Opinion / Columnist
Zimbabwe's lithium gambit: Navigating China-US rivalry
15 Jul 2024 at 08:24hrs | Views
Lithium is Zimbabwe's third-largest mineral export after gold and platinum group of metals, bringing in US$2,46 billion and US$2,27 billion, respectively, in 2023.
AS the world is going through the green energy revolution, a steady supply of critical minerals such as lithium is paramount. Yet, the lithium supply chain is interwoven with multiple vulnerabilities, including natural disasters, political uncertainty and market fluctuations. Consequently, many countries have developed strategies to minimise their supply chain vulnerabilities. On the other hand, as the mining and processing of lithium is concentrated within a handful of countries, these countries consider lithium a geopolitical leverage that can fuel their economies.
Located in southern Africa, Zimbabwe is the world's fifth-largest miner and the top lithium producer in Africa. With the potential to meet 20% of global demand, the country is placing a significant wager on the mineral to boost its economy. In 2023, Zimbabwe produced 3 400 metric tonnes of lithium, a whopping 230% rise from 2022. Dubbed "white gold," lithium exports earned Zimbabwe a record US$209 million within the first nine months of 2023.
Lithium is Zimbabwe's third-largest mineral export after gold and platinum group of metals, bringing in US$2,46 billion and US$2,27 billion, respectively, in 2023. However, as Zimbabwe exports merely raw lithium, the amount is miniscule.
The Zimbabwean government is aware of the value of lithium to the country's economy. Not surprisingly, it intends to refine battery-grade lithium domestically to create value locally and establish the nation as a lithium refining hub. Refining lithium domestically will not only boost economic growth but also create jobs for locals and pave way for infrastructural development. Therefore, in 2022, under the Base Minerals Export Control Act, Zimbabwe prohibited the export of raw lithium. Additionally, the restriction was intended to stop raw lithium smuggling across the nation's porous borders with neighbouring South Africa and Mozambique.
Yet, two years after the ban, the country's economy has not significantly benefited. The major challenges hindering the growth of the lithium industry are ongoing power outages, shortages of foreign exchange and policy uncertainty.
Due to its US$17 billion debt and arrears to the International Monetary Fund and World Bank, Zimbabwe is not eligible to receive fresh funding from multilateral development banks, which might be used to increase access to power and develop better energy infrastructure. Last but not least, lithium prices in China, the top consumer of lithium globally, were on a downtrend throughout the year.
Chinese investment in Zimbabwe's lithium
Today, Zimbabwe is in severe need of fresh investment if it wants to attain its ambitious goal of a US$12 billion mining economy by 2030. China, the world's largest producer of lithium batteries and refiner of lithium, has already made significant investment in Zimbabwe's mining sector. A few years back, China declared a whopping US$2,79 billion investment plan in Zimbabwe's lithium mining industry. Numerous Chinese mining companies exist in Zimbabwe, including Sinomine Resource Group, Chengxin Lithium Group, Yahua Group, Zhejiang Huayou Cobalt and Canmax Technologies.
Sinomine Resource Group's local subsidiary, Bikita Minerals, has started trial production at a new spodumene and petalite factory in Masvingo province. The operation, with an investment of US$200 million, is expected to produce 300 000 tonnes of high-quality chemical-grade spodumene concentrate every year. In Goromonzi, around 80 kilometres from the capital, Harare, Prospect Lithium Zimbabwe, a subsidiary of Zhejiang Huayou Cobalt in China, inaugurated a US$300 million lithium processing facility. With its 4,5 million tonnes of hard rock lithium processing capacity, it can produce about 400 000 tonnes of concentrate annually for export. For US$422 million in 2021, Huayou Cobalt purchased the Arcadia Mine from Prospect Resource, an Australian firm. Chengxin Lithium Group, another Chinese company, invested US$77 million to build a 300 000-tonne-per-year lithium concentrator at the Sabi Star Mine in eastern Zimbabwe. The company invested an additional US$130 million in constructing its lithium processing plant.
China-US tango over lithium in Zimbabwe
The cost of building the lithium economy infrastructure is immense and Zimbabwe requires multiple external investors to develop its domestic lithium industry. Yet, US sanctions since 2001 crippled its economy by restricting its ability to borrow money and attract investment. The sanctions imposed by the West were estimated to cost the nation almost US$42 billion in revenue. In the absence of adequate government capacity, government faces a tremendous challenge in trying to revive Zimbabwe's faltering economy.
As the US seeks to secure its production of green energy by severing China from the lithium value chain, it is attempting to confront China in Zimbabwe with a multifaceted strategy. Ironically, it was these US sanctions that pushed Zimbabwe closer to China. Indeed, China was probably the only nation that continued investing in Zimbabwe despite the sanctions.
It is without doubt that compared to Western development and commercial banks, Chinese financiers are significantly more willing to engage in high-risk ventures. In the first half of 2023, the Zimbabwe Investment Development Agency reportedly received 160 lithium investment applications from Chinese investors, compared to just five from US investors.
After realising the geopolitical ramifications of its prolonged disregard for the lithium value chain and its vulnerability due to overdependence on China, the US government is finally prepared to alter its approach. The US lifted sanctions against Zimbabwe in March 2024. Instead, it enforced the Global Magnitsky Act of 2016, which gave the US the authority to sanction eight particular Zimbabwean people, including President Emmerson Mnangagwa. As the country-specific sanctions are lifted, the US or other Western nations will have no further restrictions towards investing in Zimbabwe.
Zimbabwe has other challenges, such as lack of trained manpower. Many other African nations, including Kenya, Tanzania and Zambia, have passed laws mandating that mining corporations provide locals with training. These trainings may guarantee investment retention and local workforce development with the necessary skills. The US may create its own capacity-building initiatives or collaborate with other like-minded nations like India.
India is a signatory to the ambitious Minerals Security Partnership (MSP), spearheaded by the US, which aims to protect supply chains of vital minerals. India's track record of developing capacity in Africa means that the United States may benefit from its engagement with India.
Lastly, as a landlocked country, Zimbabwe lacks the cross-border logistics and infrastructure needed to connect to a port. The US has declared plans to build the Lobito Corridor, a railroad that will link the Lobito port in Angola with Zambia and the Democratic Republic of Congo. Going forward, the US might consider extending the corridor and connect Harare.
Conclusion
Considering the tightly-knit nature of the world's lithium supply networks, lithium exports might assist Zimbabwe in breaking free from its reputation as a pariah State. The fierce competition for its lithium augurs well for Zimbabwe. Access to secondary producers and international buyers is necessary to develop the lithium supply chain. China is now well ahead in turning metal to battery raw materials and controlling the whole value chain.
While this jubilant rhetoric from the West continues, China is steadily increasing the number of lithium projects in its portfolio across the nation, solidifying its status as an important trading and financial partner. Zimbabwe can gain from this competition as the US takes more interest in its lithium. However, everything will depend on how willing the US is to commit resources amid China's strategic rivalry.
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Samir Bhattacharya is an Associate Fellow at the Observer Research Foundation
AS the world is going through the green energy revolution, a steady supply of critical minerals such as lithium is paramount. Yet, the lithium supply chain is interwoven with multiple vulnerabilities, including natural disasters, political uncertainty and market fluctuations. Consequently, many countries have developed strategies to minimise their supply chain vulnerabilities. On the other hand, as the mining and processing of lithium is concentrated within a handful of countries, these countries consider lithium a geopolitical leverage that can fuel their economies.
Located in southern Africa, Zimbabwe is the world's fifth-largest miner and the top lithium producer in Africa. With the potential to meet 20% of global demand, the country is placing a significant wager on the mineral to boost its economy. In 2023, Zimbabwe produced 3 400 metric tonnes of lithium, a whopping 230% rise from 2022. Dubbed "white gold," lithium exports earned Zimbabwe a record US$209 million within the first nine months of 2023.
Lithium is Zimbabwe's third-largest mineral export after gold and platinum group of metals, bringing in US$2,46 billion and US$2,27 billion, respectively, in 2023. However, as Zimbabwe exports merely raw lithium, the amount is miniscule.
The Zimbabwean government is aware of the value of lithium to the country's economy. Not surprisingly, it intends to refine battery-grade lithium domestically to create value locally and establish the nation as a lithium refining hub. Refining lithium domestically will not only boost economic growth but also create jobs for locals and pave way for infrastructural development. Therefore, in 2022, under the Base Minerals Export Control Act, Zimbabwe prohibited the export of raw lithium. Additionally, the restriction was intended to stop raw lithium smuggling across the nation's porous borders with neighbouring South Africa and Mozambique.
Yet, two years after the ban, the country's economy has not significantly benefited. The major challenges hindering the growth of the lithium industry are ongoing power outages, shortages of foreign exchange and policy uncertainty.
Due to its US$17 billion debt and arrears to the International Monetary Fund and World Bank, Zimbabwe is not eligible to receive fresh funding from multilateral development banks, which might be used to increase access to power and develop better energy infrastructure. Last but not least, lithium prices in China, the top consumer of lithium globally, were on a downtrend throughout the year.
Chinese investment in Zimbabwe's lithium
Today, Zimbabwe is in severe need of fresh investment if it wants to attain its ambitious goal of a US$12 billion mining economy by 2030. China, the world's largest producer of lithium batteries and refiner of lithium, has already made significant investment in Zimbabwe's mining sector. A few years back, China declared a whopping US$2,79 billion investment plan in Zimbabwe's lithium mining industry. Numerous Chinese mining companies exist in Zimbabwe, including Sinomine Resource Group, Chengxin Lithium Group, Yahua Group, Zhejiang Huayou Cobalt and Canmax Technologies.
Sinomine Resource Group's local subsidiary, Bikita Minerals, has started trial production at a new spodumene and petalite factory in Masvingo province. The operation, with an investment of US$200 million, is expected to produce 300 000 tonnes of high-quality chemical-grade spodumene concentrate every year. In Goromonzi, around 80 kilometres from the capital, Harare, Prospect Lithium Zimbabwe, a subsidiary of Zhejiang Huayou Cobalt in China, inaugurated a US$300 million lithium processing facility. With its 4,5 million tonnes of hard rock lithium processing capacity, it can produce about 400 000 tonnes of concentrate annually for export. For US$422 million in 2021, Huayou Cobalt purchased the Arcadia Mine from Prospect Resource, an Australian firm. Chengxin Lithium Group, another Chinese company, invested US$77 million to build a 300 000-tonne-per-year lithium concentrator at the Sabi Star Mine in eastern Zimbabwe. The company invested an additional US$130 million in constructing its lithium processing plant.
China-US tango over lithium in Zimbabwe
As the US seeks to secure its production of green energy by severing China from the lithium value chain, it is attempting to confront China in Zimbabwe with a multifaceted strategy. Ironically, it was these US sanctions that pushed Zimbabwe closer to China. Indeed, China was probably the only nation that continued investing in Zimbabwe despite the sanctions.
It is without doubt that compared to Western development and commercial banks, Chinese financiers are significantly more willing to engage in high-risk ventures. In the first half of 2023, the Zimbabwe Investment Development Agency reportedly received 160 lithium investment applications from Chinese investors, compared to just five from US investors.
After realising the geopolitical ramifications of its prolonged disregard for the lithium value chain and its vulnerability due to overdependence on China, the US government is finally prepared to alter its approach. The US lifted sanctions against Zimbabwe in March 2024. Instead, it enforced the Global Magnitsky Act of 2016, which gave the US the authority to sanction eight particular Zimbabwean people, including President Emmerson Mnangagwa. As the country-specific sanctions are lifted, the US or other Western nations will have no further restrictions towards investing in Zimbabwe.
Zimbabwe has other challenges, such as lack of trained manpower. Many other African nations, including Kenya, Tanzania and Zambia, have passed laws mandating that mining corporations provide locals with training. These trainings may guarantee investment retention and local workforce development with the necessary skills. The US may create its own capacity-building initiatives or collaborate with other like-minded nations like India.
India is a signatory to the ambitious Minerals Security Partnership (MSP), spearheaded by the US, which aims to protect supply chains of vital minerals. India's track record of developing capacity in Africa means that the United States may benefit from its engagement with India.
Lastly, as a landlocked country, Zimbabwe lacks the cross-border logistics and infrastructure needed to connect to a port. The US has declared plans to build the Lobito Corridor, a railroad that will link the Lobito port in Angola with Zambia and the Democratic Republic of Congo. Going forward, the US might consider extending the corridor and connect Harare.
Conclusion
Considering the tightly-knit nature of the world's lithium supply networks, lithium exports might assist Zimbabwe in breaking free from its reputation as a pariah State. The fierce competition for its lithium augurs well for Zimbabwe. Access to secondary producers and international buyers is necessary to develop the lithium supply chain. China is now well ahead in turning metal to battery raw materials and controlling the whole value chain.
While this jubilant rhetoric from the West continues, China is steadily increasing the number of lithium projects in its portfolio across the nation, solidifying its status as an important trading and financial partner. Zimbabwe can gain from this competition as the US takes more interest in its lithium. However, everything will depend on how willing the US is to commit resources amid China's strategic rivalry.
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Samir Bhattacharya is an Associate Fellow at the Observer Research Foundation
Source - newsday
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