Africa Wants to Benefit from Its Lithium Boom: It Must Find Ways to Tame the Dragon

For clean and sustainable energy in the future, energy storage systems are becoming increasingly important. And, Lithium-based batteries are anticipated to be the most significant component of Energy Storage Systems (ESSs) in the electricity and transportation sectors. Furthermore, it may be argued that the most crucial factor that would influence the effectiveness and capability of executing different renewable energy projects is the easy availability of lithium. Lithium-ion batteries are essential to power electric cars and store solar and wind energy. In other words, lithium has become the driving force behind the green transition. No wonder it is dubbed as “white gold”.

Lithium-ion batteries are also used for consumer electronic devices such as smartphones and laptops. The high demand for these devices and the rapid transitions towards clean and sustainable energy is putting pressure on lithium mining. As a matter of fact, by 2030, the demand for lithium is expected to increase fivefold. Currently, lithium mining occurs primarily in Australia, Latin America, and China.

China is the world’s leading lithium refiner and controls most of the lithium supply chain. Ironically, China produces the majority of new electric vehicles worldwide despite producing only 7 per cent of the world’s lithium reserves. Nonetheless, China is the world’s largest importer, refiner, and consumer of lithium, purchasing 70% of lithium compounds and supplying 70% of the world’s lithium production, primarily to its domestic lithium battery manufacturers, six of which are among the top ten in the world.

Former US Secretary of State Henry Kissinger said, “Control oil, and you control nations.” Today, the same can be argued for lithium. Over the years, China has attained a monopoly over a number of minerals, such as cobalt, lithium, and rare earth metals. These minerals are essential to the green energy transition. However, western governments and international companies are challenging the status quo, and Africa, with its abundant lithium resources, could play a decisive role in this battle for lithium supremacy.

The issues and challenges of developing lithium industry in Africa

Only a small select group of African nations holds significant lithium reserves: the Democratic Republic of the Congo, Ethiopia, Ghana, Mali, Zimbabwe, and Namibia. These lithium-rich African countries are trying to raise the size of their processing and refining industries to take home a more significant portion of the profits from the global expansion in demand for battery materials.

Indeed, Africa has a lot of potential to grow and create a lot of jobs from its abundant lithium resources. However, establishing a large-scale lithium hydroxide plant would require a regular supply of power, chemicals, and raw lithium for processing. Currently, very few locations in Africa can provide all these things. Additionally, African governments need to provide adequate incentives for the companies to add value domestically.

One more detrimental obstacle to project development is the near-absence of transportation infrastructure. For example, even if some African countries successfully process a small quantity of lithium domestically, they would still require decent highways to take their products to the international market. Ports are distant from most lithium operations in Africa. For many landlocked countries, transporting the lithium to the port would require cross-border logistics and transport infrastructure. And China is also the leading investor in African roads and highways.

Other difficulties include erratic politics and corruption. Australia's AVZ Minerals and China's state-backed Zijin Mining are engaged in a court dispute over the ownership structure of the concession at Manono in DRC (Democratic Republic of the Congo), an abandoned tin mining location that has the potential to be Africa's largest unexplored lithium deposit. Another London-based lithium project, Atlantic Lithium, was developing a Ghanaian mine to supply the US. A short seller accused it of bribing government officials to secure licences and is now stuck in a legal battle. Last December, Zimbabwe banned the export of raw lithium ore to discourage illicit mining and encourage domestic processing. These unpredictable politics increase the project cost and jeopardise the whole project’s development.

Moreover, global politics and commodity markets are unpredictable. Prices for lithium hydroxide soared in 2022 and reached $80,000 per tonne in December. Yet, since then, the price has dropped to $55,000. Investors are pressuring some western miners to reduce their investment plans in reaction to the plunge, even though the current rate is approximately four times higher than the historical average of about $15,000. Finally, anticipating potential lithium shortages, many Western countries are experimenting with new alternatives, such as sodium-ion batteries.

If African nations aspire to become an international hub for lithium, they must begin concentrating on cross-border infrastructure and logistics. If the necessary logistics are in place, the same infrastructure can be utilised to establish different kinds of businesses, including agribusiness and generate millions of new jobs. However, constructing these infrastructures would cost a large sum of money. China is the only country that can afford to invest that much money so quickly. Indeed, Chinese financiers are far more likely to invest in risky projects than Western development and commercial banks.

If Africa can rapidly bring its lithium to the global market, it would significantly alleviate a bottleneck in the energy transition. In fact, by 2030, Africa holds the potential to provide a fifth of the world’s lithium. African lithium miners anticipate a consistent market for the metal for many years. They want competition among different Chinese companies and would prefer companies of other developed nations like Canada and Australia to join the race for African lithium. Undoubtedly, Africa could not benefit from this lithium boom without a competitive market with multiple companies from multiple countries.

Way forward
Africa stands at a crucial juncture in the development of its lithium industry. A thriving lithium industry will undoubtedly contribute to the prosperity of Africa. China has been striving to ensure a consistent critical mineral supply chain, including lithium, for many years. China has also launched several projects in this regard, such as the Belt and Road Initiative. Currently, the US and European governments are pressuring African authorities to cooperate and have been compiling lists of essential minerals. Meanwhile, Chinese companies have been purchasing African mines to produce critical minerals and constructing refineries at home for its processing. Africa would undoubtedly need Chinese investments to grow its lithium sector, at least initially, until other countries catch up. Africa must learn to successfully harness its Lithium resources to lead the global energy transition.

Samir Bhattacharya