Why Has Africa’s Mineral Wealth No Impact on the Economies of African Countries?

Sudanhorizon – Othman Siddiq

Several economic studies have confirmed the increasing demand for many minerals available in several African countries, which has made these minerals a source of African exports. In 2022, Africa exported about $29 billion in “transitional metals” products, and many countries benefited by importing $55 billion worth of transitional metals and minerals derived from them from Africa in the year mentioned above.

Between 1995 and 2018, transition metals and related products accounted for 23% of sub-Saharan Africa’s total exports. Global demand is expected to grow further as the energy transition accelerates, with demand for key transition metals produced in Africa set to rise rapidly through 2050.

A report released by the Civil Society Network on September 5th and published by The New Times of Rwanda, “How can Africa make the most of its transition metals?”, looks at the minerals produced in Africa that are used in technologies linked to the transition to renewable energy, the minerals used to make those technologies, and those needed to help existing technologies (such as motor vehicles) run on electricity.

The report notes that Africa is a significant supplier of transition metals globally. Still, the continent is stuck at a relatively low level in the transition metals value chain, processing some of its minerals but largely absent from manufacturing many clean energy technologies.

As a result, the continent may miss a critical opportunity to support inclusive growth, create jobs, and reduce poverty.

Observers say the last major surge in demand for, and in the underlying prices of, the continent’s minerals occurred between 2004 and 2014 and was linked to the rise of China and its need for raw materials. Despite rising government revenues, some resource-rich countries in sub-Saharan Africa have not invested effectively in diversifying their economies or laying the foundation for sustainable economic growth. As a result, after the commodity boom ended, these countries experienced slower growth than others. To seize this opportunity, the report recommends that African countries develop solid policies and appropriate regulations to encourage value-added of their transitional minerals or increase the involvement of national companies in supplying minerals to mining companies, with an eye toward long-term economic benefits.

The report argues that development partners, countries, and institutions that provide aid to or trade with Africa must ensure that their efforts to access transitional minerals do not contribute to increased suffering for local communities or environmental destruction in mining or processing areas and that workers in transitional minerals value chains and affected communities receive a fair share of the economic benefits in the form of social responsibility.

This has been demonstrated recently in cases such as the EU-US Memoranda of Understanding with Zambia and the Democratic Republic of the Congo and the EU-Namibia-Rwanda Memoranda of Understanding, where development partners promised to support African countries in processing their transitional minerals locally as part of agreements designed to facilitate access to those minerals.

Mining governance experts argue that some of the mineral-rich countries in Africa are not necessarily rich countries for various reasons, including lack of value addition initiatives and hence export of huge quantities of unprocessed minerals, lack of access to adequate investments, corruption, and misappropriation of public funds linked to lack of transparency and accountability by government officials, poor contribution of the mining sector to the socio-economic development of communities, environmental degradation, as well as reliance on mining income and ignoring more opportunities offered by other economic sectors.

Rwanda has made rapid strides in this direction and is known to be home to transitional minerals including, mainly, beryllium and lithium, and has so far prioritised exploration activities to accelerate transitional mineral deposits and assess their economic viability before venturing into mining, processing, value addition and selling the same minerals. Rwanda’s mineral exports hit a record $1 billion in 2023, targeting $2 billion in annual mineral export revenues by 2029. Rwanda has welcomed the world’s second-largest mining company – Anglo-Australian Rio Tinto, for ongoing lithium exploration nationwide.

Similar activities have been launched at the Trinity Metals, Musha-Ntunga mine by the top management of the Rwanda Mines, Petroleum and Gas Board. The country is nevertheless aiming to become a mineral hub for Africa, with companies already smelting cassiterite, coltan, and gold there.

In Sudan, the Mineral Resources Company actively participated in the Africa-China Forum Summit (FOCAC 9) in Beijing as part of the economic delegation accompanying Lieutenant General Abdel Fattah Al-Burhan, Chairman of the Transitional Sovereignty Council, which witnessed the signing of several bilateral agreements between the two countries, including those related to the Mineral Resources Company. Even after the forum’s conclusion, the company continued its meetings with Chinese investors and businessmen. The General Manager of the Sudanese Mineral Resources Company Limited, Mohamed Taher Omar, said during his visit to the headquarters of the Chinese AUXIN Group of Companies in Beijing that it is considered one of the leading companies in the manufacture of chemicals and explosives used in the field of mining, noting that the visit comes within the framework of the efforts made by the company to return all friendly foreign companies that were suspended due to the war and the rebellion of the Rapid Support Militia against the state.

Economic experts believe that African countries should keep gold in central banks due to its long-term value, performance during crises, and role as an effective portfolio diversifier. Although some Africans know and understand the value of gold, many trade in metal to meet their daily needs, so they are exploited.

Several experts attribute the rush of African central banks to the need to protect their local currencies. In September 2023, gold was worth $1,900 per ounce. In 2024, it was selling for $2,500. So, investing in gold is a very good investment. It is worth remembering that African gold production has grown by 60% since 2010, according to the World Gold Council, which is higher than the global increase of 26%.