As the world grapples with its economic headaches, Africa holds significant potential as a supplier of raw materials for global supply chains, particularly in high-technology sectors such as automobiles, smartphones, renewable energy, and healthcare.
A recent United Nations Conference on Trade and Development (UNCTAD) report highlights this potential and emphasizes Africa’s capacity to establish itself as a key player in global raw material supply.
In order to become a world supplier, the report says African nations must leverage their comparative advantages, enhance technology adoption, improve logistics, and make the most of trade agreements.
By capitalizing on its distinctive strengths, particularly in driving the global green transition, Africa can position itself as a hub for international supply chains, especially in technology-intensive industries.
However, this ambition primarily relies on the actions of African policymakers and businesses to create favourable conditions.
In fact, the African supply chain finance market has surged by 40% between 2021 and 2022, reaching $41 billion.
With at least a fifth of the world’s reserves in numerous critical metals required for the energy transition, the continent is endowed enough to take on this path. Yet, what are the odds in the region’s favour?
What factors provide these opportunities for Africa?
Several factors are contributing to the growing opportunities in Africa. UNCTAD points to disruptions in global supply chains caused by events like the COVID-19 pandemic and the Russia-Ukraine conflict that continue to impact economies.
Additionally, geopolitical tensions and multipolarism further exacerbate these challenges. Consequently, global manufacturers are actively seeking to diversify their production locations, making Africa an attractive prospect.
Nevertheless, attracting supply chains to Africa necessitates attracting investors.
The continent’s emergence as a consumer market and product destination is drawing interest in supply chain networks. Companies that establish supply chain bases or partnerships with local suppliers in Africa can contribute to job creation.
The imperative to transition from fossil fuels due to increasing climate-induced natural disasters has elevated the demand for minerals crucial to the energy transition.
Africa is poised to play a significant role in this value chain.
Africa’s advantage
The report highlights that Africa possesses abundant natural resources that could transform its economies into developed nations.
However, it has been a victim, where foreign powers exploit African resources for their own development while leaving populations in poverty.
Regardless, Africans could rewrite this narrative by harnessing their resources for their continent’s development.
UNCTAD underscores that Africa holds approximately 30% of the world’s mineral reserves, many of which are vital for the green transition.
Policymakers have a unique chance to capitalize on this geostrategic opportunity driven by the surging demand for minerals.
For instance, data from the World Bank predicts a tripling in demand for lithium by 2040.
Nigeria has already witnessed a remarkable increase in the price per tonne of lithium, from about $6,000 in 2020 to over $78,000 in 2022, signifying the substantial potential for wealth generation from its lithium resources.
