The Think 20 (T20) tank has called for action to address trade barriers limiting value addition ahead of the November G20 Leaders Summit, saying that countries on the supply and demand side of minerals markets and global value chains are often disconnected.

The think tank said this is reflected in geo-economic dynamics that relegate Global South, supply-side countries to positions of limited value addition and capture.

The T20 policy brief is expected to provide the G20 with concrete solutions to shape a sustainable and equitable future.

The G20 summit, which will be held in South Africa in November, comes at a time when critical mineral value chains face challenges, including supply chain concentration in few industrialised economies, infrastructure deficits, financial barriers such as volatile prices and lack of investment, and poor governance in resource-rich countries that hinder value addition. 

These issues trap developing countries in raw material export, perpetuating poverty and risking the creation of new forms of resource dependency, despite the urgent global demand for clean energy minerals. 

T20, which produces, discusses, consolidates and presents ideas on how to face current and emerging challenges that may be addressed by G20, said its recommendations prioritise supporting Global South efforts and global stability, benefitting both resource-rich and mineral demanding countries.

The think tank added that there is also a need to scale up and accelerate the transition which will significantly increase demand for critical minerals. 

“Illustratively, the European Commission (2024) projects that lithium demand will increase nearly ninefold by 2040, driven by expanding EV battery production, while graphite demand – key for battery anodes – is expected to nearly quadruple. Copper consumption is also poised to nearly double, due to its critical role in electrical conductivity,” read the brief. 

The engagement group said as demand rises for these and several other minerals, new economic opportunities emerge for resource-rich countries of the Global South, which could leverage these resources for sustainable development. 

However, there is a risk of missing the current window of opportunity to develop production and technological capabilities that enable value addition at the domestic level.

The group stated that many supply-side countries have sought to move beyond extractivism by developing backward, forward or sidestream linkages. Despite some notable success, most of them still face major obstacles. 

These include limited technological capabilities, the absence of close large-scale electromobility markets, high concentration in the more advanced segments of the value chain, restrictive trade barriers in key export destinations and the predominance of foreign capital ownership.

“Downstream activities pose significant challenges, as the relative weight of the mineral resource within the final product is lower than in upstream and midstream segments and the production processes are far more technologically complex,” said the think tank, adding that most supply-side countries have limited capabilities to manufacture these kinds of products at competitive costs. 

“Crucially, the existence and control of large-scale electromobility markets that drive demand for these products from close consumption centres is a necessary condition for the emergence of a competitive battery cell industry,” stated the brief.

The policy brief also added that the development of backward, sidestream, and forward linkages is further constrained by market concentration, trade barriers, and the predominance of foreign capital ownership.

It said mining countries often face challenges which limits their ability to move up the value chain and are further hit against Global North protectionist re-shoring and friend–shoring strategies.

“Finally, most of the mineral resources located in the Global South are under foreign control. For instance, while the Democratic Republic of Congo (DRC) mining facilities account for 66% of the world’s cobalt extraction, European and Chinese companies each own a third of the supply. DRC–owned companies account for less than 5% of production. 

The group added that while the foreign ownership is not an insurmountable obstacle to the development of production capabilities, it poses an additional challenge as mining companies usually locate their research and development  activities abroad and tend to forge global contracts supplier networks rather than local ones. 

The group said the challenges can only be addressed through a cooperation list that first connects the inadequately considered shared concerns, risks, and opportunities facing supply-side countries.

 “And second, address these within the same framework as those of demand–side countries (South–North). Such a framework should therefore reflect South–South–North interests and opportunities for a more equal distribution of benefits and burdens, in line with just transitions at international and domestic scales.”

manyane.manyane@inl.co.za

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