As far as market stability is concerned, one sector which is renowned for its volatility, particularly during times of economic and political uncertainty, is mining.
Recently, as we become ever more reliant upon modern technology, and as modern tech such as smart phones continue to evolve and become more advanced, there is a growing demand for critical minerals. Add to that, the fact that the world is in the process of transitioning away from fossil fuels, with a strong emphasis being placed upon electric vehicles, and you can see why the demand for minerals is so high.
Lithium in particular, is in incredibly high demand to power the batteries needed to help meet decarbonization targets and help nations meet clean and sustainable energy requirements. Because of this, some of the world’s most powerful nations such as China and the US, find themselves at odds in Africa, as this is where the majority of minerals and natural resources are mined.
This conflict in turn is due to what is known as the ‘natural resource curse’ and there are concerns that it could be harming many developing African nation’s economies
The “Natural Resource Curse”
Recently, tensions between certain African nations, the United States of America, and China, have escalated. This is largely due to metaphorical battles over the control of natural resources in Africa. Economists have labelled this as the natural resource curse.
The basic premise behind this so-called “curse” is that, due to there being such an abundance of natural resources across Africa, not only in the form of minerals such as lithium, but also in the form of natural gas, crude oil, and other fossil fuels, it is having negative effects on developing nation’s economies.
The natural resource curse has created all manner of geopolitical issues and conflicts, which are resulting in negative economic outlooks. The risk of conflict is higher, there are higher levels of corruption, there is poor management in place, and impoverished economic growth is also a factor.
Put simply, despite having such an abundance of natural resources that are in such high demand and are deemed so valuable, the nations these resources are located in are in fact struggling. These resources have fueled violence and have created outputs for other criminal activities such as slavery, smuggling, extortion, and theft.
China Looking to Expand its Activities in Africa’s Mining Sector
Just to add insult to injury, as if the effects of what is known as the natural resource curse weren’t enough, a number of African nations are also bearing the brunt of growing tensions between China and the USA, over the monopoly of mining activities across Africa, overseen by both nations.
Tensions between the U.S and China were already strained. Now, that’s hardly breaking years, but ever single the global pandemic in 2020, tensions have really boiled over. Lately, the U.S has found itself at odds with China, over China’s monopoly over Africa’s renewable energy minerals.
It is estimated that China controls around 8% of Africa’s mining sector. If this figure doesn’t seem especially high, just consider that the figure stood at just 6.7% back in 2018. While it’s less than half than those of the west, China’s mining activities across Africa are expanding at an exponential rate. This reflects China’s objectives of growing its mining activities across Africa and really staking its claim on Africa’s mining sector.
China’s mining presence in Africa is largely concentrated to just five countries:
- Zambia
- South Africa
- Guinea
- DRC (Democratic Republic of Congo)
- Zimbabwe
In the DRC, China has at least 7 cobalt processing facilities and operations, with the majority of these raw materials being mined and then shipped back to China. In fact, close to 90% of all Chinese imports coming in from Africa, consist of natural resources in some form or another.
It should come as no surprise to learn, then, that China is the number one destination for minerals exported from Africa, with the vast majority of them being utilized in electronic goods manufacturing. Back in 2019, sub-Saharan African mineral exports to China exceeded $10 billion.
Growing Tensions Between the US and China
Because many African nations have such an abundance of minerals and other natural resources, America, and indeed, many other Western nations also have a strong mining presence in Africa. This has of course led to rising tensions. None more so however, than those between China and the U.S who were already at odds.
Many African nations have economies that are struggling. Minerals account for more than 70% of total African exports. Furthermore, they account for roughly 28% of the continent’s GDP. China and the U.S are at the forefront of much of the mining activities, and this is causing increased tensions.
China for example, has already expanded its operations in Africa systematically for more than two decades. By contrast, U.S presence in Africa has flatlined. The U.S likely now feels “pushed out” as if China is staking too much of a claim on African resources, and the Americans don’t like that.
China is also, by far, the largest two-way trading platform in Africa. Back in 2021, trading numbers reached $254 billion. This number was more than four times that of U.S – Africa trade. Again, the U.S are watching these figures closely as there is belief that they’re concerned that China is trying to dominate the natural resource market. Needless to say, as the natural resource market is estimated to be worth $45 Trillion, you can see why America is watching China’s expansion across Africa very closely indeed.
This is not only potentially problematic for China and the U.S, many African nations could also be affected, especially concerning Chinese and/or U.S interests, where African states could be pressured into making decisions regarding said concerns. The last thing these nations need is to find themselves in the midst of proxy trading wars across the continent.
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