Critical Minerals: The pivotal key to Africa’s industrialisation

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JIMMY MOYAHA: The African Continental Free Trade Area [AfCFTA] agreement is something that has been in place for quite some time on the African continent, aimed at ensuring better trade with our continental partners and improving the state of trade on the African continent.

There are developments in that space, especially where it relates to critical minerals and industrialisation of the African continent. We’re going to be taking a look at that in more detail – and seeing how these developments could potentially benefit the continent at large.

For this conversation I’m joined on the line by the member of the Advisory Council on Industrialisation and Trade at the African Continental Free Trade Area, Dr Rob Davies. He’s also a former Minister of Trade and Industry in South Africa… He joins me on the line now to see what we make of these developments.

Dr Davies, lovely having you on the show. Thanks so much for taking the time. Let’s perhaps start with an overview of where the AfCFTA agreement sits currently in relation to some of these matters of critical minerals and the industrialisation of the continent.

ROB DAVIES: Well, I think that the reality is that the institutions of the AfCFTA have been established. The secretariat has been established. I believe that 50 of the 54 member countries of the AU have now ratified the agreement. The rules of origin on the auto sector were agreed a little while ago, and I think most of it is up and running as a trade arrangement – and there is already some trade that is taking place in the context of the AfCFTA.

There has been a small, welcome increase in inter-regional trade recorded in recent years.

But I think that the growing consensus is that the organisation and the structure is now at a crossroads and that it needs to advance in the direction of becoming a tool to promote diversification of economies’ industrialisation, and a much stronger level of cooperation and coordination around the building of regional value chains and dealing with matters like the supply of critical minerals, where there’s a stated intention and objective to try to add more value to mineral products –  as well as, for that matter, agricultural products before they’re exported.

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All of this has given rise to a decision that was taken at the African Union Conference in February this year, instructing the secretariat to facilitate a process of negotiating a protocol on industrial development.

I think this is the big challenge facing the organisation now. It comes across in a global context where I think we are seeing that there is a shift away from the kind of global value chains’ willingness to accept finished products in the markets of the Global North. The barriers are going up. There is a shift towards strategic considerations and security matters shaping trade agreements, much more transactional approaches to trade, and much less willingness to accept value-added products from the Global South.

I think the passage that supported the industrialisation of Asian countries after the Second World War – starting with Japan and concluding most recently with China, where [the path of] selling industrial products into the likes of the Global North) has now been littered with obstacles that those countries didn’t face.

And so the AfCFTA area, which is equivalent to the eighth-largest economy in the world as a combined GDP, offers a very, very important basis on which to try to drive the process of industrial development going forward.

And I think that’s the moment that the AfCFTA finds itself at.

JIMMY MOYAHA: Prof, can we take a look at the pivotal timing of all these factors lining up? It almost feels like the creation of the perfect storm. We’re seeing growth in intra-African trade, we’re seeing a huge shift globally towards that critical minerals conversation you alluded to. And for the first time as a continent, Africa has the opportunity to act, in unison and to come to these conversations with a united voice.

Take us through just how this is almost that make or break moment, not only for the Continental Free Trade Agreement in the free trade area, but for the African continent at large.

ROB DAVIES: Well, yes, I think the African continent is facing a very different global environment, one which requires us to act together. And we have the good fortune that it didn’t anticipate all the developments it has seen over the last couple of years, but we have the good fortune that we did agree some years ago to establish the African Continental Free Trade Area.

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And so I think as it has unfolded it has demonstrated the potential. And I think it’s to build on this potential that the real challenge lies – its potential to serve as a driver of regional value chains.

So what this says is that if it’s now more difficult to export finished products to the markets of the Global North, and if everybody else is also scrambling for markets wherever they can find them, it’s not going to be that easy.

But we have a large African market. How are we going to make that a tool for driving industrial development? I think the point is that it offers the basis for a larger market than any domestic economy could produce, and also the possibility of more inclusive industrialisation drawing in a number of smaller economies into different complementary roles in the production of products that will be drawing on inputs from different countries, assembled in the various countries, and then sold across the continent.

That kind of vision, I think, is now being recognised increasingly as becoming an absolute necessity for the continent as we confront all sorts of challenges – not just the geopolitical uncertainties, but also things like the transition to a low-carbon economy where, if we are not actually industrialising, I think we’re going to find ourselves facing a very, very unjust transition and one which is going to draw less and less international finance for [it].

So all of these factors I think have led to a growing recognition – and this was stated by the leaders – that we need to move in this direction.

I think the real emphasis is, as it often is, that we have to move from declarations and policy statements into the area of implementation. That’s I think where the process of developing the protocol is intended to try to move.

JIMMY MOYAHA: Prof, before I let you go I want to look at what we could potentially see as the impact of moving forward in the right direction, as opposed to moving forward in the wrong direction. We’ve seen over many, many years the results of industrialisation of economies. We now have a clear distinction between a developed economy, a developing economy, and economies that continue to struggle.

Africa sits in a unique position in that the resources are here. The resources that are sought after for industrialisation exist on the continent. How much more powerful does that industrialisation become if it is to be done correctly?

ROB DAVIES: Well, yes. Here’s the figure. There are different definitions of what a ‘critical mineral’ is. Not all of them are around climate change. But let’s take the issue of batteries, which is a critical product.

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Africa has 30% of the world’s known reserves of critical minerals required for battery production. But here’s the other side of it. Less than 5% of our production of those minerals leaves the continent with any form of processing.

So all the value addition is taking place outside the continent.

I think what the continent is clearly signalling as an ambition is that we need to break out of that position in the global value chain, and we need to move into higher value-added production and activities of that sort. That’s going to require quite a lot of cooperation. Also, it’s going to require some coordination of negotiating effort because there is a very, very aggressive pursuit of what are called critical-minerals deals, in which I think there’s no real idea on the side of our interlocutors that there should be any level of processing.

So unless we actually start to set the terms, I think we could find ourselves relegated to the position that we’ve always been in – where we were sent to during colonial rule, and where we have continued to languish ever since, tied to the apron strings of the production and exports of primary products.

I think that the whole intention is to try to move away from that. That is one important value chain. It’s not the only one, but it is one of the important ones. Several others have been identified as well.

JIMMY MOYAHA. The winds of change are inevitably blowing in favour of the African continent, and it is the continent’s responsibility to ensure that they set sail in the right direction if we are to make the most of this and industrialise this beautiful continent of ours.

We’ll leave the conversation on that note. Thanks so much to former SA trade and industry minister, but also member of the Advisory Council on Industrialisation and Trade, Dr Rob Davies, for joining us to look at the African continent and its potential.

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