The EAC has vast deposits of minerals critical to driving technology to support the green industrial revolution and yet the region lacks a proper framework to govern and maximize benefit from this mineral potential. Our analysis shows that all is not lost. There is still an opportunity for the EAC to reorganize and take a share from the increasing critical or transitional minerals demand.
By Moses Kulaba, Governance and Economic Policy Center
@critical minerals @mineralsgovernance @eac
What is the EAC’s regional problem?
Critical or transitional minerals are loosely defined as mineral commodities that have important uses to industrial technology to support the transition to a clean energy future, have no viable substitutes, yet face potential disruption in supply. These minerals include (but limited to); Graphite, Coltan, Nickel, Tungsten, Tantalum, Tin, Lithium, Manganese, Magnesium, palladium, Platinum, Beryllium, copper, fluorspar, Holmium Niobium, Rhodium, Titanium, Zinc etc. The EAC has vast deposits of some these and yet the region lacks a proper framework to govern and maximize benefit from this mineral potential.
Minerals as a national resource vs regional resource
The issue of mineral is politically sensitive. It lies at the intersection of national pride and sovereignty. Minerals are considered as a national resource whose value cannot be discussed or shared at regional level. Most countries have chosen to address mineral issues at a national level, carefully safeguarding what they consider their national interests.
Unfortunately, by taking this route, EAC mineral rich countries have exposed themselves to weaker negotiation power, and fallen easy prey to the divide and rule game played by some quick profit accumulation seeking multinational mining companies. These mining companies take on each country as an independent jurisdiction, setting each up for competition against the other and demanding exorbitant favorable terms to invest. The net effect is that EAC mineral rich countries have weaker negotiating powers and signed off bad deals. It is perhaps for this reasons that the EAC has selected to focus on protecting aquatic and terrestrial ecosystems such as forests and mountains in shared areas.
Raging political instability and counter accusations for harboring insurgents. East Africa’s mineral rich regions face raging political instability, with each member states accusing the other of supporting and harboring hostile insurgent’s, violation territorial sovereignty and plundering of the abundant mineral resources. For example, the DRC accuses Rwanda of supporting the M23 in Eastern Congo while Rwanda has constantly accused the DRC of harboring the FDRL. Similarly, Uganda’s Ailed Democratic Forces (ADF) rebels have found refuge in the DRC. Burundi accuses Rwanda of supporting hostile rebel groups against the Burundi government. As a consequence, EAC’s mineral rich regions have failed to secure maximum economic benefits from its mineral wealth. Efforts to jointly pacify the region through a military intervention by the East Africa Regional Standby Force failed miserably with the force withdrawn at the end of 2023.
Failure to curb cross border smuggling and illicit minerals trade. The UNCTAD data from COMTRADE and other online sources show a big difference between reported mineral exports and imports data from receiving countries. For example, in 2021 the DRC reported exporting a net weight of cobalt of 898,869 kg valued at USD 3,277,615 while China reported importing a net weight of 190032 kg valued at valued at USD92,065, 332 in the same period. The difference between the reported export value by the DRC and the reported import value by China was a whooping USD 88,784,717. There are large disparities between the DRC’s minerals trade data with Dubai and similarly Kenya’s mineral trade data with Dubai.
Yet, the vice has continued unabated. The recent arrests of fake gold traders in Nairobi’s upscale Kileleshwa suburb confirms that illicit mineral business is rife in the region. Illicit minerals are crossing borders undocumented, with cartels exploiting the weaknesses in the border control mechanisms to make shoddy deals worth millions of dollars. The arrested illegal mineral traders had fake Uganda Revenue Authority (URA) documents and stamps showing that Uganda was the source country. There are reports that DRC’s gold and coltan is smuggled through Rwanda and Uganda. Rwanda , a fairly none rich mineral country is a large mineral exporter. According to government reports, Rwanda’s annual mineral export earnings in 2023 was USD1.1billion reflecting a 43% increase from USD772bln in 2022. Clearly illegal trade is denying the EAC millions of dollars in economic benefits.
Lack of regional harmonization of the extractive sector regulatory framework. There were attempts to develop a model minerals legislation but all these efforts suffered a silent death. As expressed by one of the EAC members of parliament, Arusha has become a cemetery of good policy intentions. Good at expressing desire and slow at action and implementation.
Poor geological survey data, compared to superior data sets in possession of mineral companies. This has often tilted the negotiation power balance in favor of the companies, leading to signing off poor deals by mineral rich host countries.
What opportunities exist?
Maximizing on current EAC partners trade in minerals and mineral based products.
According to EAC regional statistics, the trade by EAC partner states in minerals fuels, mineral oils, products of their distillation, bituminous substances and mineral waxes were the most traded with a value of USD810.7million dollars in 2022. This was followed by trade in natural or cultural pearls, precious or semi-precious stones, precious metals valued at USD588.3million. Trade in nuclear reactors, boilers, machinery and mechanical appliances thereof ranked third with a value of USD238million[1]
This therefore shows there are a raw material and there is a market for mineral based products even within the EAC. Scaled value addition and intra trade in minerals and mineral based products to serve the existing demand can significantly boost internal regional industrialization, create jobs and economic growth
Leveraging on current and future global critical/transitional minerals demand
With a regional approach, the EAC could benefit from the rapidly expanding demand and prices for green transitional minerals. Since 2020 the global commodity prices for Nickel, Cobalt, Coltan, Lithium and Copper has been on the rise. According industry experts, such as Equity Group’s CEO, Dr James Mwangi, the demand for these minerals can only go up, and prices can only go up because of their limited supply versus the global targets to reduce emissions by 2030. It is for this reason that global consumers such as China, Australia are in the rush to secure supply chains all over the World. Tech players such as Tesla’s Boss, Elon Musk have equally explored possibilities to establish plants in the DRC and Tanzania so as to secure the raw materials and add value at source. So far, neither the EAC nor its member states have capitalized on these interests to develop a regional road map for investments into the green or transitional minerals subsector. Elon Musk’s investment plans have not materialized.
Use critical/transitional minerals demand to forge new strategic economic relationship
According to the Carnegie foundation, the combination of key mineral endowments in African countries and U.S. objectives to reorient clean energy supply chains away from competitors like China can serve as the foundation for a new economic and strategic relationship. In 2022 the US announced its desire to re-establish a new relationship with Africa driven by trade and investment. The EAC can use its abundant critical or transitional minerals potential to negotiate new long-term relationships based on mutual economic benefits away from the traditional donor recipient approach.
Attracting investments in Energy Sector
The EAC has large opportunity for investment into its renewable energy sector. Uranium, a key fuel in nuclear plants and nuclear fission, is found in eight locations in the South Kivu and Katanga provinces in the south of DRC. Tanzania and Uganda have large deposits of Uranium. These clean energy minerals are also backed with hydropower potential of the giant inga dam and Kenya’s geothermal potential.
The EAC commits to development of the energy sector covering both renewable and non-renewable energy sources. This is aimed at facilitating the broader EAC objectives of attracting investments, competitiveness and trade for mutual benefit. Despite this, there has not been joint EAC investment attraction drive purposed towards its regional power potential. The regional plans to develop the giant inga dam as a flagship Agenda 2023 project contributing to the towards East Africa’s power pool have remained stagnant.
What EAC member states can do
- Abandon limited nationalistic views and pursue large economic interests, from a regional lens
- Conduct regional mapping and improve mineral geodata sets
- Rekindle and accomplish plans to develop regional frameworks for mineral governance
- Facilitate regional investment campaigns profiling critical minerals and clean energy sources as tier one commodities available for investment for the EAC
- Stop the guns and think development
What would be the benefits of acting as an EAC region
- Joint investment promotions and attraction of the best investors
- Increased negotiation power and leverage for better deals
- Expanded regional value additional chains and industrial projects driven by large economies of scale. According to global statistics the DRC was the largest cobalt reserve (about 3.6million metric tons yet China was the largest processor(85Mt)
- Increased cooperation and opportunities for lasting peace
- Expanded economic opportunity and benefit for citizens.