British Prime Minister Theresa May’s political judgment is often questioned, but her desire to boost Britain’s investment and trade with Africa makes perfect sense for business.
The continent’s resources will play an increasingly essential role in vital new industries such as the growth of electric vehicles (EVs) in passenger transport.
Although May made scant reference to the importance of Africa’s vast resources in her Cape Town speech last week, securing access to the region’s rich seams of ore is vital to Britain.
S&P Global Platts Analytics estimates there will be more than 300m electric vehicles in a global passenger fleet of 1.7bn cars by 2040. A large proportion of the minerals and metals required to build this new climate-friendly breed of vehicles will come from Africa’s major resource producers.
Consequently, demand for Africa’s energy minerals is expected to surge as the shift to EVs gathers pace. For example, consumption of cobalt – used to produce the batteries that power electric vehicles – is expected to triple to more than 300,000m tons per year by 2030. The Democratic Republic of Congo (DRC) is the world’s largest supplier, providing two-thirds of the market.
It’s not just cobalt, which is required in ever increasing quantities for the nascent energy transition that is getting under way to become a permanent reality. Copper demand is expected to surge too.
Each electric vehicle on the roads is expected to require an additional 90 kilos of the highly conductive, ductile metal, compared with an equivalent internal combustion engine car. Zambia, the DRC and SA are major suppliers but all require investment.
With mining and energy companies like BHP Billiton and Shell accounting for almost a quarter of the value of the FTSE, it’s hardly surprising to see May’s government prioritising closer trade ties with resource-rich African nations. The British government has placed electric vehicle-related manufacturing at the forefront of its industrial strategy and plans to end the sale of fossilfuel burning conventional cars by 2040.
“Extractive and especially mining and oil and gas have played a major role in the UK’s Africa trade diplomacy,” said Alex Vines, the head of the Africa programme at Chatham House. “London-listed companies such as BP, Shell and Anglo and Rio have played an important role in pushing for increased UK government focus on the continent.”
Britain is not alone in the new race to invest in Africa’s resources and energy minerals. China has aggressively targeted the continent’s major commodity holders since the world’s second-largest economy joined the World Trade Organisation in 2001. Beijing, which needs Africa’s minerals and energy to sustain its manufacturing base, is the continent’s single largest provider of foreign direct investment.
Not that the UK’s colonial-era baggage appears to be putting it at any disadvantage to China.
“There are few signs that colonial legacies have in recent decades played any role – that Theresa May is the first British PM to visit Kenya since Margaret Thatcher is illustrative,” said Vines.
“There has been, over the last decade, an increase in African embassies opening, or reopening their embassies in London,” he added. “Mauritania and Guinea are directly about extractives, Burundi and Togo about diversification away from tooclose relationships with France. All are also driven by access to FDI. Until Brexit, the UK was a leading FDI source – although this has declined since Brexit, despite what the UK Government is saying.”
Of course, Britain’s evolving trade relationship with Africa is not just about the energy transition. UK oil and gas companies are among the most active in the region and have been present on the ground for many years. BP is operating in major projects in Algeria, Egypt and Angola.
However, Shell has scaled back some of its operations in Nigeria over the last decade. Smaller UK-based operators such as Tullow Oil and Ophir are also active in Africa’s emerging and higher risk potential basins.
Led by major producers such as Nigeria and Libya, African countries are also increasingly playing a role in the 15-member Opec group. Total output from the continent as a whole exceeds 8m barrels per day and Congo Brazzaville was the latest nation in the region to join the Opec club this year.
Opportunities for British business to invest in renewable energy projects also exist. Despite the problems of widespread poverty and corruption, five of the world’s fastest growing economies are in Africa.
The region needs more energy to fuel its own economic growth, but in many cases lacks the finance – which is where the UK, especially the City, can play a useful role.
For example, the total capacity of renewable energy projects could double to 60 gigawatts across Africa with adequate funding, according to the International Energy Agency. “There are efforts to invest in renewables and non-oil and gas infrastructure. CDC (the UK’s Development Finance Institution) is spearheading UK government efforts in this. The biggest challenge is still finding bankable sustainable projects,” said Vines.
With the doors to Europe in danger of slamming shut, Africa is a resource-rich alternative that May cannot afford to ignore.
• Andy Critchlow is head of energy news for EMEA at S&P Global Platts — The Sunday Telegraph..