Sub-Saharan Africa holds an estimated 30% of the world’s volume of proven critical mineral reserves and managing their use properly as part of the global transition to clean energy has the potential to transform the region, the International Monetary Fund (IMF) states in its ‘Regional Economic Outlook’ report.

The global transition to clean energy is set to further heighten demand for critical minerals. Between 2022 and 2050, demand for nickel will double, cobalt triple and lithium rise tenfold, according to the International Energy Agency.

However, sub-Saharan Africa still focuses more on extraction than most other regions, the IMF report shows.

Developing local processing industries could significantly boost value addition, create higher-skilled jobs and increase tax revenues, thereby also supporting poverty reduction and sustainable development.

“By diversifying their economies and moving up the value chain, countries will become less exposed to volatile commodity prices, and more able to protect themselves against exchange rate volatility and foreign currency reserve pressures,” say IMF deputy division chief Wenjie Chen, IMF senior economist Nico Valckx and IMF African Department economist Athene Laws.

“The region can generate greater windfalls by not only exporting raw materials but processing them as well. Raw bauxite, for example, fetches a modest $65/t, but when processed into aluminium, it commands a hefty $2 335/t, in end-2023 prices.”

The researchers note, however, that unprocessed minerals are usually transported to Africa’s ports for export to other regions. This shows that local processing options for critical minerals are too often limited, they note.

Foreign direct investment can help provide the capital and expertise to develop mineral processing industries, but the absence of a substantial regional market makes local processing investment less enticing. Policymakers need to remedy this, the report authors say.

“A regional strategy built on cross-border collaboration and integration can create a larger, more attractive regional market for much-needed investment.

“A regional strategy is also essential to fully leverage the diversity of critical minerals, as clean energy technology requires combining multiple minerals scattered across the region,” the authors advise.

Sub-Saharan Africa’s anticipated population boom, coupled with rapid urbanisation and industrialisation, will likely increase demand for renewable energy and expand the market for processed minerals.

The African Continental Free Trade Area can play a key role in reducing trade barriers and developing infrastructure, potentially uniting fragmented critical mineral markets for larger-scale operations and forming regional value chains that draw on both raw and processed mineral inputs.

Coordination can also start on a smaller scale, paving the way for larger regional hubs. For example, the Democratic Republic of Congo and Zambia are collaborating on battery production for two- and three-wheeled electric vehicles popular in African markets.

Countries also need to collaborate on policies to create more favourable investment and business environments, while harmonising mining regulations across borders would foster a, predictable investment environment.