Can African countries collaborate for an e-car?

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Africa’s key auto hubs, South Africa and Morocco, have hinted at mega and giga factories in their electric cars bid to remain relevant and tap a fast-rising global market.

Mineral-rich countries like the Democratic Republic of Congo (DRC), Zambia, and Mozambique are also eyeing the market with big intentions of becoming major suppliers of electric vehicle batteries.

All these ambitious bids are largely country-based at the moment, with the exception of DRC and Zambia, which have launched a joint bid.

For these countries to competitively bid for a major stake in the global electric vehicle market, industry experts say they should form regional value chains to cut cross-border trade costs and barriers to investments.

Kenya energy cabinet secretary’s economic advisor, Eric Mwangi, said during a recent webinar on electric mobility in Africa that countries need to package themselves as a regional market to attract investments from original equipment manufacturers (OEMs) with global supply chains.

Most OEMs, he argued, always think of locations as regions rather than countries or entire continents and therefore, regional blocs like Southern, Eastern or Western Africa can present a collective and compelling package that would attract a cluster of OEMs.

“So you’re not talking about Kenya’s 50 million population and, you know Ethiopia with 100 million and then.., so you are actually talking about 450 million people as the potential market, you start to look a lot more compelling than if you’re trying to have an individual conversation,” he explained.

Cliffe Dekker Hofmyer corporate and commercial practice director, Margo-Ann Werner shares similar sentiments saying there is a full appreciation that Africa is a mineral-rich continent and that the e-mobility sector could rely on the various diverse types of minerals accessible within Africa.

Establishing manufacturing nodes across the continent and leveraging on the AfCFTA, she said could result in a range of benefits including cost-effectiveness in the production of electric car batteries.

“So, it’s about establishing those sort of regional relationships between countries to achieve a collective benefit for all,” said Werner during the webinar on What we need to do to make e-mobility a reality in Africa.

Barely a year after Morocco announced plans to put up a gigafactory, investors have started trooping to the market.

In April, World’s second-largest battery maker for electric vehicles, South Korean LG Energy Solution signed an MoU with lithium compound manufacturer, Chinese Yahua to produce lithium hydroxide- a key component in high-nickel, high-capacity EV batteries in Morocco.

American EV manufacturer, Tesla defines a gigafactory as a facility with an annual output of about three gigawatt-hours (GWh) of lithium-ion (Li-ion) battery cells, enough to make batteries for 30,000-45,000 EVs per production line.

With such a capacity, Morocco is seen increasing its production capacity from the current 700,000 to a million units by 2030—in a mix of combustion engines and electric cars.

In February, the National Association of Automobile Manufacturers of South Africa (Naamsa) said in a thought leadership discussion document on new-energy vehicles (NEVs) the country needs “own mega battery factories” to remain globally competitive.

A month later, South Africa’s Industrial Development Corporation (IDC) and the department of trade, industry, and competition signed an MoU with Stellantis, a giant automaker of brands like Chrysler, Jeep, Fiat, and Peugeot to develop a manufacturing facility in the country.

This is expected to complement South Africa’s lithium-ion battery precursor pilot plant launched in 2017.

African Development Bank also singles out existing internal combustion engine expertise, the AfCFTA, raw materials and geographical proximity to key auto markets as Africa’s key strengths in the global supply chain.

But, the AfDB emphasizes in its latest Economic brief dubbed, “Strengthening Africa’s role in the battery and electric vehicle value chain,” the need for countries to rev up value addition of green mineral resources to unlock Africa’s real potential.

“Africa is endowed with significant reserves of green minerals required for the energy transition but currently operates at the primary level of the battery and electric vehicle value chain,” said the brief.

United States Geological Survey (USGS) data on global mineral reserves shows Africa hosts cobalt (52.4%), manganese (46%), bauxite for aluminium production (24.7%), graphite (21.2%), and vanadium (16%).

Some 70% of the world’s cobalt production and over 51% of global reserves are found in DRC. Zambia is the world’s sixth-largest copper producer and the second-largest cobalt producer in Africa.

South Africa is home to over 70% of the world’s manganese reserves, with some deposits in DRC and Gabon.

Namibia hosts between 20% and 40% of global graphite reserves while Zimbabwe is among the five largest lithium-producing countries, According to Naamsa data.

A lack of robust policy frameworks that prioritise industrialisation and value-addition in mining and other resource sectors have been listed by experts as major setbacks for the continent.

According to Mwangi, while South Africa and Morocco’s real experience in global auto supply chains presents them with ecosystem advantages due to existing component suppliers’ infrastructure, they might suffer a political disadvantage if they don’t get policies right.

Investing in the new, he argues necessarily means disinvesting in the old and “we” cannot discount the impending political economy effects.

“It’s much easier to start from scratch because you’re building something that didn’t exist before than saying, there are some jobs that are going to have to be lost or reconfigured, people have to be re-tooled to live in this new universe. So there’ll be some losers, but they’ll definitely be way more winners than losers, particularly, if we get the policy and regulatory framework right,” explained Mwangi.

Africa’s Climate Venture Builder, Persistent Energy Capital, LLC, partner and chief legal officer, Wairimu Karanja said the benefits of AfCFTA go beyond just facilitating cross-border trade.

“Weather AfCFTA can be helpful, is not just in facilitating intra-continental supply of minerals, for instance when DRC gets a great negotiation deal from South Africa but also in moving towards working groups that can help certain countries develop their laws and policies when they relate to ESGs,” said Karanja.

Research firm Modor Intelligence projects Africa’s electric vehicle market to grow from $11.94 billion in 2021 to $21.39 billion by 2027.

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