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Key gamers: Why mining is central to the EU’s crucial uncooked supplies ambitions in Africa

Key gamers: Why mining is central to the EU’s crucial uncooked supplies ambitions in Africa


The European Union’s Critical Raw Materials Act proposal, introduced by the EU commissioner for the inner market, Thierry Breton, on 16 March, outlines the EU’s plans to compete within the crucial uncooked supplies (CRM) house. CRMs are important to the EU’s inexperienced and digital transitions, in addition to defence and house applied sciences.

The act considers each the EU’s personal capability to provide CRMs and its want for exterior provides, creating a chance to revamp the EU’s relationship with Africa. But it should solely have the ability to take action if key stakeholders are dropped at the desk.

Bold ambitions

With the CRM act, the EU proposes a shift from naivety to rapid action. This is already evident within the act’s definition of a sub-set of CRMs as ‘strategic raw materials’, for which rising manufacturing will probably be tough, contributing to provide threat. The checklist contains the principle battery minerals, that are core to main European industries together with electrical autos and power storage for inexperienced power methods.

The CRM act goals to strengthen the worth chains for these strategic uncooked supplies within the EU, from their extraction to processing and recycling. To accomplish that, it should choose ‘strategic initiatives’, which is able to profit from streamlined allowing. The act units targets to extract 10 per cent, course of 40 per cent, and recycle 15 per cent of the EU’s annual consumption of strategic uncooked supplies inside the EU.

The CRM act additionally goals to diversify the sourcing of CRMs from elsewhere. To obtain this, the EU will forge ‘strategic partnerships’ with third nations. Through these partnerships, it should intention to combine industrial and mineral worth chains with associate nations, and cooperate with them to establish strategic initiatives. The EU has already signed partnerships with Canada, Ukraine, Namibia, and Kazakhstan; extra are in progress, together with in Africa. With resource-rich growing and rising nations specifically, the EU intends to distinguish itself by contributing to sustainability and native worth addition. It will use the Global Gateway to assist infrastructure, connectivity, and CRM initiatives.

To realise these ambitions the EU might want to have interaction with the non-public sector, inside and out of doors its borders, to construction, fund, and implement the mandatory initiatives

To realise these ambitions the EU might want to have interaction with the non-public sector, inside and out of doors its borders, to construction, fund, and implement the mandatory initiatives. In the context of strategic partnerships with African nations, it will imply bringing to the desk the African mining sector and European industrial actors – neither of which is at the moment engaged in these discussions. These actors ought to inform European priorities and inject a helpful dose of realism.

Connecting with the mining sector in Africa

Most exploration in Africa is undertaken by corporations from Canada, Australia, the United Kingdom, and South Africa, which between them accounted for 80 per cent of exploration expenditure on the continent in 2022. These are largely junior and mid-size corporations, funded by specialised threat fairness by means of capital markets in Canada and Australia. There is little overlap between them and people energetic in Europe.

Africa’s mineral potential stays largely unknown. Defining new sources would require important exploration funding, which regardless of the CRM hype just isn’t flowing. Africa is allotted solely a small proportion of worldwide exploration funding, with some estimates as little as 10 per cent for 2022, greater than half of which is spent on the lookout for gold. Less than 25 per cent of this funding focuses on producing new discoveries. These traits are set to proceed in 2023 with geopolitical disruption and financial headwinds affecting metal prices and fundraising. Governance issues, useful resource nationalism, and the dearth of infrastructure clarify Africa’s low rating, as a area, for mining investment attractiveness. Nonetheless, following a interval of retreat, some mining majors are set to return to Africa, signalling renewed confidence.

Strategic partnerships in Africa have to allow a flurry of latest CRM exploration initiatives, which requires funding to be extra enticing, even when this largely advantages non-EU corporations and traders.

When choosing strategic companions, the EU ought to due to this fact deal with essentially the most investable nations. It also needs to take into account regional networks of initiatives for better impression and threat diversification. Current European priorities don’t essentially match mining funding traits. To perceive the alternatives and challenges, the EU wants to interact with mining actors each in African nations the place they function and in monetary centres the place funding selections are made. The EU’s presence at Indaba and PDAC, the 2 most important occasions for African mining, is an efficient begin.

Strategic partnerships will entail extra cooperation on expertise (a global emergency in minerals), the advance of regulatory frameworks and enforcement capability, and infrastructure funding. These components will contribute to enhancing the funding local weather in Africa.

Mobilising European business

The EU goals to assist slim the worldwide funding gaps in CRM worth chains, whereas boosting competitiveness, sustainability, and safety. To obtain this in Africa, it additionally must mobilise European business, notably within the battery sector.

Despite their significance, the exploration and extraction of battery minerals stay considerably underfunded. This may lead to a scarcity of new discoveries, rising provide shocks to rising processing capability (the place funding has centered thus far) and competitors for entry to sources.

This sector wants direct funding, which European industrial corporations may present. Recent bulletins from producers corresponding to Volkswagen and Stellantis present rising understanding of this. However, a lot of the dialog continues to deal with securing provide and managing pricing publicity by means of offtake agreements (long-term buying preparations), that are insufficient to bridge the funding hole.

European business participation may also be wanted to satisfy the expectations of African nations for funding in native worth addition, which have been stoked by European statements and the communication accompanying the CRM act proposal. These corporations’ cooperation will probably be essential to design and implement processing and manufacturing initiatives which might combine with European worth chains. This may also require funding, together with from producers at the moment reluctant to put money into rising nations presenting reputational dangers – relying solely on the mining sector for this has not proven effective previously. In battery minerals specifically, producers’ funding wouldn’t solely assist progress straight but in addition encourage different traders by clarifying strategic choices and demand alerts regarding battery chemistry.

The EU must encourage these investments. It is already taking steps to make funding extra enticing to European business, for instance classifying extraction and processing as sustainable activities under the EU taxonomy. But extra could be performed: latest examples of credit enhancement by member states point out their capability to place public funding in danger to strengthen CRM worth chains; the European Investment Bank group and European growth finance establishments may assist strengthen CRM worth chains between the EU and Africa.

Building on the intentions within the CRM act proposal, the EU’s strategic partnerships with African nations may outline a brand new position for the EU in CRM worth chains and in Africa. But the EU can solely create a powerful coalition round shared goals by facilitating connections between the African mining sector, European business, and African states.

The European Council on Foreign Relations doesn’t take collective positions. ECFR publications solely signify the views of their particular person authors.

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