democratic Republic of the Congo and Zambia for the establishment of special economic zones for the production of electric vehicles and batteries as a continent appears to be adding value to the rising demand for its critical minerals.
Both countries have large reserves of some of the critical minerals needed to produce batteries for electric vehicles and other technologies essential to the green energy transition: the DRC accounts for about 70% of the world’s cobalt supply and 88 % of cobalt exports, and the two countries together contribute 11% of all copper supplies worldwide. Both countries also have reserves of lithium, a key ingredient in batteries for electric vehicles. But until now, both countries had been relegated to the role of suppliers of raw critical minerals to foreign manufacturers.
To ensure the countries move up the value chain, Afreximbank and ECA will lead the creation of an operating company in a consortium involving public and private investors and Afreximbank’s impact fund subsidiary, the Fund for Export Development in Africa. The new company will develop special economic zones (SEZs) in both countries for the production of battery precursors, batteries and electric vehicles.
SEZs come in many forms and their effectiveness in Africa is the subject of much debate, but they are usually geographically restricted areas where companies enjoy tax breaks and other legal privileges designed to attract foreign investment and boost employment.
ARISE Integrate Industrial Platform, a pan-African infrastructure developer, has been selected as a technical consultant to conduct the pre-feasibility study for the establishment of the SEZs in the DRC and Zambia.
The organizers say the project will “deploy tried and proven EV technology that will enable both countries to exploit their mineral resources at scale. It will accelerate the production of value-added pre-export products, enabling them to capture more value in these states and will result in a new demand for skilled engineers with technical expertise, providing a significant boost to local labor markets.”
Production challenges
But as African Business reported in January, there are significant barriers to establishing battery factories in Africa. No African country has all the minerals needed to produce batteries, meaning countries must pool mineral resources to achieve the minimum scale and reliability, according to the Triple Win report from the Natural Resource Governance Institute (NRGI).and to ensure that they do not use too much of their minerals for export.
Affordability and a lack of grid-level charging infrastructure mean that the Africa-wide market for four-wheel electric vehicles is expected to be small for decades: the value chain for nickel, manganese and cobalt (NMC) batteries may therefore be constrained to produce battery precursor material .
But with greater potential in the African market for two- and three-wheel electric vehicles, which use lithium, iron and phosphate (LFP) batteries, industries based on battery chemistry could be viable, NRGI suggests. That requires investment in cell factories, which can be facilitated by support for domestic two- and three-wheel EV manufacturers, more lithium discoveries and regional coordination on lithium refining.
There are also many institutional problems. In a survey of four critical mineral-rich African countries – the DRC (cobalt), Mozambique (graphite), Madagascar (graphite and nickel) and Guinea (bauxite) – the Peterson Institute found that none of the four countries has the energy infrastructure necessary to expanding capacity for refining – where raw critical minerals are processed into the ingredients for green energy technologies.
Nevertheless, the institutions are confident that the establishment of SEZs in the DRC and Zambia will help the countries move up the mineral value chain. Antonio Pedro, ECA’s interim executive secretary, hailed the agreement as “an important step to ensure we have the right policies in place to benefit the region from the so-called green mineral boom”.
Afreximbank Export Development Director Oluranti Doherty said: “The implementation of this framework agreement demonstrates a strong commitment by the governments of the DRC and Zambia, Afreximbank and ECA, as well as other partners, to promote the inclusive development of the Battery Electric. Vehicle value chain, making the DRC and Zambia also globally competitive investment destinations.
At Afreximbank, we firmly believe that industrial parks and special economic zones are crucial tools the continent can deploy to accelerate the development of industrial infrastructure, promote intra-African trade, accelerate the implementation of the AfCFTA and promote export development. ease.”
‘Governments must take steps’
In a recent interview with African Business, World Trade Organization Director General Ngozi Okonjo-Iweala stressed the need for African countries to be part of the electric vehicle supply chain and push for agreements to process those minerals on the continent to add value and create jobs.
“Our governments need to step it up a notch so we can take advantage because I’ve seen investment drain elsewhere,” she noted.
