Thumbs up to Zim raw lithium ban
Zimbabwe and Nigeria have locked horns with Tesla and other Electric Vehicles (EVs) manufacturers, saying they no longer want to export lithium for them to produce their batteries. Instead, they want the batteries to be produced domestically in Africa.
Let me talk about what is happening, why it’s happening and what opportunities for you as an investor going forward.
First the back story; lithium use in the world has exploded over the past 10 years with the amount produced annually increasing from 25 000 tonnes to over 85 000 tonnes and four countries have produced most of this lithium that’s Australia, Chile, Argentina and China.
However, they don’t have enough production to meet the growing demand in the world so a lot of EV manufacturers are trying to get this raw resource from Africa and they were expecting Africa to just say hey, take what you want and cut us back in.
They weren’t expecting multiple African countries to tell them no you can’t take our resources you have to build your batteries domestically.
So why are African leaders such as President Mnangagwa making such a firm stance? It comes down to their goals with their economy.
Many of these African countries don’t want to be simply places to extract raw resources from. They want to be places where value is added.
Now if we are looking at lithium production, the total value chain has six distinct parts with regards to EVs.
You start with mining, then you go to refining of the resources, cathode production, cell production, module assembly and eventually making your own Original Equipment Manufacturer (OEM) cars and Africa wants most of that done domestically because each phase of that has support industries and creates jobs for everybody and creates more wealth, more velocity of money, etc.
That’s the real game plan, instead of getting a quick buck they want to create something that creates wealth more sustainably.
Now, in reality we don’t know how much lithium Zimbabwe, Nigeria or the other Central African countries have because the terrain hasn’t been scouted out because the demand is relatively new but I love the change in mindset where the African countries are looking to create industries where value is added domestically.
Now what does that mean for you as an investor, I think you should be very bullish on these African economies because as they start to do more manufacturing, more value added, you are going to see an emerging middle class throughout the entire continent.
Brad Rohrs is president of the Rohrs Team. He is a US-based expert in residential and commercial real estate.