South Africa’s G20 Push for Local Processing of Transition Minerals Faces Barriers

Will Minerals Giant China Support a Plan to Help Developing Countries Build Their Own Value Chains?

As chair of the Group of 20 (G20) nations for 2024, South Africa is advocating for increased local processing of critical minerals that are essential for the global clean energy transition. These minerals—such as lithium, cobalt, copper, and nickel—are abundant in the Global South, yet the countries that mine them often see minimal economic benefits. However, South Africa’s ambitious initiative faces a significant hurdle: securing the support of China, the dominant player in global mineral processing.

A Push for Value Addition in the Global South

According to the G20’s official platform, South Africa aims to work with international partners to ensure that resource-rich nations and local communities reap the greatest benefits from their natural wealth. Speaking at the World Economic Forum in Davos in January, South African President Cyril Ramaphosa underscored this priority, stating that the countries rich in these critical minerals should gain the most from their exploitation.

“One of South Africa’s priorities for its G20 presidency is to harness critical minerals for inclusive growth and development,” Ramaphosa asserted. He emphasized the need for a G20 framework on green industrialization and investment to foster value addition at the source of extraction. The ultimate goal, according to Ramaphosa, is to reverse the historical trend where Africa and other resource-rich regions serve merely as raw material suppliers while value creation occurs elsewhere.

This approach, known as beneficiation, has gained momentum among developing nations seeking to capitalize on the soaring demand for materials used in electric vehicles, renewable energy infrastructure, and battery storage. Countries such as Indonesia, Nigeria, Zimbabwe, and Namibia have already taken steps to restrict raw material exports and prioritize domestic processing.

China’s Role and Resistance

Despite South Africa’s efforts, China’s backing is crucial to making beneficiation a reality. During India’s G20 presidency in 2023, officials sought to develop a collective vision for critical minerals, but China opposed the initiative. The result was a diluted mention of beneficiation in the final G20 declaration.

China’s dominant role in global mineral refining cannot be overstated. According to research by the Brookings Institution, China refines 68% of the world’s nickel, 40% of its copper, 59% of its lithium, and 73% of its cobalt. Another study by Southern Transitions reported that in 2023, over half of Africa’s critical mineral exports were destined for China.

Olimpia Pilch, Chief Strategy Officer at The Critical Minerals Africa Group (CMAG), explains that China has a vested interest in maintaining its supremacy in mineral refining. “It is not in China’s interest for other developing countries to gain more value from mineral refining,” she notes. “If that happens, it threatens China’s leverage over global supply chains.”

Adding to the complexity, China has begun restricting the export of processing equipment and closely guarding its technological expertise, making it difficult for African nations to break into the industry.

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Infrastructure and Financial Barriers

While China’s dominance presents a major challenge, Africa’s internal constraints also hinder beneficiation efforts. Many resource-rich nations lack the infrastructure needed to support large-scale mineral processing. Key issues include:

• Unreliable energy supplies – Refining raw ores into finished metals requires vast amounts of electricity, which remains scarce and costly in many African nations.
• Inadequate transportation networks – Poor logistics and high transportation costs further erode profitability.
• Limited domestic demand – Without sufficient local markets, processed minerals must be exported, reducing incentives for investment.
• Restricted access to finance – Many African countries struggle to secure affordable capital due to high investment risks.

Thando Lukuko, Director of Climate Action Network South Africa, questions the feasibility of South Africa’s G20 beneficiation agenda. “Where is the money going to come from?” he asks, pointing out that many developing nations rely heavily on raw mineral exports for revenue.

Additionally, international trade regulations pose obstacles. Anabella Rosemberg, Senior Advisor on Just Transition at Climate Action Network International, highlights that the World Trade Organization generally prohibits domestic content requirements, which could compel foreign investors to refine minerals locally. Similarly, clauses in bilateral trade agreements often prevent governments from introducing policies that retroactively enforce value addition.

Can South Africa Deliver a G20 Deal?

Despite these challenges, South Africa remains determined to drive beneficiation forward. Speaking in Davos, Ramaphosa called for reforms to global financial institutions and trade regulations to better support developing economies.

Mahendra Shunmoogam, South Africa’s Director of Foreign Trade Policy, revealed that the G20 discussions are progressing. He confirmed that South Africa has secured backing from the G77+China group, which has committed to pushing for beneficiation in critical mineral supply chains.

South Africa is also advocating for a regional approach to mineral processing, where countries collaborate to build an integrated value chain. For instance, raw materials mined in the Democratic Republic of Congo could be refined in Botswana and assembled into final products elsewhere on the continent.

According to the UN Secretary-General’s panel of experts on value addition, beneficiation has the potential to drive industrialization and economic growth in developing countries. South Africa is now working to consolidate these recommendations into a policy framework that will be presented to the G20.

However, Pilch of CMAG cautions that meaningful beneficiation in Africa will require “collective action by the G20 to challenge China’s monopoly and invest in alternative growth markets.” Without such efforts, Africa’s aspirations to develop its mineral processing sector may remain a distant dream.

As South Africa leads the G20 negotiations, all eyes will be on whether it can secure a breakthrough deal that empowers resource-rich developing nations to retain more of the wealth generated by their natural resources.