SERVAAS KRANHOLD: Africa’s mining sector holds the key to energy transition

Despite a weakening economic outlook, South Africa and the rest of Sub-Saharan Africa are attracting the attention of investors in the mining sector as the continent rapidly becomes a target for the development of new mines to meet growing global demand for so critical commodities such as copper and lithium.

In 2023, Africa held about half of the world’s cobalt and manganese reserves — essential for renewable energy and electric vehicles — positioning the continent to benefit hugely from the green energy transition. As the shift toward cleaner energy accelerates, the mining industry is undergoing major changes to meet demand for these minerals, driving innovation and reshaping mining priorities worldwide.

Critical minerals are essential to the green transition. Copper, for example, is an important component of electric vehicles (EVs), wind turbines and solar systems; nickel and manganese enhance battery performance and stability; zinc protects renewable infrastructure through galvanisation and is used in energy storage; silicon is the core of solar photovoltaic cells; chromium is used in corrosion-resistant steel for turbines and EVs; and rare earth elements such as neodymium are integral to \high-efficiency magnets in wind and EV motors.

To reach net zero, the demand for critical minerals by clean energy technologies is expected to nearly triple by 2030 and quadruple by 2040, reaching 40MT a year. Demand for lithium is set to grow substantially, potentially increasing fivefold by 2040, with cobalt demand doubling by 2040.

The total market value of key energy transition minerals is projected to more than double by 2040 under climate-focused scenarios, surpassing revenue from coal production by 50.6%.

This trend is increasingly evident in Africa, as the continent’s coal output is expected to decline by 12.5% between 2024 and 2029 owing to reduced investments and the number of new projects reflecting global climate priorities.

In contrast, metal and non-metallic ore production is set to rise by 10.3% over the same period, supported by African governments through national and regional initiatives. Between 2024 and 2050, cumulative revenues from four critical minerals are forecast to exceed those from fossil fuels by 3.1 times.

Protectionist wave

The global demand for minerals is set to be influenced by a protectionist wave, particularly with Donald Trump’s administration likely to implement new tariffs. That could hamper demand for metals like iron ore, potentially disrupting traditional trade flows. Precious metals might enjoy a different fate, possibly acting as safe-haven investments.

Apart from import tariffs, critical minerals can also be subject to export restrictions or tariffs. These measures could affect the supply of critical minerals, resulting in higher prices amid concerns by manufacturers about the security of raw material supplies.

Already, the OECD has found export restrictions on energy-related raw minerals are trending higher with the number of restrictions, including tariffs, increasing from 396 measures in 2009 to 502 in 2021.

Meanwhile, the trend of deepening interdependence between the US and China has reversed, leading to a broader but less concentrated form of globalisation. Countries are seeking new trade partners and corridors, which present both opportunities and complexities for African mining operations. This shift necessitates foresight; miners will need to navigate new geopolitical landscapes to secure capital, technology and markets.

Even with a growing number of financing solutions, the mining sector still lacks capital, despite the global interest in Africa’s minerals. The complexity of investing in the industry overall is further exaggerated by higher risks in Africa compared to other regions.

Mining companies on the continent need to develop a long-term strategy given the challenges and use coming opportunities amid the rising interest of different markets in energy transition minerals.

To meet the growing demand for critical minerals, the African mining sector should adapt to challenges, such as political instability, shifting trade paradigms, energy shortages, environmental and social issues, along with poor transport infrastructure and high logistics costs.

Jean-Claude Kassi Brou, president of the African Development Bank, has stressed the importance of investing in automation and digitalisation, not only to improve productivity but also to make the industry safer and more environmentally friendly.

The mining industry, traditionally reliant on stable energy supplies, will face increased pressure not only to operate under these constraints but also to expand beyond mere extraction.

Continued concentration of refining and processing in a few dominant countries such as China highlights the need for diversification.

There is no doubt that macroeconomic and political challenges aside, the mining sector in South Africa and across Africa is increasingly reshaping its role to become a key enabler of energy transition on the continent and globally due to its abundant supply of critical minerals.

• Kranhold is head of natural resources at BDO South Africa, an audit, tax, and advisory firm