Analysis in brief: African countries seek what they feel is a more equitable share of what is taken from their lands.
A new era in mineral exploitation
A more equitable period of mineral wealth profit sharing appears to be at hand, and hopefully will replace a history of conflict over Africa’s minerals. Such conflict is presently exemplified by the warfare over the Democratic Republic of Congo’s rich mineral resources. For thousands of years, African nations went to war with each other to possess gold deposits. European explorers came in search of gold and diamonds, some specifically to locate the fabled King Solomon’s mines. The colonial powers’ 19th-century “Scramble for Africa” divided Africa into spheres of influences based on the mineral wealth each foreign nation sought. When African countries achieved their independence, some mining companies took advantage of corrupt government officials to acquire favourable terms for the extraction of precious metals. Countries with honest governments were hamstrung by a lack of technical capacity and financial capital needed to start mining operations of their own, and many needed to yield to the terms of multi-national mining firms if they were to obtain any value for their minerals at all.
A paradigm shift, it seems, is underway in the distribution of Africa’s mineral wealth profits. African countries are finding new opportunities to achieve more revenue for what is extracted from beneath their land and from within their mountains.
Growing global demand for strategic minerals and Rare Earth Elements gives Africa a negotiating advantage
Strategic minerals, such as uranium used in nuclear weapons, are essential for the production of modern weapons of war. Rare Earth Elements (REE) are increasingly valuable as essential ingredients in the production of high-tech electronic devices like smart phones. The Democratic Republic of Congo and other Central African countries have significant deposits of both. Zimbabwe’s reserves of lithium – which is required to manufacture batteries that power electric vehicles and is thus a key ingredient in efforts to combat climate change – are so valuable that the country is using lithium to start a revolution in Africa’s exploitation of its mineral wealth.
Just as with African agriculture, value-added products are key to wealth creation for African countries. This needs to be accomplished by turning commodities that have long been exported in their raw, unprocessed state into valuable products made locally instead of overseas. Zimbabwe has seen an opportunity to create a value-added industry founded on lithium. No African country has more lithium than Zimbabwe, which has enough reserves to supply 20% of the world’s consumption of this vital REE. This puts Zimbabwe in a good bargaining position with multi-national firms that mine or wish to purchase lithium. Further, Harare is frustrated that while the price of lithium has skyrocketed 1,100% since 2021, the country has not reaped its fair share.
Data and graphic courtesy: Robin Harmer and Paul Nex
In January 2023, Zimbabwe startled the world by banning all exportation of lithium. Government wants to produce electric car batteries in the country, arguing that Zimbabwe is losing US$ 1.8 billion a year by not making value-added lithium products but instead shipping it out in its raw state. The ban also includes a crackdown on the significant amount of illegal, informal mining that is taking place, with all the raw lithium extracted by artesian miners smuggled out across the borders of the landlocked country. The lithium ban may be a bargaining ploy and may end if government gets more money for its raw lithium. Zimbabwe’s government has been ranked as one of the most corrupt in the world: number 152 of 180 countries surveyed by Transparency International on the basis of a country’s degree of good governance. The 2023 rankings were released in January 2023. However, the measure may also succeed in luring investors to Zimbabwe to open electric car battery factories. If this latter outcome transpires, then it means the start of a new industrial age in the country.
African countries with strategic mineral deposits and REE reserves, including others in the region such as Burundi, Rwanda and the Democratic Republic of Congo, are watching Zimbabwe’s manoeuvring. In spite of this it would be more effective if they put up a united front, bolstered by a minerals policy from regional bodies like the Southern African Development Community or the continental body the African Union.
Will Africa’s people finally benefit from their gemstones?
While attention is paid to lithium and other REE, essential for high-tech devices, Africa’s original valuable minerals – gold and gemstones – are also making news as countries exporting these seek better terms. Leading the way is Botswana, an arid landlocked country whose economy is dependent on diamond production.
Botswana is Africa’s largest diamond producer. For years, the country has sought to better benefit from its diamond reserves. Sorting, cutting and polishing operations that had always been done in London before were localised in 2015. This created value-added gems for the marketplace instead of simply shipping out raw diamonds to be processed elsewhere. Government also seeks to renegotiate contracts dating from the 1960s for more advantageous terms. Since 1969, 75% of Botswana’s diamond output has been sold to the multinational mining company De Beers, while 25% went to the state-owned Okwango Diamond Company. Prior to 2020, Botswana received only 10% of the profit of diamond sales. De Beers’ has long argued that its large share of diamond sale profits is necessary to recover the large investment made by the company in building and maintaining mining operations. However, investments made by the company have been fully recovered through the lucrative diamond trade. The negotiations have received international media coverage, and other African countries also possessing gemstone deposits are watching what is unfolding in Gaborone.
Image courtesy: International Monetary Fund
Conclusion
Two of Africa’s most important minerals – diamonds and lithium – are subject to unprecedented protective actions by governments, led by Botswana and Zimbabwe that seek greater revenues for their mineral resources. Since the emergence of civilisation, Africa’s mineral profits have been controlled by outsiders. A new age is dawning from the negotiation table as governments seek equitable exploitation of their resources from long-dominant multi-national mining companies.
The critical points:
- African nations seek to localise value-added manufacturing for their minerals for greater profit than exporting these minerals raw, and Zimbabwe is leading the way, empowered by large reserves of the vital REE lithium
- Africa’s largest diamond producer, Botswana, seeks the fair and equitable exploitation of its gemstones to redress over a half-century of receiving low revenue
- African nations can achieve better deals with foreign buyers of their minerals if they stand as a united front, with regional organisations and the African Union guiding mining policies