Building downstream capacity for critical minerals in Africa: Challenges and opportunities

Cullen S. Hendrix ()
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Cullen S. Hendrix: Peterson Institute for International Economics

No PB22-16, Policy Briefs from Peterson Institute for International Economics

Abstract: Demand for critical minerals--bauxite, cobalt, copper, lithium, nickel, and other minerals that underpin solar, wind, geothermal, and other forms of renewable energy and electric vehicles--is already booming and is projected to continue to grow at a rapid pace. Africa's mineral-rich developing economies could benefit greatly from this increase in demand. Many African economies have vast critical mineral reserves, and their nascent industrial sectors imply vast export potential. These countries could increase the benefits they reap from these minerals by building downstream capacity in processing--the steps that turn mined ore (bauxite, iron ore) into refined intermediate goods (aluminum, steel). To do so, however, they need to improve their infrastructure, investment climate, and governance and learn to navigate an increasingly complicated geopolitical environment. Hendrix assesses the challenges facing four critical mineral-rich developing African economies: Guinea (bauxite); the Democratic Republic of Congo (cobalt); Madagascar (graphite and nickel); and Mozambique (graphite). The solutions he offers include (a) embracing hydropower potential--which is vast in these countries--while paying attention to social costs and distributive impacts, (b) exempting refinery-related capital goods and industrial inputs from import duties, (c) locating downstream capacity in areas of relative stability, and (d) leveraging external policy anchors to provide policy stability and transparency.

Date: 2022-12
New Economics Papers: this item is included in nep-afr, nep-ene and nep-env
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