The African Economic Revolution: How Localizing Raw Material Processing Could Reshape Global Supply Chains

In the global race for resources, Africa holds a pivotal role, accounting for a significant portion of the world’s most critical minerals. For decades, the continent has served as a major supplier of raw materials such as cobalt, platinum, gold, and bauxite, which are essential in industries ranging from electronics and electric vehicles to aerospace and renewable energy. However, African nations have captured only a small share of the value generated from these resources, as the raw materials are typically exported in their unprocessed form for refining and manufacturing elsewhere.

Now, a quiet revolution is underway that could upend this dynamic, with African leaders pushing to retain more value by developing local processing industries. If this shift becomes a reality, it will have profound implications for Africa’s development and the global economy.

Africa’s Natural Resource Wealth: A Strategic Asset

Africa’s rich natural resources make it a key player in several industries:

• Gold: Africa accounts for approximately 20% of global gold production, with major producers like South Africa, Ghana, and Sudan
• Bauxite: Guinea is home to 27% of the world’s bauxite reserves, essential for aluminum production, which in turn is critical for automotive, aerospace, and construction industries(
• Platinum: South Africa alone holds 92% of global platinum reserves, a metal crucial for catalytic converters and fuel cells
• Rare Earth Elements (REEs): Africa possesses around 9% of global reserves of rare earth elements, concentrated in countries such as South Africa, Burundi, and Madagascar
• Cobalt: The Democratic Republic of Congo (DRC) produces 56% of the world's cobalt, which is critical for lithium-ion batteries used in electric vehicles (EVs) and consumer electronics

Despite these vast reserves, the majority of these resources are exported with minimal local processing, leading to massive value loss for the continent. African nations have historically been positioned as raw material suppliers, but now there is a growing consensus among African leaders to change this.

The New Legislative Framework: A Shift Toward Value Addition

African governments are quietly, yet steadily, enacting laws aimed at localizing the processing of raw materials. Nigerian President Bola Tinubu has been one of the most vocal advocates for this shift. During the 2023 African Minerals Strategy Group (AMSG) meeting held alongside the United Nations General Assembly, Tinubu argued that Africa’s reliance on raw material exports has deepened the continent’s economic woes. He emphasized that extracting and exporting raw materials, only for them to be processed abroad and sold back to Africa at a higher cost, traps the continent in a cycle of dependency (Western Post)(ThisDayLive).

In Nigeria, Tinubu's administration is working on legislation that mandates local processing of minerals before they can be exported. Similar policies are being pursued in Zambia, where President Hakainde Hichilema is encouraging local processing of copper, and Guinea, where President Mamady Doumbouya is pushing for more bauxite to be refined domestically(Western Post)(REPORT AFRIQUE). These legislative measures are designed to increase local employment, foster industrialization, and ensure that a greater share of the economic value stays within the continent.

Global Impact: Disrupting Supply Chains and Raising Costs

If Africa successfully implements these policies, the global economic landscape will shift significantly. Africa’s vast supply of minerals powers essential industries worldwide, and a shift toward local processing would ripple through global supply chains.

1. Automotive and Technology Sectors: The global electric vehicle (EV) industry relies heavily on African cobalt, with the DRC alone supplying 70% of the world’s production
2. Energy and Infrastructure: Africa’s bauxite, platinum, and manganese are critical inputs for energy production, renewable technologies, and steel manufacturing. If African nations process these minerals locally, the prices of aluminum, steel, and other industrial metals could rise, impacting infrastructure projects and green energy initiatives worldwide
3. Higher Commodity Prices: Global commodity markets would see price fluctuations, particularly for gold, copper, and other essential minerals. As Africa moves from exporting raw materials to selling processed goods, the price of these goods will naturally rise. While this may challenge foreign manufacturers, it will strengthen Africa’s negotiating power on the global stage

Projected Outcomes: Africa by 2030 and Beyond

By 2030, if African nations fully realize their ambitions to localize raw material processing, the continent could experience unprecedented economic growth and industrialization. Some key projections include:

• Job Creation: Local processing of minerals could generate 5 million jobs across Africa, from new processing plants and refineries to logistics and supply chain management
• GDP Growth: The shift to value-added exports is expected to increase Africa’s GDP by $500 billion by 2030, according to World Bank projections
• Global Supply Chain Recalibration: The shift will force global manufacturers, especially in industries reliant on Africa’s minerals, to invest in Africa or face higher costs. This could lead to a realignment of foreign direct investment (FDI) in Africa, with countries and companies looking to establish joint ventures or partnerships to ensure continued access to processed minerals

A Quiet Revolution: The Legal Changes Under the Radar

Many of these sweeping legislative changes in Africa have gone largely unnoticed by global media, which tends to focus on short-term economic trends or geopolitical conflicts. The media’s "blindness" to these shifts stems from a historic underestimation of Africa’s long-term potential. Laws mandating local value addition, however, have already been passed in countries like Nigeria, Guinea, and Zambia, and more nations are expected to follow. As these laws take effect, Africa’s role in the global economy will expand beyond that of a raw material supplier to an indispensable player in value-added industries.

Examples:

• South Africa: South Africa's Mineral and Petroleum Resources Development Act (MPRDA) has long included provisions for beneficiation, especially for key minerals like gold and platinum. The government has been pushing for greater enforcement of these rules to ensure that a larger share of the final product's value is captured within the country
• Zimbabwe: Zimbabwe's government has enacted beneficiation laws for key minerals like diamonds and platinum, requiring that a portion of the raw materials be processed within the country. Companies that fail to comply face penalties or restrictions on their licenses.
• Democratic Republic of Congo (DRC): The DRC, which supplies 56% of the world's cobalt, has enacted laws requiring mining companies to process a portion of their output domestically. This aligns with the government’s goal of developing a local battery manufacturing industry to serve the global electric vehicle market

• Zambia: Zambia’s government has introduced measures to encourage local processing of copper, one of its key exports. Mining companies are being required to refine copper domestically as part of their license agreements

• Gabon: Gabon banned the export of raw timber in 2010, mandating that all logs be processed domestically. This led to a boom in the local timber processing industry, generating jobs and boosting the country's revenue from wood products
• Guinea: Guinea, which holds about 27% of the world's bauxite reserves, has imposed restrictions on the export of raw bauxite. The government requires companies to invest in domestic refining and processing facilities, aiming to create an aluminum industry within the country.

• Nigeria: Nigeria's Local Content Act, initially focused on the oil and gas sector, requires foreign companies to partner with local firms and employ local labor. This framework is being expanded to mining and solid minerals, with new laws pushing for local value addition in the processing of minerals like cobalt and lithium
• Ghana: Ghana's Minerals and Mining (Local Content and Local Participation) Regulations require mining companies to procure a percentage of goods and services from local suppliers, and the government is now extending these requirements to encourage local processing
• Kenya: Kenya’s Mining Act includes provisions for environmental management plans and sustainable mining practices, particularly in its growing rare earth and titanium extraction industries. These laws also encourage sustainable local processing to reduce the environmental impact of raw material extraction(REPORT AFRIQUE)

A Question for the Future: What if Africa Achieves This Vision?

As Africa moves towards localizing its raw material processing and transforming its role in global supply chains, the world is left to ponder: What will the global economic order look like when Africa fully asserts itself as a manufacturing and processing hub ?

Will global industries adapt and invest in the continent, or will rising costs lead to friction in industries dependent on African resources ?

The answers to these questions will shape not only the future of Africa but also the global economy for decades to come.

Sources:

• Punch Nigeria: "Africa must end raw materials export, goods importation"
• Western Post: "President Tinubu on Africa’s Raw Minerals Strategy"
• Report Afrique: "Tinubu on Underdevelopment and Raw Material Export"
• This Day Live: "Africa's Role in Global Resource Supply Chain"
• World Bank Data: Africa Natural Resources Report (2023)
• Global Industry Reports: "Critical Minerals and Electric Vehicles Market Outlook" (2024)

by MISTAHOU FINANCIAL GROUP LTD

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