By Ethan Wilson Villa
Lithium is poised to be an essential component of the green transition. Often referred to as ‘white gold’, lithium plays a key role in technological development within the energy sector. Lithium is used in the production of rechargeable batteries for electric vehicles (EVs), solar panels, and energy storage systems, as well as consumer electronics like phones and laptops. As governments and investors increasingly gravitate towards renewables, the availability, production, and refinement of lithium will condition the execution of many green energy projects down the line. In fact, global demand for lithium is estimated to increase five-fold by 2030. Future demand projections underpin the tense geopolitical landscape facing lithium production and trade today.
The X-Factor: Africa’s Role in the Global Lithium Trade
More than 80% of lithium mining occurs in Australia and Latin America. Although China is home to under 7% of global lithium reserves, it has effectively monopolized the supply chain. China is the biggest force in the importation, refinement, and consumption of lithium – 70% of global production is supplied by China through the Belt and Road Initiative and other commercial agreements. Why, then, is Africa so important? Currently, Africa has roughly 5% of the world’s natural lithium ore reserves. These are distributed among a small selection of countries. Nonetheless, African mines – stimulated by Chinese financing – are expected to increase lithium production 30-fold from last year to 2027, when Africa will account for 12% of global supply versus its 1% share in 2022. Africa is also forecasted to provide a fifth of global demand by 2030. ‘White gold’ is a hot commodity. Considering demand already caused prices to surge last year, these projections illustrate how crucial the African continent will be in the development of the global lithium market. As stated earlier, China dominates the supply chain. The Chinese government prioritized owning the largest share of the critical minerals market in the 2000s and never looked back. In Africa, the strategy has been underpinned by public diplomacy and infrastructure investment.
However, painting the picture of a full-fledged Chinese monopoly in Africa misses the mark on two dynamics. First, it overlooks the West’s efforts to challenge the status quo. Consensus rightly points to the West “waking up too late” to the Chinese strategy. Consequently, though, the U.S. is working towards reverting Chinese lithium hegemony. The leading initiative in this quest is the 2022 Minerals Security Partnership. Spearheaded by the Biden administration and composed essentially of the Global North, the agreement seeks to diversify supply chains. In Africa, the U.S. signed a memorandum of understanding at the U.S.-Africa Summit late last year with Zambia and the Democratic Republic of Congo to develop an EV battery supply chain. The U.S. and E.U. have also committed to the development of the Lobito Corridor, a railway that connects key mineral reserves in Zambia and the DRC to the Angolan port of Lobito. American refineries are negotiating with African mines to fund their projects whilst acquiring equal – not controlling, as is the case with China – shares.
Second, the theory strips lithium-rich African states of their agency. Notwithstanding the barriers to establishing refinement plants in Africa (the need for a regular power supply, inadequate transport infrastructure, and corruption), the possession of lithium reserves grants these African states a degree of bargaining power. To illustrate these dynamics, the case of Zimbabwe is briefly discussed. Zimbabwe has Africa’s largest lithium reserves. With lingering U.S. economic sanctions from the Mugabe era, Zimbabwe turned to the Chinese for investment. The majority of its mines are run by Chinese-owned businesses, which have spent upwards of $1 billion on lithium projects. Zimbabwean lithium is a vertical the Chinese will increasingly pursue, having pledged an investment of $2.79 billion on mining operations in the country. The agency argument, for better or worse, comes into play as Zimbabwe imposed a ban on raw lithium exports in December of last year. As part of the prohibition, companies must set up refinement plants in Zimbabwe and process lithium ore before exporting it in order to create jobs and boost revenue nationally. This has prompted other mineral-rich African nations to follow suit.
Political Debates on Lithium: Policy Going Forward
The Zimbabwean case encapsulates the realities of the lithium trade in Africa. American sanctions limited Zimbabwe’s potential trade partners. China’s opportunistic grand strategy capitalized, as it has done with other African nations. One must bear in mind the nature of these sanctions: Zimbabwe is under the repressive dictatorship of Emmerson Mnangagwa. The issue of agency is, therefore, a pertinent one to grapple with. The sovereignty of African states and the ability to freely conduct their economic affairs is imperative. However, one is forced to adapt these moral dictums to the realities of our current world. Resource nationalism and noxious protectionism in Africa will only prop up inefficient industries shielded from global competitive pressures and further centralize power, thus serving to benefit the political elites at the expense of ordinary individuals. The desire to maximize economic growth in African exporters is evident. These nations, however, lack the means (production capacity, transport infrastructure, and capital) to sustainably and independently profit from lithium exports as of today. African economic growth, thus, should not be based on coercion or barriers to trade. Rather, governments should foster a competitive landscape in the trade of lithium and incentivize investors to go beyond ‘white gold’ and allocate resources to human capital. Domestic processing and refinement is how value is added and a means for investors to grow non-exploitative business partnerships with African governments. Other key areas of investment are international transportation logistics (e.g. the Lobito corridor) and joint research initiatives to educate and innovate in the presence of green energy in Africa. Ultimately, the pursuit of these policies in the context of lithium should be the objective as a competitive business environment, joint research and human capital growth may be the best pathway to sustained and sustainable economic growth.
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