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Increasing EU interest for Africa’s Raw materials

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The European Union (EU) is showing an increasing interest for Africa’s raw materials in order to secure its supplies and reduce its dependence from China and other Asian countries.

eur2Over the next six years until 2020, the European Union will implement a strategic plan to guarantee supplies of “critical minerals” to its industry which is heavily depending on them. Its vulnerability is considerable. Indeed, for five minerals (germanium, indium, magnesium, rare earths and tantalum), the EU depends in proportions ranging between 90% and 46% from China which is also a competitor for access to the resources. Other strategic suppliers are Russia which provides 76% of the EU’s tungsten imports, the Democratic Republic of Congo (71% of EU’s cobalt imports) and  Bolivia (77% of its antimony imports). South Africa is its main supplier of platinum (60%), whereas Brazil provides 84% of EU’s niobium supplies.
In order to reduce EU’s dependency, the European Commission masterplan sets the recycling of wastes from “urban mines” as a priority and all mineral substitution techniques. But this strategy has its limits. The industry has not found yet a substitute to platinum for instance. Therefore, the EU has no choice but to develop alternative sources of supply from Africa but also Vietnam, Groenland or Turkey. And in order to achieve that, the EU is considering financial and support to the Addis-Abeba based African Minerals Development Centre (AMDC) to promote the production and the transformation of mineral resources, through the use of geological and geospatial information.
During 2014, 68 million euros will be spent to develop this strategy. The Eurogeosurveys organizations which groups the EU main geological research centres is playing a key role to develop skills of African geological services and the African European Georesources Observation System (AEGOS). Spain’s Instituto Geológico y Minero de España (IGME) has already signed in October a bilateral agreement with Portugal’s Laboratório Nacional de Energía e Geología (LNEG) and the Spanish consultancy firm Impulso Industrial Alternativo a US $ 115 million contract to assist the Instituto Geológico de Angola (IGEO) in the implementation of the country’s national geological plan, involving the cartography of one third of the national territory.
eur4The strategy also includes areal survey in North Africa and the integration of the region within the Global Earth Observation System of Systems (GEOSS). The European Commission also envisages to finance the African Legal Support Facility, which was created in 2010 by the African Development Bank to help African government in their negotiations of mining contracts. The purpose is to make sure that the mining sector eventually contributes to the development of the countries which have such resources and of their peoples. For the same reason, the Commission is engaging African and other developing countries in a dialogue on governance issues and offer its expertise to enable them to set up tax legislation which may promote development. This raw materials partnerships will be on the agenda of the forthcoming EU-Africa summit of the next 3 and 4 April in Brussels. They are also taking place at a crucial moment since the EU Commission and African states are currently drafting the terms of the EUR 32 billion European Development Fund for the 2014-2020 and can therefore include or not infrastructure development and the mining sector among the priority sectors.

New Strategy

For the EU, the new strategy means a complete U-turn. Indeed, in 2000, it abolished the European support instrument to African mines Sysmin and since 2009, the European Investment Bank has nearly stopped its investments in Sub-Saharan Africa mines, following NGO attacks against the funding of the Mopani copper project in Zambia developed by the Swiss trader Glencore, because it contributed very little to the country’s development.
eur3Meanwhile, the EU Commission is examining several options to set up a responsible value chain of supply of minerals from conflict areas. One consists in a voluntary approach by the companies and another would involve the introduction of compulsory due diligence procedures inspired by the US Dodd & Frank Act and its implementation rules approved in 2012 by the Securities Exchange Commission which would force companies to prove that the minerals which they import, have not funded a war. On top of that, within two years, all EU companies from the extractive industries and timber sectors whose annual turnover is higher than 40 million EUR will have to make public the payments they make to access natural resources.  The aim is to provide the civil society of developing countries with date which allow them to better control whether profits and taxes from these sectors do benefit the people.
A legislation on the responsible sourcing of natural resources with an initiative on conflict minerals might be approved during 2014. But it might not be a carbon copy of the US legislation. Indeed, a report commissioned by the powerful Bundesverband der Deutschen Industrie to the Freiburg-based Öko Institut which is a synthesis of consultations of international and Congolese institutions or civil society organisations and German companies, concluded that the American policy had damaging consequences for the Economy of Eastern Congo. Accordingly, the companies which export coltan to the EU and United States are giving up because of the high costs and of the complexity of the traceability mechanism that only the richest of them can afford. In order to meet the criteria set by the US law, many of these companies find easier to source their minerals from other areas than the Great Lakes, specially because some clients ask the traders to prove not only that minerals haven’t financed a conflict but also that they don’t come from the region. The report quotes UN experts who claim that the Dodd-Frank Act has encouraged smuggling and even benefitted the armed groups since some artisanal miners who lost their job as a result of the decline of the mining activity, have joined some Mai Mai rebel groups. eur5Therefore, the Öko Institut recommends to support responsible mining in order to stabilize economically and socially the production areas rather than invest in costly monitoring and control systems of the supply chains.
Besides, in order to improve access for its companies to African minerals, the EU is also putting pressure on African states in favour of the dismantling of export taxes, within the framework of the trade negotiations which are scheduled to conclude in October 2014.  The trouble however is that such strategy may weaken African states. Yet the strategy does not only apply to minerals but also to natural rubber. A growing risk of supply interruption has been identified by the European Commissioned which is concerned that 93% of the world production is concentrated in South-East Asia, while Asia (and Oceania) together are also the first destination of rubber exports, far ahead of Europe (13.5%) and of the other continents. In the event of a crisis, producing countries such as India or Malaysia would soon choose to prioritize their domestic markets, point out market analysts. This is why, the Commission suggests to encourage the diversification of sources of supply, through the development of rubber plantations in Cote d’Ivoire and Cameroon. In order to achieve this plan, the Commission is recommending training programs for the growers, technical assistance of agronomists and also a better access to credit to African growers at large.

François Misser

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