Investing in Southern Africa’s critical minerals: A global imperative for the energy transition

Southern Africa stands as a pivotal player in the global energy transition, endowed with vast reserves of critical minerals such as lithium, cobalt, copper, graphite and platinum-group metals. These minerals are indispensable for manufacturing electric vehicles, renewable energy systems, and energy storage solutions.

Despite this abundance, the region remains undercapitalised, attracting less than 10% of global exploration spending. This disparity underscores the need for concerted efforts to unlock investment and harness the potential of these resources.

The global shift towards clean energy technologies has escalated the demand for critical minerals. The International Energy Agency (IEA) projects that by 2040, the demand for lithium will increase fivefold, cobalt demand will double, and copper demand will rise by 30%. These projections highlight the necessity for a robust and sustainable supply of critical minerals to meet the growing needs of the energy transition. Southern Africa\'s mineral wealth positions it as a key supplier in this global endeavour.



Barriers to investment

Several systemic barriers impede the flow of investment into Southern Africa\'s mineral sector:

• Policy uncertainty: Inconsistent and frequently changing mining regulations create an unpredictable investment environment.

• Infrastructure deficits: Inadequate transportation and energy infrastructure increase operational costs and reduce competitiveness.

• Access to reliable energy: An Unreliable energy supply hampers industrial activities and deters investment.

• Innovation lag: Slow adoption of advanced technologies affects productivity and efficiency.

• Skill gaps: A shortage of skilled labour limits the capacity to develop and manage mining operations effectively.

• Demand volatility: Fluctuating global demand for minerals introduces financial uncertainties.

These barriers collectively hinder the mobilisation of capital necessary for the development of the region\'s mineral resources.



Case studies

The World Economic Forum\'s report presents several initiatives aimed at overcoming these barriers and unlocking investment. These include:

• The Lobito Corridor: This railway-focused initiative aims to enhance export access for the Democratic Republic of the Congo (DRC) and Zambia by linking their mineral-rich regions to Angola’s Port of Lobito. Backed by the European Union, the United States, Angola, the Development Bank of Southern Africa (DBSA) and others, the project includes upgrades to existing rail lines and a planned 800 km extension to ease bottlenecks and foster regional trade and investment. This initiative exemplifies how infrastructure development can facilitate mineral exports and attract investment.

• Early-stage exploration financing: Innovative financing models are being developed to support early-stage mineral exploration, reducing financial risks for investors. These models aim to bridge the funding gap for exploration activities, which are often perceived as high-risk by traditional investors. By providing targeted financial instruments, such as blended finance and risk-sharing mechanisms, these initiatives seek to mobilise capital for the initial stages of mineral development.

• Policy reforms: Countries like Zambia and the DRC have implemented policy reforms to attract investment and streamline mining operations. These reforms include simplifying licensing processes, enhancing transparency, and establishing clear regulatory frameworks. By creating a more predictable and investor-friendly environment, these countries aim to boost investor confidence and stimulate capital inflows into the mining sector.

These case studies demonstrate that targeted interventions can address specific barriers and catalyse investment in the critical minerals sector.



Regional cooperation

Addressing the challenges in Southern Africa\'s mineral sector requires coordinated efforts among countries in the region. Aligning regulatory frameworks, harmonising trade policies, and investing in shared infrastructure can create a more attractive investment environment. Regional cooperation also enables better integration into global value chains, allowing countries to capture more value from their mineral resources through local processing and manufacturing. By working together, Southern African nations can enhance their collective bargaining power and attract larger volumes of investment.

The urgency of securing a stable supply of critical minerals is underscored by the global race to achieve net-zero emissions. The International Energy Agency estimates that to meet net-zero targets by 2050, the world will need six times more mineral inputs by 2040 than today. This escalating demand places additional pressure on existing supply chains and highlights the need for new sources of minerals. Southern Africa\'s untapped reserves present a significant opportunity to meet this demand, provided that investment barriers are addressed.

Furthermore, the development of Southern Africa\'s mineral resources can contribute to regional economic growth and job creation. By investing in the mining sector, countries can stimulate industrialisation, enhance infrastructure, and improve energy access. These outcomes align with broader development goals, including poverty reduction and sustainable economic development. - Sources: World Economic Forum, International Energy Agency, Development Bank of Southern Africa, McKinsey & Company, African Development Bank and the United Nations Economic Commission for Africa.