Assuming things go according to plan, I’ll spend the next three weeks in Zambia, Mozambique, and Tanzania. The purpose of the trip is to assess opportunities to support projects in critical minerals mining, refining, and related infrastructure - along with the associated risks. The choice of countries was deliberate: all show considerable promise for minerals essential to the clean energy transition and are also quite different in terms of their respective history, governance, logistics, security, and business environment. They are also countries the United States has largely neglected.
The remainder of this article discusses the United States’ lack of engagement in this region, why that’s an issue, and the purpose of this research trip. I should note that this article isn’t intended to be comprehensive; it probably leaves out some important details and may even misrepresent a few.
But that’s the point. Like most Americans, I make no claim to be an expert on sub-Saharan Africa, but I know it’s important for the United States to formulate a coherent approach – across the public and private sectors – to engage with the region in the context of critical mineral supply chains. I’ll be quite happy if the comment section blows up with corrections and counterarguments. Rest assured, I’ll read and learn from all of it.
One week in each country is not nearly enough, but it is more than the vast majority of American investor and policymakers will have spent on the ground, and the resulting reports should provide enough actionable info to kickstart more productive conversations.
A History of Disinterest
The United States has largely ignored sub-Saharan Africa for decades. The region has received minimal U.S. foreign direct investment (FDI), little diplomatic attention, minimal trade, and weak or non-existent bilateral military relationships.
To be clear, there are valid reasons for the lack of engagement with certain countries: many have experienced repeated coups, violence, disastrous fiscal and monetary policies, corruption, lack of infrastructure, and an uncertain regulatory environment.
That leads to a few more clarifications for this article. First, it’s not intended to excuse the trends in the preceding paragraph. Those are valid reasons for western businesses to hesitate to engage with certain countries.
Second, I don’t want to paint a diverse region of 46 fully recognized sovereign states with a broad brush. There is virtually no comparison to be made between countries like Botswana, Rwanda, the Democratic Republic of the Congo (DRC), and Angola in terms of history, culture, GDP per capita, or governance.
Third, while this article references China several times, it does not assume that Chinese business involvement is automatically bad for African countries. Sometimes it is, but many countries now have high-quality roads, rail lines, hospitals, airports, and mines because of Chinese businesses – not American support.
Back to the article. American trade with the African continent was just over a quarter that of Chinese trade in 2021 and American FDI was about half that of Chinese FDI. The European Union’s trade with Africa easily surpassed that of either the United States or China in 2020.
Almost every major infrastructure project in sub-Saharan Africa has been – or is being – funded by loans provided by Chinese institutions and usually employ Chinese construction companies. Those countries’ citizens are unlikely to forget who provided them with the infrastructure to prosper in the 21st century.
To be sure, there are unsavory aspects to this – payoffs to key officials and occasionally dangerous or abusive working conditions, for a start. American firms ought not do the same – it would be illegal, not to mention the morality aspect.
However, many U.S. banks and companies appear simply uninterested in getting involved in the region, no matter the country – if their loan officer can even locate said country on a map. Many European firms and a handful of American firms have managed to operate successfully in the countries I am visiting, under comparable corruption and human rights regulations – so it’s certainly doable.
A common source of frustration among African governments has been the conditions attached to loans from western public lenders. Some are quite understandable - those related to fiscal policy or corruption, for instance - but others are largely related to culture and have nothing to do with the loan itself. Imagine telling a conservative American that they can get a home loan only they teach their children Critical Race Theory. Then imagine the bank becomes furious when that person takes a loan from another bank that only considers financial variables.
Perhaps I’m oversimplifying, but many African governments appear to see little reason to take a western loan with financially irrelevant strings attached when they can turn to a Chinese bank that only cares whether the loan will be repaid. Right or wrong, values-based conditions are only effective if the loans are accepted.
U.S. government lending capacity is also a challenge. The U.S. International Development Finance Institution (DFC) has a tiny balance sheet limit of $90 billion, which is actually an increase from a few years ago. The U.S. Export-Import Bank (EXIM) can also provide loans, provided they support U.S. jobs by facilitating exports of U.S. goods and services. Beyond those two institutions, the U.S. government has very little capacity to provide debt financing to overseas projects.
All that aside, at the end of the day, Western countries have reached something of a consensus that they need to engage more productively with sub-Saharan African countries. They also know they need far more minerals to support clean energy, semiconductor manufacturing, and a host of other technologies. The question is, where to start?
Why This Trip?
This article will only provide a cursory overview of the opportunities and potential challenges associated with each country I am researching. I’ll provide more information in future articles and three (hopefully) detailed reports upon my return. Even then, those reports will mainly provide starting points for follow-on deep dives into specific projects and risks next summer.
My conversations with U.S. companies, investors, and government officials over the past several months have made it clear that there is considerable interest in deploying capital to develop new mines and refineries overseas, but very little on-the-ground information to support capital deployment. Capital allocators and policymakers typically have broad mandates and very little time for detailed, fundamental research to identify and evaluate new projects. That is particularly true in developing countries.
Most market research reports and geopolitical risk consultancies provide high-level overviews of a given market; the analysts usually work from a desk in an air-conditioned room and focus on indicators they can quantify in charts and graphs. The only entities spending time on the ground are typically mining companies and physical traders – and perhaps non-profits – but their research is rarely intended for financial or policy decision makers.
My thesis is that capital allocators will only support a risky – but potentially lucrative – overseas critical minerals project if they A) realize it exists, B) understand the project’s significance, and C) have a thorough understanding of the political, competitive, logistical, security, and reputational risks involved. Throw a dart at a map of any of the countries below and you’re likely to hit a project in need of capital, but with minimal information available to support a decision.
Zambia
Zambia is a landlocked country in southern Africa, located just south of the DRC. It has experienced consistent political and social stability relative to many of its neighbors, with no civil wars or successful coups since independence. It is a significant supplier of copper and was, at one point, a major supplier of cobalt – though it is also a heavily indebted country which became the first to default after the onset of COVID-19 in 2020.
Mining was historically concentrated in Copperbelt province, though mining exploration and development has recently shifted toward Northwest Province. It is also logistically crucial since all cobalt and copper exported from the DRC (about 70% and 8%, respectively) must pass through Zambia to reach African ports. Manganese mines are under development in Central Province and several lithium deposits are being explored near the Zimbabwean border. All these minerals are essential for clean energy.
My trip to Zambia will begin and end in Lusaka, where government departments and mining companies are headquartered, though I will also spend two days in Copperbelt – specifically Ndola and Kitwe. The road that connects the DRC to Tanzania runs through the center of each of these cities, and they constitute the backbone of the Zambian mining industry, so there is no better place to speak with local officials and miners to understand the regional dynamics and potential mining opportunities.
Mozambique
Mozambique is in southeast Africa, north of South Africa and south of Tanzania. With a GDP per capita (purchasing power parity) of about $1500 in 2022, it is among the world’s poorest countries – and most wealth is concentrated in the south. Its poverty is due, in large part, to the civil war that tore the county and its infrastructure apart from 1977-1992.
By all accounts, it remains a difficult country in which to do business. The regulatory environment and lack of both physical infrastructure and human capital are just some of the challenges. One logistical operator in the northern port town of Pemba told me it can cost $9,000 to move a single truckload of cargo from Maputo to Pemba, and barges are rarely employed as a workaround. Still, the business environment is gradually improving, and numerous South African, Australian, and European companies operate in the country. The central port city, Beira, is also a major export terminal for minerals from the DRC and Zambia.
Cabo Delgado province in the north is believed to contain some of the world’s largest reserves of natural graphite, which is essential for lithium-ion batteries. Despite all the challenges of working in Mozambique, the country is already the #2 global producer of natural graphite. However, the region is particularly risky due to an ongoing insurgency which has targeted military personnel, civilians, and extractive industries. The flagship project in the region is a $20 billion liquified natural gas project near the Tanzania border, though TotalEnergies declared force majeure and paused operations after a major attack in 2021. Operations are expected to resume in 2024.
I will begin in Maputo, the national capital, to speak with mining executives and (hopefully) government officials about mining operations, security, and the regulatory environment. I’ll then spend three days in Pemba, Cabo Delgado province to assess the logistical and security challenges involved in graphite mining and LNG production, along with the feasibility of expanding Pemba’s port to accommodate large-scale exports.
Tanzania
Tanzania is an East African country located between Mozambique and Kenya. Its commercial hub, Dar es Salaam, also houses one of the most significant ports on the continent. It is the leading export terminal for minerals originating from the DRC and Zambia since the country has good roads and the port is more efficient than those in Durban, South Africa or Beira, Mozambique. Tanzania’s political capital is Dodoma, near the center of the country. After 50 years of delays following a 1973 referendum, the government completed its move to the city in 2023.
Like northern Mozambique, southern Tanzania houses potentially massive natural graphite reserves which are just beginning to be exploited. The graphite formation runs from Cabo Delgado province in Mozambique north through Mtwara, Lindi, and Morogoro provinces in Tanzania. Nickel and rare earth element mines are also under development elsewhere in the country. Tanzania’s road system is among the best in Africa, so land-based logistics are not as significant a concern as in Zambia or (particularly) Mozambique. That said, an ongoing consideration appears to be Dar es Salaam’s capacity to handle additional exports. The southern Mtwara port could be an option, though it remains small and underdeveloped.
My time in Tanzania will begin and end in Dar es Salaam, where most mining and logistics companies are headquartered. I’ll also spend three days in and around Mtwara to assess both graphite mining operations, the port’s capabilities, and the feasibility of expanding the port for mineral exports.
Final Thoughts
Smarter and more experienced people than me have grappled with the United States’ relationship with sub-Saharan African nations for decades and I’m under no illusion that I have the answers to foreign policy or project finance challenges. Given my background, my expertise lies in getting on the ground, talking to local experts, assessing logistical and security challenges, and synthesizing that information so others can make informed decisions.
I also don’t intend to focus only on sub-Saharan Africa going forward; there’s a whole world of critical mineral supply chains out there. Still, the next few weeks will be the first real opportunity to test whether Searchlight can play a constructive role in the transition to a cleaner, brighter, and more collaborative future.
Quixotic? Maybe. Necessary? In my opinion. See you all in a few weeks.
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