Could Africa replace China as the world’s source of rare earth elements?

The rare earth elements, the group 17 metals, are critical to human and national security. They are used in electronics (computers, televisions, and smartphones), renewable energy technologies (wind turbines, solar panels, and electric vehicle batteries), and defense (jet engines, missile guidance and defense systems, satellites, GPS equipment, and more). in 2021 global demand for rare earth elements reached 125,000 metric tons. It is predicted to reach 315,000 tons by 2030.

For that matter, the production of these rare earth minerals has remained concentrated. China dominates the market, accounting for 60% of global production and 85% of processing capacity. Amid growing geopolitical tensions around China and Taiwan, the United States, Australia, Canada and other countries are seeking to reduce their reliance on China as a source of rare earth metals production and processing.

This opens a window of opportunity for African countries. With an abundance of essential commodities, African countries can take advantage of this search for new sources of rare earth elements to generate much-needed revenue to finance key socio-economic goals and reduce poverty, using the African Continental Free Trade Area (AfCFTA) to enhance value. and strengthen global trade partnerships.

The tip of the iceberg of rare earth raw materials in Africa

Africa’s full rare earth potential is largely untapped given the low level of exploration. As shown in Figure 1, in 2021 Sub-Saharan Africa had the second lowest mining research budget in the world – about half that of Latin America, Australia and Canada – despite having three times the surface area of ​​Canada and Australia. in 2021 Canada’s research budget has increased by 62%, Australia by 39%, the US by 37% and Latin America by 29%. The budget for Africa grew by only 12 percent, and most exploration remains focused on gold rather than rare earths or green metals, which are important for the clean energy transition (Figure 2).

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Figure 1 Mining exploration budgets by region, 1997-2021. (millions of USD)

Figure 1

Source: “World Exploration Trends 2022”, S&P Global Market Intelligence.

Figure 2 Breakdown of exploration budgets by commodity, 2012-2022.

Figure 2

Source: “Africa – mining by the numbers, 2022”, S&P Global Market Intelligence.

Expanding exploration to identify and extract rare earth elements in Africa is essential. Several rich deposits have already been found. in 2022 Canadian exploration company Mkango Resources has announced that its Songwe Hill rare earth mine in Malawi is expected to begin production in 2025. Australian company Bannerman Energy has announced that it has acquired a 41.8% stake in Namibia Critical Metals. which owns 95% of Lofdal’s heavy rare earth production operations. The mine produces 2,000 tons of rare earth oxides per year and is rich in deposits of the two most valuable heavy rare earth metals, dysprosium and terbium. South Africa’s Steenkampskraal mine contains one of the highest-grade rare earths in the world. It contains 15 elements and 86,900 tons of total rare earth oxides with significant deposits of neodymium and praseodymium. in 2020 British subsidiary Pensana Rare Earths in Angola has been awarded exclusive 35-year mining rights to the Longonjo mine, a rare earths operation. These deposits are not insignificant given the small proportion of world exploration in Africa.

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How to maximize the benefits of rare earth minerals for Africa

In addition to increasing exploration, there are three ways African countries can maximize the benefits of rare earths for their economies:

  1. As there has been a shift from labor-intensive to capital-intensive mining, the main benefit of these resources is the income generated rather than job creation. Governments have strengthen tax policy to maximize revenue collection while maintaining a stable fiscal policy to avoid volatility which may discourage investment. For example, in 2017 South Africa’s mining and quarrying sector accounted for just 1.3% of total revenue collected, compared to 7.3% of GDP, partly due to tax incentives and benefits. Good governance is needed to ensure that these revenues – in the form of production taxes, regulatory fees and royalties – are used to reduce dependence on external debt and finance key social and economic objectives. This is especially important considering that by 2030 90% can live in Africa. of the world’s poor, as countries have less fiscal space for pro-poor policies.
  2. African countries should use the African Continental Free Trade Area to add value. The process of extraction and value addition is difficult to carry out in a single country due to the high cost of rare earth separation equipment. The United States provided $156 million for a rare earth extraction and separation facility, an amount beyond the reach of most African countries. But without continental separation facilities, African countries will export ores and lose the advantages of local processing and production. If the AfCFTA is effectively implemented, countries could add value within the bloc before exporting. We’ve already seen the power of collaboration, with Zambia and the Democratic Republic of Congo signing an agreement to create a regional value chain to produce electric batteries using minerals found in both countries. It is time for more such efforts.
  3. Africa should strategically deploy resources to build strong trading partnerships and strengthen our presence in global value chains, especially with the US, EU and Australia. U.S. Treasury Secretary Janet Yellen has called for “buddying,” or building supply chain networks, with allies and friendly countries to reduce the risk of political disruption. Canada recently invested 162 million USD to help Quebec become a center of excellence for processing key minerals, specifically to build strong global supply chains and strengthen trade ties with allies. African countries as a bloc can build long-term trade partnerships with these countries that seek to create more resilient rare earth value chains.
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Still, countries need to address the challenges of mining by developing and implementing policies that ensure companies cover all social and environmental costs, from mine exploration to mine closure. Mining can cause significant negative externalities, including pollution, health effects and damage to land and infrastructure. Covering these costs should be included in agreements between companies and governments.

If African countries heed these recommendations, they will be well-positioned to use their rich resources to connect to strategic global value chains and use revenue inflows to sustain equitable economic growth.


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