By Helen Reid and Nelson Banya
JOHANNESBURG (Reuters) – Mining companies and governments in Africa are calling for stronger trade ties with the United States after a new climate law set out incentives for U.S. carmakers sourcing battery materials from trade partners.
The $430 billion Inflation Reduction Act (IRA) has been criticised by the European Union and South Korea, who say it could hurt their car industries.
It could also negatively impact African nations that produce battery materials.
The United States has a Free Trade Agreement in place with only one African country, Morocco. Yet the continent is a key copper producer and Democratic Republic of Congo produces most of the world’s cobalt.
Battery materials and trade are set to be a focus at next week’s U.S.-Africa Leaders’ Summit in Washington where President Joe Biden will meet presidents of African countries including Congo.
“The IRA was intended to push out China, and what it’s ended up doing is pushing out the DRC, and the EU, and South Korea,” said Indigo Ellis, managing director at consultancy Africa Matters Limited, who will attend the Dec. 13-15 summit.
Under IRA, U.S. carmakers will get tax credits if they source at least 40% of battery materials domestically or from American free-trade partners. This risks carmakers replacing Congolese cobalt with Australian, Canadian, Moroccan, or U.S. cobalt.
Congo produced 74% of the world’s mined cobalt last year while the next-biggest single producer, Australia, was responsible for just 3%, according to a Cobalt Institute report.
An adviser to Congo’s President Felix Tshisekedi said a USA-DRC Free Trade Agreement “is an option for the medium to long-term, but in the short term other avenues will be explored”.
A spokesperson for the U.S. Trade Representative (USTR) said “we look forward to discussing ways to strengthen and deepen our trade and investment ties with our partners throughout Africa” during the summit.
The IRA aims to boost U.S. mining and processing, which some companies fear could come at the expense of value-added processing in Africa.
“The West needs to work with us to build some value-add,” said George Roach, CEO of Premier African Minerals, which has a lithium project in Zimbabwe.
His is one of many projects across sub-Saharan Africa aiming to produce battery materials like lithium, nickel and graphite.
Joe Walsh, managing director at Australia-listed Lepidico, which is building a lithium mine in Namibia and chemical plant in Abu Dhabi, said the IRA makes the United States a more attractive location for a planned second plant.
“The U.S. is not going to be able to incentivise the development of a significant battery raw material production base of its own without ruffling a few feathers along the way.”
(Reporting by Helen Reid and Nelson Banya, Additional Reporting by Sonia Rolley in Paris, Nuzulack Dausen in Dar es Salaam, Ernest Scheyder in Houston, Daphne Psaledakis in Washington DC, Chris Mfula in Lusaka, Manuel Mucari in Maputo, Nyasha Nyaungwa in Windhoek, Editing by Pratima Desai and David Evans)