AFRICA CAN LEVERAGE THE
AFRICA CAN LEVERAGE THE GLOBAL SHIFT TO ANELECTRIC ECONOMYMining companies may need to pivot or scale down to withstand the current strains andmaintain their operations, argues Igor Hulak, a Partner at Kearney, but there are also hugeopportunities to leverage the continent’s wealth of base and precious metals.The ongoing Ukraine war and ensuing sanctions imposed on Russia (the mostextensive in world history) have resulted in spasms in the oil and natural gasmarkets, driving well-documented disruptions to energy supplies, as well asagricultural resources.However, the shortages in supplies of crucial basic and precious metals, whichare just as concerning to Africa’s business leaders as those in energy and agriculture,have garnered far less coverage and attention.“The sanctions against Russia – one of the world’s biggest exporters of rawmaterials – is causing knock-on effects that are rippling throughout many spheresof business, from the sustainability of Africa’s mining operations to the stablefunctioning of the manufacturing base,” explains Igor Hulak, a Partner at Kearney,a leading global management consulting firm.The suspension of foreign shipping operations has triggered a worldwideshipping container shortage. With existing infrastructure insufficient for handlingthe redirection to and through Asia of raw materials in their full volumes, industriesare looking for solutions.In addition, alternatives that make use of ageing infrastructure are unsuitable asthey pose massive environmental risks, as evinced by the catastrophic 2020 dieselspill at Norilsk Nickel, Russia’s worst-ever Arctic environmental disaster. Chinamay have been able to fill the supply gaps, but ongoing Covid-related shutdownsand supply-chain interruptions have made that difficult.These sanctions and shutdowns will continue to affect Africa’s consumers as well,having manifested in increased prices for food and fuel.Since early 2022, the five base metals that Russia produces on a vast scale –nickel, aluminium, copper, iron and zinc – have experienced sharp price increasesand continued supply disruptions are likely to see prices rise further still.“Nickel, which is a critical ingredient in lithium-ion batteries and essentialfor the global energy transition, is in short supply. Russian companies such asGeopolitical shifts and the rising demand for metals essential to the energy transition were important subjects of debate at the Critical Minerals Africa 2024 Summit.PHOTO: Critical Minerals Africa Summit38
MININGOffhore wind plants need huge amounts of copper, making facilities such as Ivanhoe’s Komoa-Kakula copper mine in the Democratic Republic of the Congo critical to the modern economy.Norilsk Nickel, the world’s largest nickel producer, had historically suppliedglobal markets.However, the sanctions have made Russia, which accounts forroughly 10% of the global share of nickel, unable to meet this global demand,”Hulak notes.Nickel opportunity“This deficit in global supply presents an opportunity for African nickel producers,such as Zimbabwe and Botswana, to step in and fill the gap. However, overcomingexisting inadequate export infrastructure will be a major challenge, requiringgovernment buy-in and a collaborative multi-sector approach. Though thechallenges are formidable, Africa must find a way to seize this opportunity andemerge as a key player in the new global metals market,” Hulak asserts.Hulak says that prices of other base metals for which the world is less reliantsuch as iron and zinc (of which Russia produces 4% and 2% of the global share,respectively), are likely to stabilise.Precious metal prices have, by contrast, shown less volatility. However, as thesetoo are crucial to the electric economy, experts warn that price increases are stillon the cards.The most significant increases are expected in the platinum group. Russiaaccounts for almost 40% of the world’s supply of palladium and 11% of platinum,which is essential for hydrogen-based energy technologies (as well as alloys,circuitry and ceramic capacitors).According to Hulak, market and pricing drivers are currently indicating longtermprice increases for platinum group metals (PGMs). This presents a goldenopportunity for South Africa, still the world’s largest producer of these metals, tostep in and fill the supply gaps. Moreover, this is a unique opportunity for SouthAfrica to leverage its already strong position and expand its operations in thesector to meet the escalating global demand.Hulak goes on to add that PGMs are typically associated with rare earth metalssuch as rhodium, iridium and palladium. With Russia unable to supply such metals,PHOTO: Ivanhoeand with potential higher demand for these metals from increased military activity,it creates a market gap that African countries can fill.Gold powerhousesTraditionally a reliable safe-haven investment, gold (of which Russia is a majorproducer) is likely to see moderate price increases. This could work in favour ofAfrica’s gold production powerhouses like Ghana and South Africa.The silver price is, however, expected to stabilise, mainly because of the lack ofdirect sanctions and Russia’s minor share of global production (6%).At this pivotal moment, with the energy transition enjoying popular publicbacking, the major concern now is whether the market can find enough of thecritical raw materials needed to support it. Apart from exacerbating the disruptionsdriven by the Covid pandemic, these supply shocks are compounding the pricepressures associated with this global shift and the resources this requires.Offshore wind plants, for example, need more than seven times the amount ofcopper compared to equivalent gas-fired plants and EVs use more than six timesmore minerals than internal combustion-powered vehicles.Supply disruptions will likely continue to affect global markets. As a result, someAfrican companies may need to pivot or scale down to withstand the current strainsand maintain their operations.However, Africa’s wealth of natural resources, including many of the basic andprecious metals currently in short supply, could allow the continent to leverage theopportunities presented by the shift towards an electric economy. By leveragingthese resources effectively, Africa has the potential to drive additional economicgrowth, develop industries along the value chain and create jobs.Overall, however, the balance in global supply will not change significantly. As aresult, prices for many base metals are expected to revert to the global consensusforecastlevels. Still, for some commodities like nickel and precious metals, priceincreases look like they’re here to stay.Distributed by APO Group on behalf of Kearney.39
