South African mining sector set to reshape its role by becoming a key enabler of energy transition
South African mining sector set to reshape its role by becoming a key enabler of energy transition
Servaas Kranhold, Head: Natural Resources, BDO South Africa
Despite a weakening economic outlook, SA and the rest of sub-Saharan Africa is attracting the attention of investors in the mining sector as the continent rapidly becomes a key target for the development of new mines to meet the growing global demand for critical commodities like copper and lithium.
As of 2023, Africa held around half of the world’s cobalt and manganese reserves — essential for renewable energy and electric vehicles — positioning the continent to benefit significantly from the global green energy transition. As the global shift toward cleaner energy accelerates, the mining industry is undergoing major changes to meet rising demand for these critical minerals, driving innovation and reshaping mining priorities worldwide.
Critical minerals are essential to the green transition; for example, copper powers Electric Vehicles (EVs), wind turbines, and solar systems; nickel and manganese enhance battery performance and stability; zinc protects renewable infrastructure through galvanisation and is used in energy storage; silicon is the core of solar PV cells; chromium is used in corrosion-resistant steel for turbines and EVs; and rare earth elements (REE) like neodymium enable high-efficiency magnets in wind and EV motors.
To reach Net Zero, critical minerals demand from clean energy technologies is expected to nearly triple by 2030 and quadruple by 2040, reaching 40 million tonnes. Demand for key minerals like lithium is set to grow substantially, with lithium demand potentially fivefold by 2040 and cobalt demand doubling by 2040.
The total market value of key energy transition minerals is projected to more than double by 2040 under climate-focused scenarios, surpassing revenue from coal production by 50.6%. This trend is also increasingly evident in Africa, as the continent’s coal output is expected to decline by 12.5% between 2024 and 20293 owing to reduced investments and number of new projects, reflecting global climate priorities.
In contrast, metal and non-metallic ore production is set to rise by 10.3% over the same period3, supported by African governments through national and regional initiatives. Between 2024 and 2050, cumulated revenues from four critical minerals are forecasted to exceed those from fossil fuels by 3.1 times.
The global demand for minerals is set to be influenced by a protectionist wave, particularly with Trump's administration likely to implement new tariffs. This could exert downward pressure on the demand for metals like iron ore, potentially disrupting traditional trade flows. Precious metals might enjoy a different fate, possibly acting as safe-haven investments amidst global uncertainties.
Apart from import tariffs, critical minerals can also be subject to export restrictions or export tariffs. These measures could potentially impact the global supply of critical minerals, resulting in upward pressures on world prices and concerns about how secure the supply of raw materials to manufacturers is, as indicated in the Organisation for Economic Co-operation and Development (OECD) Apart from import tariffs, critical minerals can also be subject to export restrictions or export tariffs.
These measures could potentially impact the global supply of critical minerals, resulting in upward pressures on world prices and concerns about how secure the supply of raw materials to manufacturers is, as indicated in the OECD Methodological note to the Inventory of Export Restrictions on Industrial Raw Materials.
Already, the OECD database has revealed an upward trend of export restrictions on energy-related raw minerals, with the number of export restrictions, including export tariffs, increasing from 396 measures in 2009, to 472 measures in 2012, to 489 measures in 2017, to 502 in 2021 Already, the OECD database has revealed an upward trend of export restrictions on energy-related raw minerals, with the number of export restrictions, including export tariffs, increasing from 396 measures in 2009, to 472 measures in 2012, to 489 measures in 2017, to 502 in 2021
Meanwhile, the trend of deepening interdependence between the U.S. and China has reversed, leading to a broader but less deep form of globalisation. Countries are now seeking new trade partners and corridors, which presents both opportunities and complexities for African mining operations. This shift necessitates strategic foresight; miners will need to navigate new geopolitical landscapes to secure capital, technology, and markets.
Despite a growing range of financing solutions that are coming into play, the mining sector still lacks capital despite global interest in Africa's minerals. The complexity of investments in the mining industry overall is further exaggerated by higher risks in Africa compared to other regions. Mining companies in Africa need to develop a long-term strategy given the existing challenges and leverage upcoming opportunities amid the rising interest of different markets in energy transition minerals.
To meet the growing demand for critical minerals, the African mining sector should adapt to strategic challenges, such as political instability, shifting trade paradigms, energy shortages, environmental and social issues, along with poor transport infrastructure and high logistics costs. The industry also faces other challenges, particularly in terms of safety, profitability and human resource management.
According to Jean-Claude Kassi Brou, President of the African Development Bank (AfDB) it’s critical to invest in cutting-edge technologies such as automation and digitalisation. This will not only improve productivity but also make the industry safer and more environmentally friendly.
The mining industry, traditionally reliant on stable energy supplies, will face increased pressure not only to operate under these constraints but also to expand its role beyond mere extraction. Continued concentration of refining and processing in a few dominant countries like China pose significant challenges, highlighting the need for diversification. There's also a global trend where corporations are expected to contribute more broadly to societal development, and this expectation will be acutely felt in Africa.
Concluding, there is no doubt that macro-economic and political challenges aside, the mining sector in SA and across Africa is increasingly reshaping its role to become a key enabler of energy transition on the continent and globally due to its abundant supply of critical minerals.