## Digging for Opportunity: Harnessing Sub-Saharan Africa’s Wealth in Critical Minerals

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**Canonical URL:** [Digging for Opportunity: Harnessing Sub-Saharan Africa’s Wealth in Critical Minerals](https://www.imf.org/-/media/files/publications/reo/afr/2024/april/english/mineralsnote.pdf)

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---

### Overview and key findings
- Sub-Saharan Africa is estimated to hold about 30 percent of the volume of world’s proven critical mineral reserves.
- Extraction of select minerals could boost the region’s GDP by 12 percent or more by 2050.
- Advancing beyond exporting raw materials to developing processing industries presents larger opportunities: higher profits, increased tax revenues, higher-skilled jobs, and technological spillovers.
- Realizing these gains requires sound fiscal regimes and policies to manage resource revenues responsibly.

### Demand outlook and revenue projections
- Under the IEA 2050 Net Zero Emissions (NZE) scenario (IEA 2023):
  - Demand projections: doubling and tripling of demand for nickel and cobalt, and a tenfold increase in demand for lithium between 2022 and 2050.
- Global revenues from production of four key minerals (copper, nickel, cobalt, and lithium) are estimated at $16 trillion over the next 25 years (in 2023-dollar terms).
- Sub-Saharan Africa stands to reap over 10 percent of these cumulated revenues—nearly $2 trillion in 2023-dollar terms.
- By contrast, estimated fossil fuel revenues for the region over the next 25 years are $625 billion (current dollar terms).
- Fossil fuels in the region are on average:
  - Higher carbon intensity by 70 to 80 percent.
  - Higher extraction cost by 15 to 20 percent.

### Current production, reserves, and global role
- The Democratic Republic of the Congo dominates the global cobalt market with over 70 percent of global output and approximately 50 percent of the world’s proven reserves.
- The Democratic Republic of the Congo accounts for 74 percent of global cobalt mining and sends 97 percent of its cobalt exports, mostly unprocessed, to China.
- Key manganese producers—South Africa, Gabon, and Ghana—collectively account for over 60 percent of global production.
- Zimbabwe, the Democratic Republic of the Congo, and Mali hold substantial yet-to-be-explored lithium deposits.

### Value-added gap from limited local processing
- Most sub-Saharan African countries export critical minerals primarily in raw form rather than processed form.
- Market-value example (end 2023 spot prices):
  - Raw bauxite: $65 per ton.
  - Aluminum (processed): $2,335 per ton.
- Regional participation in global value chains shows a focus on extraction rather than downstream processing; empirical indicators show sub-Saharan Africa lagging in moving downstream and in GVC participation relative to China and Indonesia.

### Constraints to developing processing industries
- Major constraints identified:
  - Limited access to financing for building processing plants; public finances have been under strain after recent shocks.
  - Domestic firms lack know-how and expertise for sophisticated processing.
  - Insufficient infrastructure and energy systems to meet high energy demands of processing plants.
  - Need for comprehensive transport networks: trains, containers, trucks, storage, and integrated custom port facilities.
- Energy intensity example for bauxite:
  - Extracting bauxite consumes 34 kWh per metric ton.
  - Refining bauxite consumes over 3,000 kWh per metric ton.

### Role of Foreign Direct Investment (FDI)
- FDI can provide capital, advanced technology, and expertise; greenfield FDI is particularly impactful for technology transfer, job creation, and skills development.
- Between 2016 and 2022:
  - Sub-Saharan Africa attracted about 13 percent of announced global greenfield FDI projects in metals and minerals annually.
  - Of those projects, 73 percent went towards extraction and only 26 percent, on average, towards manufacturing and processing.
- Multinationals require both stable raw-material supplies and sizable markets for processed products; the absence of a substantial regional market reduces incentives for local processing investment.

### Policy directions and regional strategy
- Regional coordination and integration can create a larger, more attractive market for processing investment and pool resources to overcome scale, infrastructure, and market-size constraints.
- Specific policy priorities:
  - Bolster regional integration to provide a larger interconnected market and source of both raw materials and demand for processed minerals.
  - Reduce trade barriers and improve connectivity through infrastructure development to facilitate sourcing components across countries.
  - Use the African Continental Free Trade Area to help unite fragmented mineral markets for larger-scale operations.
  - Complement regional approaches with country-level structural reforms to nurture domestic firms in processing and supporting industries.
- Caution on inward-looking local content policies:
  - Currently 17 countries in the region enforce local content regulations in mining and related activities.
  - Past export bans and export control measures (e.g., in Tanzania, Zambia, Gabon, South Africa, Zimbabwe) have often led to reduced local production of processed and raw minerals or discouraged investment when underlying processing constraints remain unresolved.
- Fiscal and resource management:
  - Prudent and transparent resource management and strategic fiscal planning are vital given commodity price volatility and technological change risks (including the possibility certain minerals become less important due to technological change).

### Regional integration and value chains (Section 2)
- Strategy: Form regional value chains that draw on both raw and processed mineral inputs to tap material sources and unlock consumer markets for processed minerals and renewable energy products.
- Policy priorities:
  - Collaborate on policies to create more favorable investment and business environments, prioritizing openness over protectionism.
  - Simplify bureaucratic procedures and harmonize mining regulations across borders to foster a stable, predictable investment environment.
  - Pursue a regional approach to resource taxation and a well-crafted regional mining tax treaty to decrease tax competition between countries and more effectively harness resource revenues (Bourgain and Zanaj 2020; Perry 2022).
  - Minimize environmental impacts of mining and processing to unlock “green finance” funding and investment opportunities.
- Institutional framework: Strengthen the Africa Mining Vision (launched in 2009 by the African Union) as a key framework for regional efforts.
- Pilot/scaling path: Start with smaller-scale collaborative initiatives (example: Democratic Republic of the Congo and Zambia collaboration on electric battery production for two- and three-wheeled electric vehicles for Africa) to pave the way for larger regional mineral processing and manufacturing hubs.

### Domestic policies and structural reforms (Section 2)
- Local content requirements:
  - Caution advised in applying local content requirements that mandate use of local materials and labor.
- Risks of inward-looking policies:
  - Many countries need to reevaluate inward-looking policies, which, despite intentions to strengthen domestic industries, can result in inefficiencies, market distortions, increased costs, trade disputes, and retaliatory actions.
- Preferred reform agenda:
  - Adopt broader reforms to foster a business-friendly environment rather than protectionist measures.
  - Reduce entry barriers and simplify regulatory and tax frameworks to stimulate growth in ancillary sectors and boost overall competitiveness.
  - Strengthen domestic financial markets and improve access to finance—new fintech innovations can be particularly helpful for small and medium enterprises and entrepreneurs that supply goods and services to the mining sector but face difficulties securing traditional financing.

### Fiscal and institutional frameworks for resource windfalls (Section 2)
- Key elements to prioritize:
  - Enhance accountability and transparency.
  - Design an appropriate tax regime.
  - Implement sound public financial management practices.
- Strategic opportunity: Use the current window to negotiate favorable contracts and fortify resource management strategies for the decades ahead.

### Industry placement and supply-chain considerations (Section 2)
- Strategic placement: Processing plants and production facilities in the electric vehicle industry are influenced by proximity to end markets and technical considerations (for example, high costs and safety concerns of transporting heavy battery packs lead manufacturers to locate battery production close to assembly plants).
- Market example: China’s dominance in electric vehicle manufacturing has spurred growth in metal refining capacities, positioning it as a major hub for importing unrefined ores and producing refined metals.

### Greenfield FDI Projects in Metals and Minerals: Capital Expenditure, 2000–22 (chart details)
- Title: Sub-Saharan Africa: Greenfield FDI Projects in Metals and Minerals: Capital Expenditure, 2000–22 (Share of sub-Saharan Africa’s GDP, percent)
- Axis tick values visible in source: 2005; 0.0; 0.5; 1.0; 1.5
- Activity categories shown: Processing; Other activities; Extraction
- Note: Other activities include sales, marketing and support, education and training, research and development, and logistics and distribution.

*Source: International Monetary Fund, April 2024 Regional Economic Outlook: Sub-Saharan Africa Analytical Note — "Digging for Opportunity: Harnessing Sub-Saharan Africa’s Wealth in Critical Minerals".*

### Section 1

### Digging for Opportunity: Harnessing Sub-Saharan Africa’s Wealth in Critical Minerals

### Overview and key findings
- Sub-Saharan Africa is estimated to hold about 30 percent of the volume of world’s proven critical mineral reserves.
- Extraction of select minerals could boost the region’s GDP by 12 percent or more by 2050.
- Advancing beyond exporting raw materials to developing processing industries presents larger opportunities: higher profits, increased tax revenues, higher-skilled jobs, and technological spillovers.
- Realizing these gains requires sound fiscal regimes and policies to manage resource revenues responsibly.

### Demand outlook and revenue projections
- Under the IEA 2050 Net Zero Emissions (NZE) scenario (IEA 2023):
  - Demand projections: doubling and tripling of demand for nickel and cobalt, and a tenfold increase in demand for lithium between 2022 and 2050.
- Global revenues from production of four key minerals (copper, nickel, cobalt, and lithium) are estimated at $16 trillion over the next 25 years (in 2023-dollar terms).
- Sub-Saharan Africa stands to reap over 10 percent of these cumulated revenues—nearly $2 trillion in 2023-dollar terms.
- By contrast, estimated fossil fuel revenues for the region over the next 25 years are $625 billion (current dollar terms).
- Fossil fuels in the region are on average:
  - Higher carbon intensity by 70 to 80 percent.
  - Higher extraction cost by 15 to 20 percent.

### Current production, reserves, and global role
- The Democratic Republic of the Congo dominates the global cobalt market with over 70 percent of global output and approximately 50 percent of the world’s proven reserves.
- The Democratic Republic of the Congo accounts for 74 percent of global cobalt mining and sends 97 percent of its cobalt exports, mostly unprocessed, to China.
- Key manganese producers—South Africa, Gabon, and Ghana—collectively account for over 60 percent of global production.
- Zimbabwe, the Democratic Republic of the Congo, and Mali hold substantial yet-to-be-explored lithium deposits.

### Value-added gap from limited local processing
- Most sub-Saharan African countries export critical minerals primarily in raw form rather than processed form.
- Market-value example (end 2023 spot prices):
  - Raw bauxite: $65 per ton.
  - Aluminum (processed): $2,335 per ton.
- Regional participation in global value chains shows a focus on extraction rather than downstream processing; empirical indicators show sub-Saharan Africa lagging in moving downstream and in GVC participation relative to China and Indonesia.

### Constraints to developing processing industries
- Major constraints identified:
  - Limited access to financing for building processing plants; public finances have been under strain after recent shocks.
  - Domestic firms lack know-how and expertise for sophisticated processing.
  - Insufficient infrastructure and energy systems to meet high energy demands of processing plants.
  - Need for comprehensive transport networks: trains, containers, trucks, storage, and integrated custom port facilities.
- Energy intensity example for bauxite:
  - Extracting bauxite consumes 34 kWh per metric ton.
  - Refining bauxite consumes over 3,000 kWh per metric ton.

### Role of Foreign Direct Investment (FDI)
- FDI can provide capital, advanced technology, and expertise; greenfield FDI is particularly impactful for technology transfer, job creation, and skills development.
- Between 2016 and 2022:
  - Sub-Saharan Africa attracted about 13 percent of announced global greenfield FDI projects in metals and minerals annually.
  - Of those projects, 73 percent went towards extraction and only 26 percent, on average, towards manufacturing and processing.
- Multinationals require both stable raw-material supplies and sizable markets for processed products; the absence of a substantial regional market reduces incentives for local processing investment.

### Policy directions and regional strategy
- Regional coordination and integration can create a larger, more attractive market for processing investment and pool resources to overcome scale, infrastructure, and market-size constraints.
- Specific policy priorities:
  - Bolster regional integration to provide a larger interconnected market and source of both raw materials and demand for processed minerals.
  - Reduce trade barriers and improve connectivity through infrastructure development to facilitate sourcing components across countries.
  - Use the African Continental Free Trade Area to help unite fragmented mineral markets for larger-scale operations.
  - Complement regional approaches with country-level structural reforms to nurture domestic firms in processing and supporting industries.
- Caution on inward-looking local content policies:
  - Currently 17 countries in the region enforce local content regulations in mining and related activities.
  - Past export bans and export control measures (e.g., in Tanzania, Zambia, Gabon, South Africa, Zimbabwe) have often led to reduced local production of processed and raw minerals or discouraged investment when underlying processing constraints remain unresolved.
- Fiscal and resource management:
  - Prudent and transparent resource management and strategic fiscal planning are vital given commodity price volatility and technological change risks (including the possibility certain minerals become less important due to technological change).

*Source: International Monetary Fund, April 2024 Regional Economic Outlook: Sub-Saharan Africa Analytical Note — "Digging for Opportunity: Harnessing Sub-Saharan Africa’s Wealth in Critical Minerals" (Section 1).*

### Section 2

### mineralsnote - Section 2

### Regional integration and value chains
- Strategy: Form regional value chains that draw on both raw and processed mineral inputs to tap material sources and unlock consumer markets for processed minerals and renewable energy products.
- Policy priorities:
  - Collaborate on policies to create more favorable investment and business environments, prioritizing openness over protectionism.
  - Simplify bureaucratic procedures and harmonize mining regulations across borders to foster a stable, predictable investment environment.
  - Pursue a regional approach to resource taxation and a well-crafted regional mining tax treaty to decrease tax competition between countries and more effectively harness resource revenues (Bourgain and Zanaj 2020; Perry 2022).
  - Minimize environmental impacts of mining and processing to unlock “green finance” funding and investment opportunities.
- Institutional framework: Strengthen the Africa Mining Vision (launched in 2009 by the African Union) as a key framework for regional efforts.
- Pilot/scaling path: Start with smaller-scale collaborative initiatives (example: Democratic Republic of the Congo and Zambia collaboration on electric battery production for two- and three-wheeled electric vehicles for Africa) to pave the way for larger regional mineral processing and manufacturing hubs.

### Domestic policies and structural reforms
- Local content requirements:
  - Caution advised in applying local content requirements that mandate use of local materials and labor.
- Risks of inward-looking policies:
  - Many countries need to reevaluate inward-looking policies, which, despite intentions to strengthen domestic industries, can result in inefficiencies, market distortions, increased costs, trade disputes, and retaliatory actions.
- Preferred reform agenda:
  - Adopt broader reforms to foster a business-friendly environment rather than protectionist measures.
  - Reduce entry barriers and simplify regulatory and tax frameworks to stimulate growth in ancillary sectors and boost overall competitiveness.
  - Strengthen domestic financial markets and improve access to finance—new fintech innovations can be particularly helpful for small and medium enterprises and entrepreneurs that supply goods and services to the mining sector but face difficulties securing traditional financing.

### Fiscal and institutional frameworks for resource windfalls
- Key elements to prioritize:
  - Enhance accountability and transparency.
  - Design an appropriate tax regime.
  - Implement sound public financial management practices.
- Strategic opportunity: Use the current window to negotiate favorable contracts and fortify resource management strategies for the decades ahead.

### Industry placement and supply-chain considerations
- Strategic placement: Processing plants and production facilities in the electric vehicle industry are influenced by proximity to end markets and technical considerations (for example, high costs and safety concerns of transporting heavy battery packs lead manufacturers to locate battery production close to assembly plants).
- Market example: China’s dominance in electric vehicle manufacturing has spurred growth in metal refining capacities, positioning it as a major hub for importing unrefined ores and producing refined metals.

### Greenfield FDI Projects in Metals and Minerals: Capital Expenditure, 2000–22 (chart details)
- Title: Sub-Saharan Africa: Greenfield FDI Projects in Metals and Minerals: Capital Expenditure, 2000–22 (Share of sub-Saharan Africa’s GDP, percent)
- Axis tick values visible in source: 2005; 0.0; 0.5; 1.0; 1.5
- Activity categories shown: Processing; Other activities; Extraction
- Note: Other activities include sales, marketing and support, education and training, research and development, and logistics and distribution.

*International Monetary Fund — Digging for Opportunity: Harnessing Sub-Saharan Africa’s Wealth in Critical Minerals, APRIL 2024 — Section 2*

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_Source: https://www.imf.org/-/media/files/publications/reo/afr/2024/april/english/mineralsnote.pdf_