9th June, 2022
On the back of the Africa Business Forum held in Kinshasa, Democratic Republic of Congo (DRC) in November 2021 under the theme “Fostering the development of a battery, electric vehicle and renewable energy industry value chain and market in Africa”, Zambia and DRC, represented by their respective Heads of State, signed a Memorandum of Understanding (MOU) in April 2022. The overall goal of the MoU is to increase the two countries’ contribution to the electric vehicle (EV) value chain and thus benefit from this emerging global market. Specifically, the MOU is intended to eliminate undue competition by preventing ‘a race to the bottom’ and instead maximise mutual benefits between the two countries.
With DRC and Zambia possessing about 70% of the world’s cobalt reserves, and together producing more than 1.8 million metric tonnes of copper annually, the potential to benefit from the bullish EVs market cannot be overstated. The anticipated high demand for copper and cobalt and the favourable prices on the international market present a unique opportunity for the two nations to push-start Industrialisation. Demand for copper and cobalt is projected to grow to 33 million tonnes and 650,000 tonnes respectively by 2040.
The global market for EVs is expected to grow tremendously over the next three to four decades as the world ramps up efforts to reduce greenhouse gas emissions (GHGs) and subsequently reduce dependence on fossil fuels in the transport industry. Globally, EVs now represent 10-15 percent of new vehicle sales in pioneering regions such as North America (US), UK, Europe (Germany, France), and Asia (China, Japan). This share is projected to grow to about 50% of new vehicles sales in these regions by 2040; a development that represents a huge potential for Zambia and DRC as major producers of several minerals such as cobalt and copper, which are inputs in EV battery manufacturing.
In Africa, the market for EVs is still in its infancy, with South Africa the leading country in terms of consumption with just under 300 units of EVs sold annually. Other notable countries with a newly surfacing market for EVs on the African continent include Rwanda, Mauritius, Seychelles, and some North African countries like Morocco and Egypt. Being a relatively new technology in mobility, the cost of EVs is still significantly high, and thus deterring demand in most of Africa’s low-income countries, Zambia included. As such, the market for EVs is practically non-existent in Zambia at present.
How then can Zambia benefit from this growing global market of EVs given an infant continental market and an almost non-existent domestic market? As one would deduce from the foregoing analysis, the current prospects for low-income countries, including Zambia, to benefit from the EV market remains in contributing to the EV battery manufacturing and wire circuit value chain. EVs mostly use lithium-ion batteries, with battery anodes and cathodes made up of metals such as cobalt, copper, nickel, and manganese, among others; minerals that Zambia (and DRC) are richly endowed with. Battery manufacturing presents the most realistic entry route into the EV value chain given Zambia (and DRC’s) current state of Industrialisation. Notably, Zambia already has the capacity to refine copper and cobalt on a large scale and the next step would be further processing for use in battery manufacturing.
At the heart of EVs, copper is used throughout because of its high electrical conductivity, durability and malleability. Although still the largest foreign exchange earner, Zambia as it stands, is unfortunately still far from reaching its full potential in the mining sector, with only about 800,000 metric tonnes of copper produced annually. In addition, the country continues to export raw copper, thereby depriving itself of obtaining value from the export of finished products that can yield more than raw copper
As such, besides significantly increasing the country’s annual production of certain metals like copper and cobalt in the medium to long-term (such as the target to produce 3 million metric tonnes of copper in a decade), Zambia needs to engage in value addition to these minerals. In this way, the country will benefit from the increasing global demand from EV manufacturing. By refining and adding value to copper and cobalt on a large scale for use in EV battery manufacturing, among others, Zambia can tap into the global EV value chain market, targeting overseas manufacturers.
For value addition to be attained, the Government must create a conducive environment to attract the necessary investment to foster value addition in the sector. In addition to the DRC-Zambia Battery Council and its Technical Committee created by the MOU to monitor and evaluate this new initiative as well as avoid unnecessary and injurious competition, the goal to create a “harmonized legislative and regulatory framework as well as a system of incentives common to both States” should be highly pursued to create a favorable business environment to promote value addition, and thus adequately position Zambia to benefit from this global transition to EVs. Further, the Government must continue to reduce the cost of doing business in the country and facilitate access to affordable finance to encourage domestic investments in the mining value chain. A stable and predictable policy environment (particularly fiscal regime) is very cardinal to promote investments in the sector, and thus reap the rewards of this growing EV global market.
By: John Mututwa and Shimukunku Manchishi
The authors are researchers at the Zambia Institute for Policy Analysis and Research (ZIPAR). For details contact: The Executive Director, ZIPAR, MNDP Complex, Cnr John Mbita & Nationalist Roads, P.O. Box 50782, Lusaka. Telephone: +260 211 252559. Email: firstname.lastname@example.org