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Africa’s vast mineral resources have always pointed to its potential as a market maker – and a global player in consumer goods. But division has kept producers and markets weak. An agreement between Democratic Republic of Congo and Zambia shows how to change that, according to a new report.
SPECIAL REPORT | BIRD AGENCY | Over the last five years, Democratic Republic of Congo (DRC) and Zambia – both of them among the world’s largest copper producers – have refined only a tiny fraction of output domestically.
Between 2017 and 2021, DRC, which produced some 10% of the world’s copper, refined only 7% of its production. Over the same period, Zambia refined only 1.3% of its output, despite being responsible for 3.5% of global production.
Both countries are examples of why Africa has until now played only in the “third tier” of a global supply chain, producing mostly raw materials and not benefitting financially from the handsome rewards of metal and component processing (“second tier”) and consumer goods production (“first tier”).
According to a report by BACI-CEPII, an international trade database covering more than 200 countries, change has begun.
Since 2022, the two countries have collaborated on a number of issues relating to mineral beneficiation, from removing trade barriers – including easing of traffic delays at their borders – to stabilising mining taxes and setting up a cross-border economic zone. All in a quest to add more value to their copper and spur development of locally-made products, like electric car batteries.
These developments, according to the report, shine a spotlight on how other African nations can transform critical resources like aluminium, cobalt, lithium, and manganese – all integral to tech-centric industries – into intermediary products, then finished goods, to become more competitive in the global economy.
The United Nations Conference on Trade and Development (UNCTAD) in their Economic Development in Africa Report 2023, encouraged the continent to leverage on abundant resources, an expanding, youthful consumer market and a burgeoning middle class population, to grow the continent into a global supply chain powerhouse.
“This is Africa’s moment to bolster its position in global supply chains as diversification efforts continue. It’s also an opportunity for the continent to strengthen its emerging industries, foster economic growth and create jobs for millions of its people, ” said UNCTAD Secretary-General Rebeca Grynspan, during the launch of the report in Nairobi.
According to the report, tapping into automotive, electronics, pharmaceutical and medical devices, and renewable energy sectors offers Africa a huge opportunity for make a great leap forward.
In the automotive sector, authors of the report call for greater regional supply chain integration to cut over-reliance on the import of automotive parts and components from outside the continent.
Manufacturing of (“tier 2”) parts and components, the report said, provides the most viable production option for most African countries, as it “requires abundant metals as inputs demanded by a range of manufacturing sectors,” the report explained.
Large reserves of cobalt, copper, graphite, lithium, manganese and nickel in various African markets also provides an opportunity for the strengthening of regional supply chains for items such as mobile phones, in an emerging market.
“Developing mobile telephone supply chain capacities in Africa can unlock further potential in the electronics supply chain and open up market opportunities towards the production of tablets, laptops and high-performance servers, and data storage solutions,” the authors of the report said.
Already, a number of homegrown companies ventured into the precursor development market to give Chinese mobile handset makers like Transsion a run for their money on the continent.
On renewable energy, African countries have been tipped to enhance knowledge and technology transfer to tap a huge opportunity in assembly of large-scale, grid-connected photovoltaic power systems-on the back of surge in local connections.
The UNCTAD report also sees a huge opportunity to enhance local sourcing and manufacture of raw materials beyond collaborating with multinationals to access knowledge and technology to make and supply medical products and devices.
It commended major local research initiatives under way in Egypt to produce the most essential active pharmaceutical ingredients.
But there is a caveat to Africa’s ability to harness these key market and investment trends.
“In order to drive more large-scale private investment, regulatory barriers will have to be removed and regional industrial development plans put in place,” said UNCTAD’s Division on Africa, Least Developed Countries and Special Programmes Director, Paul Akiwumi in a statement.
Grynspan also underscored the urgent need for debt relief for economies in Africa to create the fiscal space needed for them to invest in strengthening supply chains and in education for their workforce.
African countries pay four times more for borrowing than the United States and eight times more than European nations due to perceived high risk profiles for developing nations, according to UNCTAD.
“This must change if Africa is to achieve its full economic potential and be a major actor in global supply chains,” said Grynspan.
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SOURCE:By Conrad Onyango, bird story agency
