Seeds of Opportunity: The African Growth Series
May 2022 | Issue 2
In this week's issue, you will learn more about:
- Africa's Mineral Resources
- Russia – Ukraine war: The Implications on Africa
- Private Sector Participation in African Ports
Africa's Mineral Resources
Africa's soil holds a vast range of mineral resources producing almost 1 billion tonnes of minerals worth USD 406 billion in 2019. The continent has 23% of titanium reserves, 40% of known gold, 60% of gem-diamond, 80% of phosphates and platinum and 90% of chromite reserves. Most of the electronic devices we use today need several minerals, including zinc, lithium and cobalt, with 70% of global cobalt production coming from the Democratic Republic of the Congo (DRC) in 2019. The DRC is an example of how African countries have mineral exploration and production as significant parts of their economies. Metals such as gold, iron and copper are the top produced minerals for 11 out of 54 countries. In 2019, Africa produced approximately 983 million metric tons of minerals, with South Africa having the highest mineral output at 320 million metric tons. Nigeria and Algeria followed with around 140 million metric tons. Various countries' 2019 mining exploration budgets received investments to improve production output, with the ten leading countries having over USD 850 million collectively. The DRC leads with 20% of the collective total, followed by Burkina Faso at 16%, Ghana at 12% and South Africa at 11%. According to a 2021 report by S&P Global Market Intelligence, the annual global exploration budget could grow between 5% and 15% year over year for 2022. Africa could establish itself as a significant supply of crucial mineral resources for further downstream processes and growing industries such as technology chips and renewable electricity generation.
Russia – Ukraine war: The Implications on Africa
The invasion of Russia into Ukraine has disrupted global commodity markets and trade flows into Africa, creating an unprecedented crisis that has compounded the difficulties Africa already faces. Africa now needs to prepare for an inevitable political and economic fallout that propels countries to formulate new political and economic policies that prioritise the use of the continent’s vast natural resources. This invasion has had detrimental consequences on African households, food security and the agricultural sector due to the heavy reliance on wheat and maize Russian/Ukrainian exports. This has, however, highlighted the need for Africa to shift its dependence away from global markets taking advantage of its arable land.
Additional Opportunities:
With the world’s deepest natural gas reserves, Africa could be a viable option to supply Europe with gas as Europe seeks to reduce its reliance on Russian gas. Furthermore, South Africa may be an option for European coal plants seeking high-quality coal. Nigeria, the continent’s largest gas producer is too moving towards filling the gas void in Europe by continuing the construction of the trans-Saharan gas pipeline (614km), which will carry the gas to Algeria and then to Europe. While Tanzania has indicated its willingness to supply gas to both local and international markets. South Africa, second to Russia is the world’s second-biggest producer of palladium and is well-positioned to benefit from the projected demand.
The ensuing war has and will continue to affect Africa as the sanctions imposed on Russia are likely to last beyond the current conflict. This however provides African counties with new opportunities to develop their infrastructure to gain access to new markets.
Private Sector Participation in African Ports
The efficiency of transport infrastructure plays a critical role in Africa's trade, both at a regional and international level. African traders at the recent 26th Intermodal Africa Exhibition and Conference held in Mombasa highlighted several key challenges in the logistics sector contributing to the high cost of doing business on the continent. As significant progress is being made on the policy side through establishing regional economic trade blocs, the only issue lagging behind is adequate infrastructure and its management. To help address the issue in East Africa, calls have been made for increased private sector participation in the ports, particularly in Kenya. Data from the Kenya Port Authority revealed that the second commercial port in Lamu had only been able to handle 11 vessels, with a throughput of 1,821 twenty-foot eleven months after its launch. Other challenges highlighted were linked to congestion around the Northern Corridor, but unattractive incentives were also noted. Neighboring Tanzania, however, has managed to secure a $500 million deal with DP World, which is expected to result in the improvement of the ports. As the ports in both countries aid businesses in Uganda, Rwanda, the Democratic Republic of Congo, and South Sudan, their successful operation is important for the region's economy.
To find out more about opportunities in Africa, please contact Lynne Martin.
