The African Export-Import Bank (Afreximbank) and the United Nations Economic Commission for Africa (ECA) have signed a framework agreement with the Democratic Republic of Congo (DRC) and Zambia for the establishment of special economic zones (SEZs) dedicated to the production of electric vehicles (EVs) and batteries. This move comes as Africa aims to add value to the surging demand for critical minerals needed in the production of EVs and other green energy technologies.
The DRC and Zambia are major reserves of critical minerals such as cobalt, copper, and lithium, which are essential for EV battery production. However, until now, these countries have primarily been suppliers of unprocessed minerals to foreign manufacturers. The new agreement aims to change this by establishing SEZs that will enable these countries to move higher up the value chain and capture more value within their borders.
The operating company for the SEZs will be led by Afreximbank and ECA in consortium with public and private investors, as well as Afreximbank’s impact fund subsidiary, the Fund for Export Development in Africa. ARISE Integrate Industrial Platform, a pan-African infrastructure developer, has been selected as the technical consultant to conduct the pre-feasibility study for the establishment of the SEZs in DRC and Zambia.
SEZs are geographically limited areas where companies enjoy tax benefits and other legal privileges to attract foreign investment and boost employment. The organizers of the project believe that it will accelerate the manufacture of value-added products, create new demand for skilled labor, and contribute to the growth of local labor markets.
However, there are significant challenges to establishing battery manufacturing facilities in Africa. No single African country has all the minerals required for battery production, which means that countries will need to pool their mineral supplies to achieve the necessary scale and reliability. Affordability and a lack of grid-scale charging infrastructure also pose challenges to the growth of the EV market in Africa.
Despite these challenges, the institutions involved in the agreement are confident that the establishment of SEZs in the DRC and Zambia will help these countries move up the mineral value chain. Ngozi Okonjo-Iweala, director-general of the World Trade Organization, has stressed the need for African countries to be part of the supply chain for EVs and insist on agreements to process minerals on the continent in order to add value and create jobs.
The establishment of SEZs for EV production in Africa is seen as a significant step towards promoting inclusive development, boosting industrial infrastructure, and facilitating export development. It is hoped that this initiative will contribute to Africa’s participation in the global green mineral boom and make the DRC and Zambia globally competitive investment destinations.
