Value Addition, Governance and Global Responsibility: A Roadmap for Equitable Mineral Supply Chains

Divyam Nagpal, Principal Specialist – Renewable Enerfy, SEforALL:

You participated in the Secretary General’s Panel on Critical Energy Transition Minerals, which emphasized the centrality of advancing equity across the global supply chain. What are the most important steps that international institutions, private sector and researchers can take to ensure that investment in African supply chains is equitable and benefits Africa and Africans?  

Suneeta Kaimal, President and CEO, NRGI:

Last year, the UN Secretary General convened a multistakeholder panel on critical energy transition minerals to help define principles and actions to ensure low- and middle-income producer countries are not left behind or made worse because of the energy transition. At the center of the panel’s work was the agreement that achieving justice and equity requires change. Change from the deep-rooted inequities that have long plagued the minerals sector and global supply chains. Change from the destructive, exploitative practices that have left too many countries with neither wealth nor resources. And a change from the pit-to-port model. In fact, in a 2023 survey by the Intergovernmental Forum on Mining, Minerals, Metals and Sustainable Development, more governments named value addition as the main driver for their critical mineral strategy than any other factor.  

Given that sense of urgency on value addition, the very first actionable recommendation of the UN Panel report launched last year focuses on advancing value addition, economic diversification and benefit sharing. In the coming months, the Secretary General will establish a new multistakeholder, high-level advisory group to advance these ambitions. To help ensure the success of these efforts, NRGI brought together representatives from governments, the private sector, international institutions, academia and civil society to develop a roadmap to increase value addition for low- and middle-income producers.  

Three key recommendations emerged from our discussions to bring equitable, feasible value addition to life: 

• First—all voices must be included. Too often, the ambitions of the consumer countries or the global north dominate the global dialogue on energy transition and energy security related to transition minerals. The UN Panel was a welcome step forward in placing the voices and needs of people in low- and middle-income countries at the center of the dialogue. It brought together wealthy and consumer countries with low- and middle-income producers, civil society experts, industry and finance leaders in the same room, at the same table. However, meaningful multi-stakeholder participation shouldn’t be something remarkable, it should be the norm.
• Second—the required international financial support has to be on the table. In the last few years, including here at past Indabas, we’ve heard the likes of the US, EU and Saudi Arabia talk about the importance of win-wins and seen them dangle the prospect of significant financial support to enhance supply chain equity. But without delivering. Take the Lobito Corridor. A project that has the potential to generate benefits for Africans but also carries many environmental and social risks and could end up just reinforcing the pit-to-port model if it’s not accompanied by critical, additional steps to help African governments link these opportunities to broader economic ambitions that contribute to sustainable development for all Africans.  For example:
  • Support to increase government planning capacity, to enable procurement of the necessary models and data.
  • Support in the form of concessional financing to governments that can realistically help address feasibility constraints, including by crowding in more private investment.
  • Support to target value addition facilities directly or address bottlenecks in areas such as local skills and transport and energy infrastructure.  

• Third—global leadership is needed to strengthen governance. Good governance is a critical driver of change in mineral supply chains. It supports strong environmental and social protections. It makes sure that laws are enforced, communities have a voice, and businesses operate responsibly. Without good governance, corruption, weak enforcement, and short-sighted policies pave the way for environmental destruction and social injustice. Now, more than ever, countries committed to responsible mineral supply chains must ramp up efforts for global action that supports stronger governance.  But good governance isn’t just a moral imperative—it’s a smart business strategy. The only way mining companies can attract the level of investment needed to meet soaring demand for transition minerals is by reducing the risks that scare investors away. Disputes with governments or communities create uncertainty, drive up costs, and make the entire sector less attractive to capital. By fostering trust, ensuring fairness, and addressing the concerns of all stakeholders, good governance benefits communities and governments, but also the private sector.

  Good governance is also a shared responsibility. Our research identified more than 50 cases of corruption in the licensing and contracting of transition minerals projects alone, with cases found in 10 African countries. The companies involved are often based in the world’s wealthiest or most powerful countries, including Australia, Canada, China, Russia, Switzerland, the UK and the US. Each is a signatory to the U.N. Convention Against Corruption, which requires countries to criminalize foreign bribery and—except for China—signatories to the OECD Anti-Bribery Convention. Yet, Transparency International’s latest Exporting Corruption report found that only 2 of 47 countries analyzed are actively enforcing foreign bribery laws (the U.S. and Switzerland). Unless wealthier countries do more to hold companies based in their jurisdictions to account for wrongdoing, African countries will continue to suffer the consequences and we will not reach the fairer, greener world that current and future generations deserve.

The UN Panel on Critical Energy Transition Minerals is an opportunity for catalytic actions that bring together the voices, the resources and the global leadership necessary for Africans and Africa to at last see benefits from their minerals. 

Nagpal:

How can African governments move along the value chain given the persistent challenges such as energy and infrastructure bottlenecks? What role should regional cooperation and global actors play in ensuring that value addition can advance? 

Kaimal:

From our work with governments and citizens all over the world, we’ve seen the challenges of building new visions that move beyond the traditional mining model and deliver economic value, along with social and environmental benefits.  

A key takeaway from our work is that the root of successful value addition is a clearly articulated strategy. Such a strategy helps inform government decision-making on the amount of political capital, time and money to spend, or what trade-offs to accept. It also attracts investment by signaling that a government has a plan that accounts for economic realities and the current impediments and how to overcome them.  

A successful value addition strategy must be rooted in the goals of the national development plan, account for economic feasibility, market outlook, rigorous cost-benefit analysis, and include robust, transparent, public engagement. The strategy must also consider individual minerals and stages of the value chain. While Indonesia has learned the hard way, its differentiated approach to value addition—focusing on nickel given its dominant position and taking a more gradual approach with bauxite and copper—is the type of nuance that is required.   

Understanding, assessing, and, where possible, increasing the feasibility of value addition is critical to ensure that value addition is more than hype. Governments must consider key drivers of feasibility such as the size of the mineral supply, the transport costs, availability of competitively priced, reliable, clean energy, competing capacity elsewhere, and good governance. 

To return to the example of Ghana—in the absence of a clear competitive advantage, most of the gold refineries constructed in Ghana are lying largely idle due to a combination of profitability constraints. Or take Australia, where the government has had to provide subsidies for several decades to keep the country’s aluminum smelters operating. 

There are ways to increase the feasibility of value addition—this is where regional cooperation matters. Cooperation between countries can increase economies of scale for value addition facilities, enable specialization of different components to support the production of more complex products and increase the size of the end market. The possible collaboration between DRC and Zambia on the battery value chain provides an example of what the continent needs. 

But we know that cooperation is not easy. It must navigate an array of economic and political dynamics. Successful coordination in Africa’s mining sector has yet to materialize. One of the key drivers of future progress will be the capacity of regional and subregional bodies like the African Union’s African Minerals Development Centre, African Development Bank’s African Natural Resources Management and Investment Centre to plan, advocate for and support the implementation of coordination projects. These entities are doing important work with their limited resources, but those resources are insufficient for achieving transformative regional coordination.  

This is where international actors can help. African governments and regional bodies must do the legwork to pave the way for fundable, beneficial projects, including by having a clear, evidence-based value addition strategies in place. However, development partners and governments seeking Africa’s minerals must finally step up and put real money on the table. This will support planning and policymaking capacity of African governments and regional bodies, and address the feasibility constraints. It’s in everyone’s interests that they do.

Managing tradeoffs is at the crux of any value addition strategy. For example, Indonesia’s downstream strategy has succeeded at dramatically increasing the percentage of nickel processed in country, but it also brings potential risks in terms of public health impacts in producing regions. As the government assesses the next steps in its downstream strategy, it needs to balance these factors carefully and ensure protections against harm. 

Take Ghana—Its aluminum value chain ambitions bring with them the potential to increase the economic returns that the country generates from its mineral endowments. But the plans would require almost all the country’s hydropower capacity. Without other new competitively priced electricity capacity coming online, that will increase electricity costs for other businesses and households.