Harnessing Africa’s Critical Raw Materials: A Pathway to Sustainable Development

Summary

The immense potential of Africa’s critical raw materials (CRMs) can only be realized through meaningful partnerships that prioritize local processing, industrialization, and skill development. The contrasting approaches of the European Union (EU) and Indonesia toward CRM engagement in Africa provide opportunities for synergies rather than competition. While Indonesia offers expertise in downstream industrialization, the EU brings regulatory standards and market access. Together, they can explore triangular cooperation to align their interests with African developmental goals, provided that mechanisms for cooperation, robust financing, and African-led accountability are established.

Introduction

As the global quest for critical raw materials intensifies, nations are forming new alliances aimed at accessing resources while fostering sustainable industrial development. Africa’s rich reserves of strategically vital CRMs position it at the forefront of this competition, essential for the green transition. Despite these valuable resources, many African nations face challenges in turning mineral extraction into meaningful economic benefits due to insufficient processing capabilities and weak infrastructure. For instance, from 2016 to 2022, a staggering 73% of greenfield foreign direct investment (FDI) in sub-Saharan Africa focused on extraction, with a mere 26% allocated to processing and manufacturing. In response, African governments are increasingly prioritizing domestic value addition, which includes refining, processing, and expanding downstream industries, in accordance with strategies like the African Union’s Green Minerals Strategy.

Simultaneously, global players like Indonesia are recognizing the need to secure and diversify their supply of CRMs for the clean energy transition. Indonesia’s status as a leading nickel producer underscores its commitment to downstream industrialization, as evidenced by its 2020 ban on nickel ore exports. This move sets the stage for Indonesia to nurture an electric vehicle battery industry, necessitating additional critical minerals beyond its domestic capabilities. Collaborating with African countries can facilitate access to complementary minerals and tap into Africa’s burgeoning EV market while helping African economies enhance their value capture efforts.

Meanwhile, the EU is working to diversify its CRM supply chains through initiatives such as the Green Deal Industrial Plan and the Critical Raw Materials Act (CRMA). Africa plays a central role in this strategy, given its rich deposits of cobalt, copper, manganese, rare earth elements, and emerging lithium resources critical for Europe’s net-zero goals. Through various partnerships, the EU is strengthening cooperation with African nations to secure stable inputs for its clean technology sectors.

Indonesia and Africa: A Growing Partnership

Indonesia’s relations with Africa date back to the landmark 1955 Asia-Africa Conference, which established the Bandung Spirit, laying the groundwork for cooperation among developing nations. In 2005, Indonesia introduced the New Asian-African Strategic Partnership (NAASP), aiming to institutionalize interregional cooperation, particularly in trade and investment. In recent years, Africa has gained significance for Indonesia as a market for its non-traditional exports, particularly following the 2008 financial crisis.

The first Indonesia-Africa Forum (IAF) in 2018 marked a turning point in cooperation, broadening government and business ties, particularly in infrastructure. This momentum continued with subsequent initiatives focused on economic transformation and critical minerals. The promotion of a new framework for preferential trade agreements (PTAs) aims to lower tariffs on processed mineral products and create mutually beneficial partnerships with African nations.

Two main strategies characterize Indonesia’s CRM engagement in Africa: negotiating PTAs and enhancing cooperation through memoranda of understanding (MoUs). PTAs facilitate smoother trade by abolishing tariffs and harmonizing rules regarding the origin of mineral products, which can better integrate African producers into global markets. Countries like Mozambique and Morocco have already benefitted from such agreements.

In addition to tariffs, Indonesia is fostering cooperation through MoUs that focus on capacity building, technology transfer, and value addition in the CRM sector. Initiatives with nations like Rwanda and Tanzania aim at developing domestic production capacity for green technologies.

Case Study: Indonesia-Tanzania Partnership

A notable example of this cooperation is the MoU signed in 2024 between Indonesia and Tanzania, focusing on electric vehicle (EV) battery cooperation. This agreement envisions Indonesian investments in processing facilities and support infrastructure in Tanzania, alongside knowledge transfer that can benefit both countries.

Divergent Approaches: EU and Indonesia in Africa

The EU aims to decrease its dependency on a limited number of suppliers, particularly China, and has already signed partnerships with several resource-rich sub-Saharan African countries, including South Africa, Rwanda, and Namibia. Each MoU commits parties to create an operational roadmap with specific development activities.

The distinct approaches taken by the EU and Indonesia illustrate both competition and opportunity. While Indonesia promotes downstream industrialization through trade restrictions, the EU focuses on integrating African producers into its supply chains. Both entities have yet to find common ground regarding specific minerals and value chain segments, presenting both a challenge and the possibility for creating mutually beneficial arrangements.

Existing Agreements: EU vs Indonesia

Bridging Interests through Triangular Cooperation

Triangular cooperation can emerge as a powerful vehicle to align supply-security interests with African developmental objectives. The EU’s capacity in ESG regulation, alongside Indonesia’s expertise in downstream industrialization, offers an essential synergy. Together, they can support African nations in scaling their mineral processing industries while ensuring sustainable practices.

Strategic Opportunities for Collaboration

1. Financial Support: EU public funding could facilitate triangular cooperation projects through programs like the EU Global Gateway investment package or the Clean Trade and Investment Partnership.

2. Knowledge Sharing and Sustainability: Leveraging Indonesia’s experience in mining and processing alongside EU standards can create frameworks that foster sustainable development in African nations.

3. Risk Mitigation: Implementing blended finance solutions can help de-risk large-scale projects, thus attracting both public and private investments necessary for sustainable practices in Africa.

4. Skill Development and Technology Transfer: Prioritizing education and technical assistance will empower local talent, enhancing African countries’ capacities in CRM processing.

5. Mutual Accountability Mechanisms: Establishing frameworks that address socio-environmental concerns will not only uphold community rights but also generate public support for these partnerships.

Conclusion and Recommendations

To maximize the potential of triangular cooperation over critical minerals, clear strategies and actionable recommendations must be implemented:

• Incentivize EU Private Sector: Mobilize investments by offering guarantees and incentives to reduce perceived risks in the African CRM sector.

• Ensure Safeguards: Integrate adequate safeguards in financial solutions to alleviate public debt concerns while maintaining sustainable development objectives.

• Position Indonesia as a Tech Leader: Implement frameworks that align Indonesian expertise with EU resources, ensuring common ESG standards across partnership projects.

• Forge a Unified African Agenda: Create baseline guidelines at a regional level for mineral partnerships, which will empower African country negotiations with foreign partners.

• Install Mechanisms for Accountability: Develop trust funds and benchmarks to monitor the effectiveness of cooperation initiatives while ensuring they contribute to Africa’s development objectives.

Through these collaborative efforts, both the EU and Indonesia can navigate the complexities of their respective interests while supporting Africa’s industrial ambitions and sustainable development trajectory.