South Africa and Morocco, two of Africa’s leading automotive centres, are considering building mega and giga factories to keep up with the increasing demand for electric vehicles worldwide. A growing question, however, is whether those countries can scale fast enough, on their own, to make a difference.
Meanwhile, mineral-rich countries like the Democratic Republic of Congo (DRC), Zambia, and Mozambique are also eyeing the market with big intentions of becoming significant suppliers of electric vehicle batteries.
All these ambitious bids are country-based mainly at the moment, except for DRC and Zambia, which have launched a joint bid, participants at a recent webinar heard.
Industry experts suggest that for these countries to effectively compete for a significant portion of the global electric vehicle market, they should establish regional value chains to reduce investment barriers and cross-border trade expenses.
Economic advisor to Kenya’s Energy Cabinet Secretary Eric Mwangi said during a recent webinar on electric mobility in Africa that countries must package themselves as a regional market to attract investments from original equipment manufacturers (OEMs) with global supply chains.
Most OEMs, he argued, think of locations as regions rather than countries or entire continents. Therefore, regional blocs like Southern, Eastern or Western Africa can present a collective and compelling package to attract a cluster of OEMs.
“So you’re not talking about Kenya’s 50 million population or Ethiopia’s with 100 million… so you are actually talking about 450 million people as the potential market. You start to look a lot more compelling than if you’re trying to have an individual conversation,” he explained during the webinar.
Margo-Ann Werner, the corporate and commercial practice director at Cliffe Dekker Hofmeyer, shared similar sentiments, saying there is a full appreciation that Africa is a mineral-rich continent and that the e-mobility sector could rely on the various diverse types of minerals accessible within Africa.
She said establishing manufacturing nodes across the continent and leveraging the AfCFTA could result in various benefits, including cost-effectiveness in producing electric car batteries.
“So, it’s about establishing those sorts of regional relationships between countries to achieve a collective benefit for all,” Werner said.
Barely a year after Morocco announced plans to launch a battery “giga factory”, investors have started trooping in.
In April, the world’s second-largest battery maker for electric vehicles, South Korean LG Energy Solution, signed a memorandum of understanding (MoU) with Chinese lithium compounds manufacturer Yahua Industrial Group to produce lithium hydroxide- a key component in high-nickel, high-capacity EV batteries – in Morocco.
American EV manufacturer Tesla defines a giga factory as a facility with an annual output of about three gigawatt-hours (GWh) of lithium-ion (Li-ion) battery cells, enough to make batteries for 30,000-45,000 EVs per production line.
With that capacity, Morocco would increase its vehicle production capacity from the current 700,000 units to one million units by 2030 – producing a mix of combustion engines and electric cars.
In February, the National Association of Automobile Manufacturers of South Africa (Naamsa) said in a thought leadership discussion document on new-energy vehicles (NEVs) that the country needs its ‘own mega battery factories’ to remain globally competitive.
A month later, South Africa’s Industrial Development Corporation (IDC) and the Department of Trade, Industry and Competition signed an MoU with Stellantis, a giant automaker of brands like Chrysler, Jeep, Fiat, and Peugeot to develop a manufacturing facility in the country.
According to the African Development Bank, Africa has several key global vehicle supply chain strengths. These include existing expertise in internal combustion engines, proximity to key auto markets, access to raw materials, and participation in the AfCFTA.
But, the AfDB emphasises in its latest Economic brief dubbed ‘Strengthening Africa’s Role in the Battery and Electric Vehicle Value Chain,’ there is a pressing need for countries to rev up value addition of green mineral resources to unlock Africa’s real potential.
“Africa is endowed with significant reserves of green minerals required for the energy transition but currently operates at the primary level of the battery and electric vehicle value chain,” said the brief.
The United States Geological Survey (USGS) data on global mineral reserves shows that globally, Africa hosts key reserves of Cobalt (52.4%), Manganese (46%), Bauxite for aluminium production (24.7%), Graphite (21.2%) and Vanadium (16%).
Currently, around 70% of the world’s cobalt is obtained from the Democratic Republic of Congo. Additionally, Zambia holds the title of being the second-largest cobalt producer and sixth-largest copper producer in Africa.
South Africa is home to over 70% of the world’s manganese reserves, with deposits also found in the DRC and Gabon. Namibia hosts between 20% and 40% of global graphite reserves, while Zimbabwe is among the top five largest lithium-producing countries, according to Naamsa data.
The lack of a robust policy framework that prioritises industrialisation and value-addition in mining and other resource sectors has been listed by experts as a major obstacle for the continent.
According to Mwangi, while South Africa and Morocco’s experience in global auto supply chains presents them with ecosystem advantages due to existing component supplier infrastructure, they might suffer a political disadvantage if they don’t get their policies right.
Persistent Energy Capital, LLC (an African climate venture builder) Partner and Chief Legal Officer Wairimu Karanja said during the webinar that AfCFTA can help countries develop these policies.
“Where AfCFTA can be helpful, is not just in facilitating intra-continental supply of minerals, but also in moving towards working groups that can help certain countries develop their laws and policies when they relate to ESGs,” said Karanja.
Research firm Mordor Intelligence placed the potential value of an African Electric Vehicle market at US$ 11.94 billion in 2021, growing to US$ 21.39 billion by 2027.
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South Africa and Morocco are contemplating establishing mega and giga factories to meet the growing global demand for electric vehicles (EVs). Additionally, countries rich in minerals such as the Democratic Republic of Congo (DRC), Zambia, and Mozambique aim to become key suppliers of EV batteries. Experts argue that to compete globally, these countries need to form regional value chains to lower investment and trade barriers. Aligning as regional markets can attract investment from original equipment manufacturers (OEMs).
Morocco has already secured investment from LG Energy Solution and Yahua Industrial Group for lithium hydroxide production, crucial for high-capacity EV batteries. This venture is part of Morocco's ambitions to increase vehicle production to one million units by 2030. Similarly, South Africa is planning mega battery factories, supported by agreements with automakers like Stellantis.
Despite Africa's rich reserves of essential minerals for EV batteries, such as cobalt, manganese, and graphite, the continent currently operates mainly at the primary level of the battery supply chain. To unlock its full potential, Africa needs to focus on added value to green mineral resources and robust industrial policies. The AfCFTA could aid countries in creating effective policy frameworks. The African EV market is projected to grow significantly, from US$ 11.94 billion in 2021 to US$ 21.39 billion by 2027.
