Will lithium discovery help Zimbabwe in its debt crisis
THE Centre for Natural Resource Governance (CNRG) recently hosted a side session during the 15th edition of the Alternative Mining Indaba that explored the connection between debt and critical minerals.
The main objective of this session was to examine how debt, critical minerals, and the need for a fair energy transition are all interrelated.
It was an opportunity to investigate the challenges as well as opportunities in controlling debt, securing critical minerals, and ensuring a fair and equitable shift towards sustainable energy sources.
Besides addressing these interconnected issues’ geopolitical, economic, and social aspects, the session also sought to identify ways to move towards a more equitable and sustainable energy transition using a feminist lens.
Global demand for lithium, a crucial component used in producing batteries for electric vehicles and renewable energy storage, has spiked over recent years as automobiles turn electric.
If Zimbabwe, with its significant lithium reserves, can efficiently extract and export the resource, it could generate revenue through exports, attract foreign investment, and contribute to economic growth.
Most importantly, for a country saddled with a huge debt burden revenue from the sector can be a boon in settling external debt from bilateral (China) and multilateral lenders including the International Monetary Fund (IMF).
Additionally, addressing a ballooning external debt crisis requires comprehensive economic policies, debt management strategies, and structural reforms, among other measures.
However, it is crucial to note that the impact of resource discoveries on a country’s economy is complex and depends on several factors, such as governance, infrastructure, market conditions, and global commodity prices.
Mining communities are often characterised by poverty due to the depletion of resources by mining companies and individuals.
Africa is home to critical minerals essential for transitioning from high-emission energy sources like coal to renewable sources that can reduce carbon emissions in line with the target of limiting global temperature rise to 1.5oC by 2050.
Further, the structure of Africa’s mining sector still relies heavily on the “pitto-port” model, which involves sending mineral ores overseas for processing.
The security of critical mineral supply chains is becoming increasingly important for many nations due to the anticipated increase in demand brought on by the global adoption of clean energy technology.
China’s dominant position in the production and processing of numerous critical minerals has raised geopolitical concerns.
External debt payments are a significant obstacle to achieving a just energy transition in Africa, as debt settlement is often a priority at the expense of strategic infrastructure development and socio-economic expenditure for largely impoverished populations.
Many countries are struggling to invest in infrastructure and technology for renewable energy due to the large amounts of natural resource-backed loans being entered into between the Global North and Global South.
Heavy external debt can also impact a nation’s creditworthiness, limiting access to affordable finance for renewable energy projects and raising borrowing prices overall, which can impede the advancement of an equitable energy transition.
Zimbabwe has abundant lithium reserves; it is crucial to manage the extraction and exportation of the resource responsibly.
This includes establishing regulatory frameworks, environmental safeguards, and fair revenue-sharing mechanisms to ensure long-term sustainability and equitable distribution of benefits.
Enhancing governance, transparency, and accountability is vital for attracting investment, managing resources, and rebuilding trust.
Implementing measures to combat corruption and promote good governance can help create a favorable economic growth and debt management environment. Recommendations
•It is recommended that African governments conduct mineral resource audits, also known as geological surveys, to better inform their negotiations of mining concessions. Evidence suggests that many African governments lack knowledge of the quantities and types of resources they own, resulting in under-negotiated contracts. For instance, some countries have agreed to platinum concessions, but mining companies end up extracting other minerals such as gold, rhodium, and palladium.
•It is necessary to enhance transparency and accountability in the mining sector to allow the public, including civil society and independent experts, to examine mining contracts. The contents of most mining contracts are controversial and hidden and often do not benefit the local communities whose lives are impacted and altered by the extraction of these resources. African governments should examine the tax relief and expenses mining companies declare to prevent tax evasion.
Tracy Mutowekuziva