Zimbabwe currently sits on Africa's largest lithium reserves and the fifth-largest globally.
The government says it is losing US$1.8 billion in mineral revenues due to smuggling and externalization to South Africa and the United Arab Emirates.
This drive could create a $65 billion upper-middle-income economy with a per capita income above $5,000 in the next decade.
Harare- Economic revolutions in Africa tend to have a short life span. Even the greats, who have only just tasted independence, are falling victim to the miscellanies of a global economy. With high inflation, unemployment, poverty, corruption, climate change, pandemics, geopolitically motivated wars, the culture war, it seems Zimbabwe is at the mercy of all the world’s problems. Last on the nations’ alphabet, and last in the race to the economic and political freedom envisioned by our forefathers. Zimbabwe is sleeping. But it is a sleeping giant. Once the bread basket of Africa, Zimbabwe has been reduced to a nation on reset.
Yet, the Jewel of Africa has something it didn’t have three or four decades at the peak of its powers. It’s known as white gold. The metal of the future. One that has the potential to transform Zimbabwe in only a few years. This is a series that will run for the next few weeks and will look to propose policy solutions derived from empirical evidence, first principles thinking and artificial intelligence. This week we take a deep dive into lithium.
Lithium, a critical mineral that will underpin the world’s green energy transition, has taken off in the past three years, with prices surging to record highs as supply has struggled to keep pace with unrestrained global demand. In 2022, lithium prices soared more than 101.4% between January and March alone, according to Benchmark Mineral Intelligence’s Lithium Price Index. Lithium carbonate prices in China, the biggest electric vehicle (EV) market in the world, rose to a record $84,000 per tonne in November.
If done right, this “economic revolution” could foster the realization of the country’s Vision 2030 economic blueprint, which calls for an industrialization drive to create a $65 billion upper-middle-income economy with a per capita income above $5,000 in the next decade. As analysts, our jobs require that we exercise caution in our optimism, especially about the Zimbabwean economy. However, based on all the recent evidence, this is no longer about whether lithium can deliver on all these promises, it is about the government’s knack for the economic policy ruthlessness and aggressiveness required to usher this revolution. At its core, Zimbabwe is well-positioned to leverage its natural resources, arable land and its human capital to awaken the sleeping giant.
Zimbabwe currently sits on Africa's largest lithium reserves and the fifth-largest globally. Located in the province of Masvingo, Bikita mine has one of the world's largest-known deposits of the metal at around 11 million tonnes. And the Arcadia Lithium Mine is expected to reach an annual production of 2.5m tonnes, which could equate to US$3 billion in exports. If these lithium resources are fully exploited, Zimbabwe could meet 20% of the world’s total lithium demand, ushering in a gargantuan economic boom. However, all this hangs on the government’s ability to not only scale up beneficiation but to solve the extraction crisis.
Having realised that the lithium rush is in full force, in December, President Emmerson Mnangagwa’s government set out its stall with a strict ban on the export of unprocessed lithium, in a bid to stop artisanal miners from digging up the mineral and taking it across borders. In 2020, the government said it was losing more than $100m a month in mineral revenues, mainly through the smuggling of gold mined by artisanal miners. Mnangagwa says hordes of artisanal miners have been invading abandoned mines to dig for lithium amid high global prices, before funnelling raw lithium into neighbouring countries for export on international markets. The government says it is losing $1.8 billion in mineral revenues due to smuggling and externalization to South Africa and the United Arab Emirates.
The government’s plan is to build domestic processing capacity and take advantage of surging global prices. Companies that have made multi-billion-dollar acquisitions in Zimbabwe will have to build lithium processing plants. Most are Chinese companies, which have bought a number of Zimbabwe’s lithium mines in recent years. Although still in the early days, the ban is yet to yield tangible results, instead, it has resulted in two-million tons of ore being stockpiled, according to Zimbabwe Miners Federation President Henrietta Rushwaya.
So how does Zimbabwe move from this stall to a point where it dominates the global lithium industry?
Step 1: Solve the extraction crisis
In recent weeks, the industry has asked President Emmerson Mnangagwa to review the ban as it threatens the viability of their operations. The outcry is premised on a number of issues. Firstly, artisanal mining alone provides a livelihood for more than a million Zimbabweans. The abrupt ban on raw lithium exports has pushed many of these miners back into poverty, essentially excluding a huge percent of the population from the already very in formalised economy. However, it is our view that herein lies the major problem of the ailing sector. It is a sector dominated by artisanal miners who work outside the realm of government oversight. The same miners are responsible for a significant proportion of illegally exported raw minerals. There is no regulation in this sector. This is surprising considering that with gold, for example, artisanal miners account for the majority of deliveries.
The next question the nation needs to ask seriously is who owns the land that contains all these mineral reserves littered around the country. There should be processes for evaluating the ability of landowners to lawfully leverage these minerals, whether at the extraction level or throughout the value chain. If the land has to be reclaimed from said individuals, who would be sufficiently compensated, it would be for the good of every Zimbabwean. What we cannot continue to have, is this muddled operating environment and lack of regulation in the sector.
Step 2: Fully leverage the value chain
The "Zimbabwe is open for business" mantra should be applauded for pulling investment from China, but at what cost? The government has several options. They could explore the potential of locally available resources (for example, lithium, nickel, and cobalt) and processing (refining and attraction of materials producers), facilitate value-chain collaboration through industry forums, and encourage talks between nearby EV producers and cell manufacturers. Further, the government should learn how other industries have built collaboration, and build and fund research and educational institutions to develop talent and advance technology.
Zimbabwe is currently looking at a number of case studies including Chile and Indonesia which have also banned raw mineral exports.
To attract cell manufacturers, the government should establish a fast-track process for permitting and land leasing; make loans, grants, and guarantees to overcome capital limitations; and encourage and facilitate effective cross-border collaboration and trade with other suppliers and partners in the value chain. Chinese investment has been crucial in elevating the country’s forex balances and essentially keeping a broken mining industry afloat. However, the government should adopt more mutually beneficial arrangements with foreign investors, forgoing short-term gains for long-term profits. DEBSWANA and NAMBED are prime examples of how African nations can collaborate with external mining companies to beneficiate scarce resources, expanding these countries’ influence on the diamond value chain.
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