As chair of the Group of 20 (G20) nations this year, South Africa wants to secure agreement for more local processing of the metals and minerals critical to the clean energy transition, with many mined in large quantities in the Global South – but it will first need to win support from dominant player China.
According to the G20 website, South Africa plans to work with other governments in the international economic forum “to ensure that the countries and local communities endowed with these resources are the ones to benefit the most” – especially as mineral extraction and refining accelerates to supply growing electrification and renewable power production worldwide.
Q&A: What you need to know about critical minerals
At the World Economic Forum in Davos in January, South African President Cyril Ramaphosa said that countries rich in these minerals – which include lithium, cobalt, copper and nickel – should be the ones to gain most from their exploitation.
“Another of South Africa’s priorities for its G20 presidency is to harness critical minerals for inclusive growth and development,” Ramaphosa said, calling for a G20 framework on green industrialisation and investment aimed at delivering a grand bargain “that promotes value addition to critical minerals particularly close to the source of extraction”.
This, according to Ramaphosa, will result in “an additive rather than an extractive relationship” and reverse the historical trend by which resource-rich countries, many of them in Africa, lose out “because the benefit flows out of their own countries to other locals in the world”.
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Interest in processing minerals close to their source – known as “beneficiation” – has increased in recent years amid rising demand for the metals and minerals that are essential to produce clean technologies such as renewable energy infrastructure, electric vehicles and batteries.
Last December, during former US leader Joe Biden’s first and only visit to Africa, President Felix Tshisekedi of the Democratic Republic of Congo (DRC) said, “it is imperative that the wealth contained in our [Africa’s] ground contribute directly to the well-being of our peoples”.
This view is in line with recent efforts by some developing countries – including Indonesia, Nigeria, Zimbabwe and Namibia – to ban or curb exports of these raw materials and build processing and manufacturing facilities as a way to grow their economies and develop sustainably.
Why is China’s co-operation essential?
During India’s G20 presidency in 2023, its officials pushed for the group to develop a shared vision on critical minerals. India’s renewable energy secretary Bhupinder Singh Bhalla spoke of the need “for a cost-effective and risk-proof scale-up of clean energy through diversified supply chains and distributive expansion of [the] manufacturing base”.
But the plan fell through after it was opposed by China, meaning that the aim to have “critical minerals and materials beneficiated at source” received only a brief mention in the final G20 declaration that year.
China dominates the global critical minerals supply chain. The Asian powerhouse refines 68% of nickel globally, 40% of copper, 59% of lithium, and 73% of cobalt, according to research by the Brookings Institution and Results for Development. Another report from Southern Transitions shows that China – with the largest global manufacturing capacity for key renewable energy technologies – was the destination for more than half of Africa’s critical mineral ore exports in 2023.
That is a global advantage China will not easily concede, said Olimpia Pilch, chief strategy officer at The Critical Minerals Africa Group (CMAG). “It is not in China’s interest” for other developing countries to gain more value from critical mineral refining, as this would “threaten China’s leverage” with rival super powers, she said.
What’s more, breaking into the complex space of making products from critical minerals will be “very difficult”, she added, as China is increasingly banning exports of processing equipment and closely guarding its intellectual property and operational know-how.
Africa’s lack of reliable energy supplies and infrastructure
China is not the only obstacle to boosting beneficiation across the Global South. Pilch said many countries that have deposits of critical minerals, including in Africa, lack “almost all of the key ingredients to enable profitable processing and refining”.
Barriers include limited supplies of cheap and reliable energy to convert ore into usable materials and metals; inadequate transport infrastructure; insufficient domestic consumer demand to spur manufacturing; and constrained access to cheap finance due to the high investment risk associated with many African nations.
Thando Lukuko, Climate Action Network’s director for South Africa, said South Africa would struggle to advance its G20 beneficiation plan because resource-rich poorer countries generate a large share of their income from mineral exports and lack the infrastructure needed to process raw materials. “Where’s the money going to come from for that?” he asked.
The rules of the global economic game work against those countries, preventing them from moving away from their status as simple raw material exporters, according to Anabella Rosemberg, senior advisor on just transition at Climate Action Network International.
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For example, the World Trade Organisation generally considers domestic content requirements – which mandate companies to purchase or use a certain percentage of locally produced goods – “as a violation of free trade principles and [they] are therefore prohibited”.
Another problem is clauses embedded in bilateral trade agreements that can prevent countries from introducing policies that retroactively ask foreign investors to add value to the minerals they are extracting, Rosemberg noted, calling for more “openness” from developed countries on value addition.
She welcomed South Africa’s willingness to take on the topic in the G20 negotiations, adding that it could create more awareness on how these barriers intersect with prosperity in the Global South.
Can South Africa seal a G20 deal on critical minerals?
In Davos, Ramaphosa said there is a need to reform the WTO and global financial institutions to be more representative and responsive to citizens’ needs. He promised that South Africa “will use this G20 to champion the use of critical minerals through a programme of green industrialisation and as an engine for growth and development in Africa, and the rest of the Global South”.
Mahendra Shunmoogam, South Africa’s director of foreign trade policy, told Climate Home that a key focus of the G20 this year will be to work out how to “bring about better outcomes for global trade” and make it more inclusive.
He said progress is being made, adding that South Africa has the full backing of the G77+China group of developing countries, with all members of the bloc agreeing to push for beneficiation of critical minerals at source during the 2024 Third South Summit.
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The summit’s outcome document references it only briefly, however, calling “for a coherent set of policy actions at the national, regional and international levels to support the need for developing countries rich in critical minerals to add value to their supply chains as a way of contributing to their economic structural transformation, creating decent employment, increasing export revenues, and participating in the process of economic development”.
Shunmoogam, who is part of the G20 trade and investment working group, said so far there have been no objections to talks on beneficiation from member countries – which are still at an early stage – and he therefore expects them to co-operate on securing a positive result.
The text of a framework on green industralisation that will support the creation of value chains in developing countries will be negotiated this year during South Africa’s presidency, he added.
He suggested that resource-rich countries, such as those in Africa, should develop a regional approach – for example, minerals mined in the Democratic Republic of Congo could be refined in Botswana and assembled elsewhere on the continent. “We do want the minerals from the Global South to add value in the Global South,” he emphasised.
Rosemberg said that South Africa, as G20 president, will need to work with recommendations outlined in a recent report from the UN Secretary-General’s panel of experts on value addition. It states that beneficiation of minerals can spur industrialisation and economic development, therefore “all countries, in particular developing countries, should have an equitable opportunity to harness technological innovation, participate in global mineral value chains and to benefit from these”.
Shunmoogam noted that there are different resolutions by a range of multilateral organisations supporting the processing of minerals at their source, and South Africa aims to collate these as a basis for further discussion at the G20.
Pilch of the CMAG said, however, that for beneficiation to be achieved in Africa and other mineral-rich parts of the developing world, “collective action would need to be taken by G20 to tackle China’s monopoly and invest in growth to boost demand outside of China”.
