By Craig Brewer
As the race for valuable commodities intensifies, it is increasingly evident that geopolitical competition will catalyse a wave of mergers and acquisitions (M&A), reshaping the landscape of Africa’s resource-rich industries. India, the US, Saudi Arabia and the United Arab Emirates (UAE) are all poised to commit further investment to the continent and Africa will need to find ways to maximise its investment attractiveness amid global upheaval.
The rise of the “metals of the future” has seen global demand for cobalt, copper, lithium and manganese, rare earths among other minerals, soar to levels where demand exceeds current production levels.
China dominates critical mineral supply in many of these levels. It accounts for more than 70% of rare earths extraction and 90% of processing including 90% of the world’s neodymium and praseodymium, the key metals for EV magnets and could potentially control up to a third of the lithium mining capacity by as early as 2025.
To feed this, China has taken an increasingly active role in Africa as it seeks to secure access to these key resources.
With shifting geopolitics across the globe, we have seen a number of parties respond with their own moves into Africa.
The current Biden administration has declared that the US is “all in on Africa, and all in with Africa”, meaning that the US is keen to assist African countries to use their critical mineral resources for economic development while helping to strengthen supply chains that are diverse, open and predictable. Historically, the US has had limited commercial engagement with Africa, so this change in strategic outlook is fundamental and will drive investment in the region.
This will be assisted by the US and its 2022 efforts in driving the Minerals Security Partnership (MSP) which is made up of Australia, Canada, Finland, France, Germany, India, Italy, Japan, Norway, the Republic of Korea, Sweden, the UK, the US and the EU.
Its goal of catalysing public and private investments into sustainable, responsible critical supply chains (from mining and extraction, to processing and refining, to recycling) will have to have a real impact on Africa.
Saudi Arabia is a powerful ally for the US. I Its proximity to Africa will enable it to play an increasingly important role in terms of M&A in the mining sector – particularly as the sector has been identified as a critical element of Saudi Arabia’s Vision 2030, a government-led programme aimed at economic diversification away from oil.
It is clear that Saudi Arabia intends to operate across the globe and appears keener to hold equity in mining companies over actually operating them. Its recent invite to participate in the BRICS cluster may also accelerate its entrance into Africa.
As examples, Saudi Arabian Mining Co (Ma’aden) and the Saudi Public Investment Fund (PIF) acquired 10% of Brazilian Vale’s base metal unit and have formed a joint venture called Manara Minerals as a vehicle for further acquisitions. Ma’aden also acquired a 9.9% stake in Ivanhoe Electric, a US mineral exploration group and is part of an equal joint venture agreement with Barrick Gold for the Jabal Sayid copper mine.
Manara Minerals has indicated it has more than $15 billion (R282bn) to invest in mining assets globally over the next few years.
The support by Africa for Saudi is shown in that more than 25 African governments were present at the Future Minerals Forum, held by the Saudi Arabian government, in Riyadh in January 2024.
The UAE is another Gulf player with its eye on Africa. The UAE’s International Resources Holdings is the new strategic equity partner in Mopani Copper Mines in Zambia and has also recently teamed up with London Stock Exchange (LSE)-listed Jubilee Metals to process significant copper tailing deposits, again in Zambia.
Last, but not least, India itself is a force to be reckoned with as China grapples with some of its internal economic challenges which has seen it focus inwardly on its own domestic market. India and Africa have been long-standing trade partners across multiple industries and mining and resources are no different. The total trade in the mining and mineral sector between India and Africa since 2001 stands at $43.13bn with Indian net imports around 77%.
Africa is attractively positioned as global powers seek to identify key investment assets on the continent. However, it is important that the continent focuses on two elements.
The first is that Africa has often struggled with a fractious relationship with international investors who have viewed their activities on the continent as extractive by nature. This has limited the economic benefit being realised by the countries and communities who are home to these valuable resources. It is key that this mining is done in a sustainable manner with a focus on long-term benefits.
The second is the importance of developing an environment which is attractive to the best long-term investors, rather than short-term partners. To obtain this financial and investment support, Africa will need to strengthen its governance practices, be more open and consistent in its regulatory frameworks and allow a broader distribution of benefits to its own people.
If Africa can get this right, it will reap the economic benefits for years to come.
Craig Brewer is the managing director: Co-Head Origination, Investment Banking Absa CIB
BUSINESS REPORT