Africa looks inward for EV resources

From the newsletter

The battle for securing critical minerals for electric vehicles is heating up. South Africa, a major player in the auto industry, is looking to partner with Nigeria to secure lithium minerals. This comes after the leaders of two of the world's biggest economies visited Africa for the same purpose.

• South Africa wants to become a hub for EV manufacturing and has been pushing for better policies and incentives to support local manufacturers and consumers. 

• One of its energy storage technology companies, Balancell, last month unveiled a new facility to scale up battery manufacturing capacity from 250 MWh to 1 GWh annually, targeting energy storage, electric mobility, and other applications.

More details

• Historically, African countries have often prioritised partnerships with developed countries for technology transfer, neglecting collaborations with their neighbours. However, South Africa is taking a different approach. Its partnership with Nigeria, a country rich in lithium—a critical mineral for the electric vehicle transition—is a significant development. This serves as a wake-up call for the continent. Africa possesses abundant mineral resources, yet most are exported raw and processed elsewhere, predominantly in China.

• But the growth of the EV market is forcing African countries to re-evaluate their priorities. The annual demand for electric two- and three-wheeler batteries in Africa is projected to reach 2.6 to 3.1 GWh by 2030, driven by increasing demand. Africa is eager to capitalise on this opportunity by utilising its abundant mineral resources.

• To promote local value addition, some countries are restricting the export of unrefined raw materials. Zimbabwe led the way in 2022 with a ban on raw lithium exports, requiring refinement into ores before export. Namibia followed suit in 2023, and Tanzania in 2024.

• This trend is evident in the growing number of local processing initiatives. Andrada Mining has begun beneficiation of lithium in Namibia, while in Zimbabwe, Tsingshan Holding Group is establishing lithium mining and processing operations. These developments position Zimbabwe as a potential hub for lithium production in Africa.

• Research projects the EV and battery market to grow from $7 trillion in 2030 to $59 trillion by 2050, presenting a significant opportunity for Africa. The continent has a competitive advantage, with the cost of establishing a lithium-ion battery plant in the DRC estimated to cost one-third of similar facilities in the US.

• Across Africa, countries are taking action. Nigeria is constructing its first lithium processing plant in Kaduna, thanks to Chinese company Ming Xin Mineral Separation (MXMS). Morocco has attracted over $10 billion in investments across the battery value chain, with Gotion Power recently partnering with Saudi Arabia's ACWA Power to build an $800 million wind power plant for its EV battery gigafactory.

• South Africa, a major player in vehicle manufacturing, is actively pursuing R&D and supporting local companies in establishing Li-ion battery gigafactories. Afrivolt is planning a Li-ion cell gigafactory to produce cathodes, anodes, and batteries for both stationary storage and EVs.

Our take

• Demand is key for Africa to achieve mass production of electric vehicle batteries. Without sufficient demand, economies of scale won't materialise. Building gigafactories is crucial for achieving these economies of scale. Morocco is well-positioned to do this, although its primary focus is the export market due to its strategic location. South Africa is pursuing both local and export markets, which could benefit the entire continent.

• Africa should prioritise the regionalisation of markets, ensuring production in regions with abundant raw materials to minimise transportation costs. While establishing battery manufacturing plants is a long-term strategy, it is a worthwhile investment. Countries like Morocco and Tanzania can produce EV batteries at competitive prices for both local and export markets, including Europe.

• The primary target market should be batteries for electric two- and three-wheelers. This segment is likely to lead EV adoption in Africa due to its practicality and affordability. Key markets will include Nigeria, Kenya, Ethiopia, and Uganda.