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Sep 07, 2023

Biden's IRA Shuts Africa Out of Critical Minerals Supply Chains

Few U.S. presidents have done as much as Joe Biden to strengthen ties with African nations. Few U.S. presidents have done as much as Joe Biden to strengthen ties with African nations. Last December,

Few U.S. presidents have done as much as Joe Biden to strengthen ties with African nations.

Few U.S. presidents have done as much as Joe Biden to strengthen ties with African nations.

Last December, the president hosted nearly 50 African leaders for a three-day summit in Washington. During the meeting, the administration committed to invest at least $55 billion in Africa over the next three years, including private sector initiatives of more than $15 billion. Since then, various senior U.S. officials, including Vice President Kamala Harris and Treasury Secretary Janet Yellen, have visited the continent. Biden has also pledged to visit before the year is out.

But when it comes to one of the most important issues on the administration’s agenda—climate change and the transition to a green economy—Africa is missing. As a result, the United States is forgoing an opportunity to deepen commercial ties with the continent, partner with African nations to strengthen supply and production chains, and diversify away from its reliance on China for more than 50 percent of 26 critical minerals.

Congress should amend the IRA to include all African nations that participate in the African Growth and Opportunity Act.

This message is implicit in the Inflation Reduction Act (IRA), signed into law last August. One of the act’s key provisions is a tax credit available to American consumers who purchase electric vehicles whose batteries contain a certain percentage of critical minerals extracted or processed in the United States or in any country “with which the United States has a free trade agreement.”

Currently, the United States has 20 free trade agreements in effect but only one with an African nation: Morocco, which has the world’s largest known reserves of phosphates but few other known critical minerals. Moreover, the Biden administration has gotten out of the business of negotiating free trade agreements in favor of nonbinding trade and investment frameworks. As a result, there is little prospect that strategic minerals from Africa will contribute on a significant scale to the U.S. energy transition anytime soon. Given the Biden administration’s push on climate change and its desire to prioritize relations with the continent, the administration should redouble its efforts now to include African nations in its energy transition.

As currently structured, the IRA tax credit significantly limits the United States’ ability to engage with key African nations in a way that is mutually beneficial and furthers key climate change goals. Moreover, if Washington does not diversify its suppliers, the U.S. energy transition will remain dependent on a relatively narrow base of trade partners. According to the Congressional Research Service, the United States is 100 percent import reliant on 14 minerals on the critical minerals list (including graphite and manganese) and more than 75 percent import reliant on an additional 10 critical minerals.

Currently, the United States relies most heavily on China for imported mineral commodities but also Germany, Brazil, South Africa, and Mexico. China also dominates the global market in refining strategic minerals. According to a recent study by the Brookings Institution and Results for Development, China refines 68 percent of nickel globally, 40 percent of copper, 59 percent of lithium, and 73 percent of cobalt. China also accounts for 78 percent of the world’s cell manufacturing capacity for EV batteries.

Africa is home to 30 percent of the world’s critical mineral reserves, many of which—cobalt, lithium, manganese, graphite, and nickel—are essential to renewable and low-carbon technologies. The Democratic Republic of the Congo accounts for nearly 70 percent of the world’s supply of cobalt.

Under the African Continental Free Trade Agreement, Africa has an established framework for engagement and has made clear its desire to be a contributing member to global value chains in the processing of critical minerals as well as manufacturing. Africa also has a comparative advantage in the production and early processing of some EV parts, such as battery precursors.

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The Biden administration and Congress have made a strategic error in not providing a way for African nations and their critical mineral supplies and value chains to produce for the U.S. market on an incentivized basis.

The IRA will have the unintended consequence of lessening U.S. commercial ties with Africa and ceding the African market in critical minerals to other nations—such as China.

If not rectified soon, the IRA will have the unintended consequence of lessening U.S. commercial ties with Africa and ceding the African market in critical minerals to other nations—such as China.

Congress and the administration could rectify this situation by amending the IRA to include not only countries with which the United States has a free trade agreement but those African nations that participate in the African Growth and Opportunity Act (AGOA). The legislation offers duty-free access to U.S. markets for countries in sub-Saharan Africa that meet certain conditions on governance, human rights, and labor protections.

Currently, 36 African countries participate in the AGOA, including those that produce or are known to have the critical minerals that the United States will need for its energy transition, such as Zambia, Namibia, Tanzania, Gabon, Kenya, South Africa, and Niger (for now) as well as Congo. Discoveries of critical minerals are likely to be made in other African nations. Including AGOA-eligible countries in the IRA would provide Washington with a greater number of suppliers of critical minerals and encourage investment in sectors that are a priority for African governments.

During last year’s summit with African leaders, a memorandum of understanding was signed with the Congolese and Zambian governments in which the United States pledged to support the development of a value chain in EV batteries in the two sectors. By including all AGOA-eligible African nations in the IRA, the U.S. government would be deepening its own commercial relationship with the continent as well as enhancing its capability to access the critical minerals it needs for its energy transition without giving greater influence and market share to its adversaries.

Witney Schneidman is the CEO of Schneidman & Associates International and a former chair of the Africa practice at Covington & Burling. He was the U.S. deputy assistant secretary of state for African affairs from 1997 to 2001.

Vera Songwe is a nonresident senior fellow at the Brookings Institution and a former executive secretary of the U.N. Economic Commission for Africa. Twitter: @SongweVera

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Read More

Embargoes have unintended consequences—and would hurt China more than the West.

|

Desperate to diversify away from Beijing, Washington is ramping up efforts to jump-start its struggling domestic industry.

|

Rethinking supply chains is vital for U.S. security.

|