Mineral-rich African states to explore new markets after EU changes its buying rules

Sunday July 30 2023
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Congolese men work at a processing plant during a maintenance day on December 1, 2011. PHOTO | AFP


The European Union, the world’s largest single market, has introduced new measures to reduce their “dependency” on mineral imports from outside the bloc.

The European Council adopted the Critical Raw Materials Act on June 30, a regulation that seeks to utilise the bloc’s Common Market and partnerships to “diversify critical raw material supply chains, which currently rely on imports from a handful of third countries.”

A spokesperson of the European Commission told The EastAfrican that the bloc has taken this route because of the lessons they have learnt from the recent supply-chain disruptions that significantly impacted their supply and consequently costs of products associated with the raw materials.

Read (from the Archives): Africa must benefit from its vast natural wealth

“The urgency of such measures is made clear by the recent Covid-related supply disruptions, Russia’s war of aggression in Ukraine, disrupting, for example, nickel and titanium markets, and the Chinese export restrictions on gallium and germanium introduced last week,” the spokesperson said.

High cost of compliance


Under the new regulations, EU will source up to 65 percent of its annual consumption of critical and strategic raw materials from within the bloc, dealing a blow to countries in the region that have been exporting to the region.

At least 10 percent of the minerals used in the bloc will now be extracted from countries in the union, 40 percent will come from processing, and 15 percent will come from domestic recycling of the critical and strategic minerals.

According to the spokesperson, domestic extraction of the minerals in the EU has been low due to a number of factors, including “long permitting procedures, local opposition, high energy costs, high labour costs, and high costs of regulatory compliance.”

The Act now seeks to address most of these hurdles.

“By prioritising strategic projects and setting binding timelines, domestic extraction projects should be approved more quickly; by requiring companies to engage with local communities, social acceptance should be improved, and by promoting supply diversification by private businesses, EU projects should be able to become competitive despite higher production costs,” the spokesperson told The EastAfrican.

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The Act also seeks to spur recycling of the critical raw materials by addressing the key barriers to that, which include the lack of awareness by users on when recyclable products have come to their end of life and higher costs associated with products made from recycled raw materials.

Ebba Busch, Minister for Energy, Business, and Industry of Sweden – the current President of the EU – said with the Act, the EU will gain the much-needed freedom in the exploration and supply of critical raw materials and will no longer have to depend on any countries outside the bloc.

“When it comes to raw materials, Europe’s destiny is mainly in the hands of a few third countries,” she said.

“With the Raw Materials Act, we want to recover our autonomy in a truly European way: extracting our minerals sustainably; recycling as much as we can and working in partnership with like-minded third countries to promote their development and sustainability, while ensuring our supply chains.”

Critical to manufacturing

The list of 34 critical and 17 strategic raw materials that will be affected by the new regulations includes copper, cobalt, titanium, manganese, natural graphite, platinum group metals, nickel, tantalum, vanadium and niobium.

The minerals are crucial in the manufacture of electric vehicles’ batteries, wind turbines, solar photovoltaic systems, aircraft and spacecraft parts, laptop and mobile phone parts.

They are crucial export commodities, providing foreign exchange needed for importation of other goods and services and debt repayment, and source of employment for millions of people in the region.

In the Democratic Republic of Congo, copper and cobalt and their related products account for about 93 percent of their annual exports, majority of which goes to China and Europe, making the extractive sector the primary source of foreign exchange in the country.

Read: DR Congo signs $2bn mining deal with UAE

According to the World Bank, DRC’s exports to Europe stood at $992,105 in 2020, coming after the country’s exports to Sub-Saharan Africa and East Asia, where China – Kinshasa’s largest export market – is.

With about half a million people in the DRC directly employed in the mining industry, the loss of the European market as an export destination could lead to massive job losses, in addition to a drop in forex, which is crucial for imports.

Tanzania also earns a significant amount of foreign exchange from these raw materials and has the European Union as a key export market. World Bank estimates that Dar’s exports of minerals, excluding gold, silver and diamond, amounted to $562,735 in 2020, making it their third-leading export.

Some of the minerals Tanzania exports include nickel, graphite, coal, and uranium, which have also been affected by the new regulations. Data firm Statista estimates that Dar’s mining sector employs some 310,000 people, who might be affected by the EU move.

Ambitious goals

As Europe is Dar’s second largest export market after Sub-Saharan Africa, the plan to reduce mineral imports from outside the bloc could significantly affect their foreign exchange earnings.

Read: Tanzania signs mining deal with Australian firms

Kenya might also be affected by the changes, should they trickle down to African mineral exporters. Minerals and metals account for about 8.9 percent of Kenya’s exports, with the main one being titanium ores, which contributed $156,804 of foreign exchange in 2020, according to the World Bank.

Rwanda and Burundi may also be significantly affected by the EU’s change in regulations, as mineral exports account for about 12 percent of their individual total exports. Kigali and Bujumbura are exporters of niobium, tantalum and vanadium ores.

In Uganda, the mining sector, other than gold mining, is a small performer, accounting for just about 4.5 percent of exports, having brought in $185,238 in 2020, based on World Bank’s statistics.

Patrick Kanyoro, Chairman of the Kenya Chamber of Mines, a Nairobi-based lobby group for the mining sector, however, believes that the new regulations in Europe will not have a “serious impact” on the revenues from Africa’s extractive industry and on jobs in the sector.

Continental free trade

“I do not think this will have any major impact on mining in Africa in the next ten years. Even if they reduce their demand, we will still have other markets, particularly under the Africa Continental Free Trade Area,” Dr Kanyoro told The EastAfrican.

According to him, the plan to source at least 15 percent of critical minerals used in Europe from recycling is “quite ambitious” and may not be met in the next ten years, hence they will continue relying on raw materials imported from other countries.

Besides spurring intra-African trade, Dr Kanyoro says should EU’s demand for African minerals fall as projected, it will also encourage industrialisation on the continent, to have the raw materials processed here, which will still be a win for Africa and will safeguard jobs.

“The truth is, the EU is not buying much of our minerals, but even if that were to drop, we will focus on selling to Asia and on industrialising our countries and we will still be good to go regardless,” he said.

China is currently the leading buyer of African minerals and most of the manufacturing in the Asian economic giant relies on raw materials drawn from the DRC and other African countries.

In most mineral-rich African countries, Beijing is among the leading single country export market, if not the leading, as is the case in Kinshasa.