Critical minerals an opportunity for Zim to increase trade with China




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Over the past year, Chinese companies which invested billions of dollars in the southern African nation of Zimbabwe have begun production and exports of lithium.

By Nyasha Madhake

This is an important development that must be carefully analysed to demonstrate how Zimbabwe could benefit immensely from trade with China while at the same time, leaving its mark on the global economy.

Zimbabwe is considered to hold Africa’s largest reserved of lithium – a reported one-fifth – while China is the biggest consumer of the mineral, as the leading manufacturer of new energy sources in the form of batteries for solar energy, electronics and electric vehicles.

China accounts accounts globally for 80%+ of solar cell exports, 50%+ of lithium-ion batteries and 20%+ of EVs, according to statistics, making these three the most important pillars of the Chinese economy today.

According to You Xiaoying writing on China Dialogue, “new three” – or xin san yang – speaks directly to China’s “old three” that were once the pillars of its exports: clothing, home appliances and furniture.

The statistics are incredible.

According to China Dialogue, last year, China’s exports of EVs, lithium-ion batteries and solar cells (the building blocks of solar panels) reached 264 billion yuan (US$36 billion) between January and March, a 66.9% year-on-year increase.

EVs, which recorded a 122.3% year-on-year export increase in the period, led this growth. This was followed by lithium-ion batteries at 94.3% and solar cells at 23.6%.

This trend has continued into the year and as of July a 61.6% year-on-year jump had been recorded for the three sectors in the first half of 2023.

In the previous year, 2022, China had achieved a near-monopoly in the global exports of solar cells last year, accounting for 83.8% of the total, according to data compiled by Natixis, a French corporate and investment bank, cited by China Dialogue.

Further, China’s share of global manufacturing at every stage of solar panel production exceeded 80% of the global total in 2022, and its share in making polysilicon, wafers, solar cells and solar panels were, in order, 94%, 96%, 90% and 81%. Polysilicon is the key base material for the solar PV supply chain, while wafers (thin slices of semiconductors) are used to make integrated circuits in solar cells.

Accordingly, China’s battery manufacturing capacity in 2022 was 0.9 terawatt-hours, which is roughly 77% of the global share, according to a UK-based energy think-tank.

World-beating

China-Zimbabwe collaboration could be the most important  relationship in the world right now – and in he future. It is this important to unpack this significance and to explain why the lithium sector is booming in Zimbabwe.

Even more importantly stakeholders from Government, civil society and ordinary people must understand these dynamics and also explore ways in which both sides should benefit.

Currently, there are some criticisms from certain quarters that China is “plundering” Zimbabwe’s lithium, and the critics often point to loads of trucks transporting lithium for processing in China from mines such as Sinomine Bikita Minerals, Sabi Star and Arcadia Lithium Mine.

These criticisms are largely uninformed and in most part malicious.

Zimbabwe must leverage on its position as a world-leading lithium producer, and make take advantage of its relationship with China. This does not only make common sense – logic – but huge economic sense too.

In economics there is a term called comparative advantage. Comparative advantage is an economy’s ability to produce a particular good or service at a lower opportunity cost than its trading partners. Comparative advantage is used to explain why companies, countries, or individuals can benefit from trade. According to Investopedia, comparative advantage, when used to describe international trade, refers to the products that a country can produce more cheaply or easily than other countries.

With an abundance of lithium, the fifth global reserves, resource-rich Zimbabwe has a comparative advantage in the production of lithium making it Africa’s biggest producer.

China is hungry for lithium, and nowhere else in Africa is it capable of getting the resource than in Zimbabwe at the moment. On the other hand, China has the technology and capacity to refine lithium into global products.

This makes the relationship between the two countries, objectively speaking, an important one.

What is then required is more and more production and exports, which could hold keys to Zimbabwe’s economic survival and future.

Zimbabwe’s comparative advantage: China-Africa context

According to an article published last month by the South China Morning Post titled, “China-Africa trade gets a boost from critical minerals needed for EV battery production”, there is massive growth in trade between the two sides.

Two-way trade grew nearly 6 per cent to US$70.86 billion year on year in the first quarter of 2024, Chinese customs data shows

“A boost to China’s imports of critical minerals and metals, combined with higher commodity prices, have helped to power the growth,” writes Jevans Nyabiage.

Data shows that trade between China and Africa defied economic headwinds in the first quarter of 2024, with two-way trade growing by 5.9 per cent year on year to US$70.86 billion, according to the latest customs data.

China’s largest trading partners in Africa for the quarter, such as South Africa, Angola, the Democratic Republic of the Congo (DRC), Nigeria, Egypt, Liberia, Algeria, Guinea and Morocco.

Zimbabwe, which exchanged trade of close to US$4 billion, does not feature among China’s top trading partners – at least for now.

And there is great potential.

Nyabiage reports: “Another country that has emerged as a key source of battery metals for China is South Africa’s northern neighbour, Zimbabwe, where Chinese companies have pumped in billions of dollars to build lithium processing plants.

“In the first two months of 2024, Zimbabwe’s trade with China jumped 77.6 per cent year on year, driven by an increase in exports of Zimbabwean products, including lithium and tobacco.

“According to the customs data, Zimbabwe’s exports to China rose 255.5 per cent in the period to US$320.54 million.”

Nyabiage asserts that it is likely this figure is so high because in the same period in 2023, most of the new lithium processing plants had not started operations.

This is an important point.

There is a large legroom for Zimbabwe to grow its trade with China to reach levels high up there with the big boys, even bettering South Africa, China’s largest trading partner on the continent.

The key to this, is leveraging on the lithium resource – one of the dozens of minerals the country has – and this means exploiting Zimbabwe’s comparative advantage.

Everything is aligning well: the global push for new energy materials in the context of climate change and the growth in the electronic and electric vehicle industries. Further, China and Zimbabwe enjoy excellent bilateral relations that date back to the days of the liberation struggle. Currently relations have been upgraded to what is termed “comprehensive strategic partnership of cooperation”, which have implications on extant, dynamic and potential capabilities of the two sides.

What this means is that, from a Zimbabwean perspective, the country has to expand its trade with China with lithium at the centre.

There should be no apologies about it. It’s economics, simple!

To the extent that there have been criticisms on the nature of trade relations and exploitation of resources such as lithium. There are several pragmatic steps that Zimbabwe has a responsibility to undertake to undergird and ensure its benefits. These internal factors and actions include:

  • Strengthening resource governance and institutionsthrough implementing strong policies and governance frameworks and institutions can help manage resources responsibly and transparently, ensuring that the benefits are distributed equitably among the population
  • Building infrastructure, since infrastructure is crucial for supporting the development of other economic sectors and improving the overall business environment.
  • Environmental protectionby enacting policies that protect the environment and promote sustainable resource extraction practices
  • Skills development and transfer which entails education and skills training to prepare the workforce for a diversified economy and reduce dependence on resource-based industries.
  • Negotiating fair trade terms; since capital seeks profit, it is the responsibility of Zimbabweans to ensure the country benefits from its trade in commodities such as lithium. It is not up to capital to determine this as capital is by its nature maximum-seeking. Ensuring mutual benefit and parity includes securing better terms for resource prices and value-added processes.
  • Countries such as Zimbabwe have already established its Sovereign Wealth Fund concepts ranging from Community Share Ownership Schemes two decades ago to the current Mutapa Investment Fund. Ideally, sovereign wealth funds can help manage and invest resource revenues for long-term economic stability and growth, and Zimbabwe needs to implement this effectively and studiously.
  • Lastly, it is critical for Zimbabwe to ensure local content and participation through encouraging the development of local industries related to resource extraction to create jobs and stimulate the local economy. Already, Chinese companies and value chains are creating benefits for locals upstream, middle of the stream and downstream industries.

In light of the above, there is an urgent need and opportunity for Zimbabwe-China economic relations to grow and thrive, and put Zimbabwe on the global map, through win-win cooperation with China.

This challenges stakeholders to be alive to all the dynamics involved, especially for Zimbabwe, as this is an opportunity to compete with other African countries that are on paper doing better in terms of trade with China.

*Madhake is an associate researcher with a Zimbabweans think tank that analyses local and global issues.