Electric Vehicles: Africa’s battery minerals and GVC opportunities (4)
Significant synergies required to overcome challenges
A number of challenges to greater African participation in LIB GVCs have been identified. There are not enough skilled human resources. Financing is also constrained. The much-harped infrastructure deficit on the continent also applies. And even as governments have recognised the opportunity and gone ahead to enact industrial policies, implementation has been slow. Most importantly, the still small number of annual EV sales does not as yet support making the substantial investment to produce LIBs locally, especially as it is cheaper to import.
In fact, the Energy Storage Research, Development and Innovation (RDI) consortium, which was established in 2011 by South Africa’s Department of Science and Innovation in partnership with the country’s leading universities and research centres, for the development of a local LIB value chain, has since pivoted to simply developing skills and expertise, owing to an “inability to compete with leading countries.”
“There is currently no commercial production of battery cells in South Africa and, despite some projects in development, it remains to be proven whether such an activity would be competitive domestically (TIPS, 2021).” Still, “battery manufacturing based on imported cells is, however, a vibrant industry in the country (TIPS, 2021).”
As the continent has all the raw materials needed to produce LIBs, however, it has a potential comparative advantage in a global market that is expected to expand exponentially over the next ten years to 2030 and beyond. In fact, “battery manufacturing capacity will need to increase from 300 GWh in 2020 to at least 2,023 GWh by 2030 to meet the demand for EVs (Foli, 2020).” In other words, the relatively small local market size need not be a disincentive.
Still, while there is clearly an advantage for South Africa and the SADC region from having all the raw materials in situ, it is still unclear whether the region and the continent could be globally competitive beyond the mineral beneficiation stage. In fact, of the four identified GVC stages of mineral refining, cell manufacturing, battery manufacturing and assembly and battery recycling, only mineral refining and battery manufacturing can be scaled up in South Africa at the moment (TIPS, 2021).
To move forward, African governments may need to follow in the footsteps of hitherto Asian peers like Hong Kong, South Korea, Singapore and Taiwan, which have since left them behind. These Asian countries implemented deliberate industrial policies that birthed numerous global conglomerates that are leaders in the automobile, electronics, and technology sectors today.
Chinese firms already dominate LIB minerals mining in the key African countries. Some of the leading global commodities firms like Glencore, which own mines across the continent, have their Asian hubs in Singapore. Thus, China and Singapore could especially facilitate financing, testing and certification, and access to global markets for African firms looking to move up the LIB GVC.
But some of the impediments are local, by governments, no less. Take the case of the Eurasia Resources Group’s (ERG) Chambishi Metals refinery in Zambia, which has a capacity to produce 6,800 tonnes of cobalt metal per annum. The Chambishi refinery has repeatedly faced constraints on its imported cobalt and copper concentrate feedstock from the DRC.
In February 2019, ERG Africa suspended operations at Chambishi after Zambia imposed a 5 percent duty on its feedstock imports. A year later, in January 2020, Chambishi operations were suspended yet again, owing to a shortage of feedstock, which ERG Africa has been hard pressed to find locally but cannot seem to find enough of the right quality.
The Chambishi case highlights the potential holdups around developing a regional LIB GVC in the SADC region. So even as the case for beneficiation is clear, some of the constraints are local. Firms would only be interested in refining minerals to battery-grade level before shipping if the costs compare favourably. An impositon of tax on feedstock is hardly an approach that supports that economic reality.
An edited version of this article was first published by Nanyang Business School’s NTU-SBF Centre for African Studies, Singapore. References, figures and tables are inthe original article. See link viz.https://www.ntu.edu.sg/cas/news-events/news/details/electric-vehicles-africa-s-battery-minerals-and-gvc-opportunities