Africa is not new to tilling the ground for gold – whether it is oil or literal goal. The continent’s mineral sector is the largest in the world, ranking first or second for resources such as cobalt, industrial diamond, platinum-group metals (PGM), bauxite, phosphate rock, vermiculite, and zirconium. In 2022, Africa Mining Market size was valued at USD 476.86 Billion, and it is projected to reach $799.66 billion by 2030, growing at a CAGR of 6.60% from 2023 to 2030 according to Verified Market Research. While the global demand for certain mineral resources have led to an overreliance on some commodities more than others, Africa’s mining potential remains vast and there is no better time than now to explore the opportunities.
Saudi Arabia’s Race to Mining Glory – A Case Study
Saudi Arabia like many other nations set out to diversify its economy from oil and gas. To do this, it has apparently set its sight on mining, making a bold move to obtain minerals like copper, nickel, lithium and iron ore as a result of their demand as critical resources for the creation of electric vehicle batteries as well as solar panels. Then in 2023, the kingdom secured a $2.6 billion deal to purchase 10% of Vale SA’s base metal unit, warding off competition from Qatar and Japan.
Additionally, the country is looking to purchase more stakes in foreign mining operations through Manara Minerals Investment Co., -- a special vehicle established by Saudi Arabia’s powerful sovereign wealth fund and Saudi Arabian Mining Co. Industry analysts believe that their entry will ultimately making it harder for nations like the US and Europe to secure access to commodities. Just this month, it had its first mining conference in Riyadh, bringing in top executives from major global miners, around 16,000 other delegates, and a range of government representatives from the United States.
Why Africa Needs To Pick Up The Pace
- Because it can?
It is no news that Africa is resource rich. Nigeria for one is blessed with over 44 solid mineral resources in commercial quantities, with resources like Granite, Limestone, Laterite, etc possessing the largest share based on a production volume. It earned a total of N193.59 billion from the solid minerals sector in 2021, representing an increase of ₦60.32 billion or 51.89% growth compared to the 2020 revenue flows of ₦116.82 billion.
Yet, Nigeria Extractive Industries Transparency Initiative (NEITI) refers to the contribution as abysmal considering the vast potential of the sector to the Nigerian economy. In 2022, Nigeria’s Lithium minerals caught global attention following its discovery in commercial scale in states like Ekiti, Nasarawa, Kwara, Cross-River, and Kogi. Just in 2022, the global cost of tonne of Lithium in 2022 rose to ₤61,000 from ₤4,600 in 2020. If that isn’t reason enough, Gafeng Lithium Industry Ltd., a Chinese company is currently building a Lithium processing plant in the central Nasarawa state, Nigeria, to process 18,000 tons of Lithium ore per day to manufacture batteries for electric vehicles.
We can also see a similar trajectory in South Africa. South Africa has as much as 91% of the world’s platinum. It is also a leading source of platinum-group minerals (PGM). According to the 2022 United States Geological Survey’s Mineral Commodities Summaries, South Africa contains about 90% of the world’s PGM reserves. Just last year, the total revenue of South Africa's mining industry was placed at around $34.8 billion. It has as much as doubled its revenue in the sector over the past five years.
Various other African countries can boast of stellar solid mineral reserves. While the continent’s abundance of critical mineral supply is not in doubt, limited investments in technology and capacity expansion specifically around processing, manufacturing, and refining have limited its value.
2. Positioning for the Energy Transition (+EV’s)
Given the move to green energy, there’s no gainsaying the fact that mining will be at the core of the energy transition. Africa stands at the core of this from both a demand and supply side. From a demand side, a wide range of mineral resources will be required for the energy transition specifically for the development of low-carbon energy sources. Specifically, the technologies to be used in the conversion of solar, wind, hydro, and geothermal resources into energy require the use of these mineral resources. Critical mineral resources like cobalt, manganese, lithium, nickel, neodymium, samarium etc, will be required to create low-carbon energy infrastructure including solar panels, wind turbines, and batteries.
From a supply side, about 50% of the countries in Africa contain substantial amounts of one or more critical minerals required for the energy transition, with South Africa, Nigeria, Algeria, Angola, and Libya producing more than two-thirds of Africa’s mineral wealth. Generally, there has been an increaseddemand for Rare Earth Elements (REE) owing to the rise of electric vehicles and the technology required for renewable energy technology.
3. Increased investment and revenue potential
Africa is home to about 30% of the world’s mineral reserves; yet, in 2022, it accounted for less than 5% of the global mining revenue. Naturally, investors are interested. Capital that has previously been deployed into African oil & gas projects is now being redirected into mining specifically as a response to the energy transition. Additionally, trade tensions from the Russia-Ukraine war have led western countries to look to Africa for investment opportunities. The mining sector is set to witness increased demand for investment given its availability and limited exploration. However, there is ardent need for the creation of sound regulations to encourage investments and protect investors interests.
Additionally, it provides an avenue for increased revenue as well as the creation of both direct and indirect jobs across various stages of the value chain. Investing into the African mining sector also allows the continent to tap into the $2 trillion dollar global mining market as well.
While the mining sector appears to hold a lot of potential, global investors remain concerned about the continent’s volatile political and economic landscape. It is why many African mining organizations choose to expand their operations abroad. However, for Africa to truly expand, it needs to create sustainable value in Africa and for the benefit of the continent.
Lawretta Egba is a chartered accountant, financial analyst and writer, leveraging data to tell meaningful stories.
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