Ceteris Paribus: Harnessing lithium deposits for economic development

Bikita Minerals completed the construction of two lithium processing plants this year and has started production.

ZIMBABWE possesses vast untapped lithium deposits, boasting of Africa's largest lithium reserves, which are also the fifth largest lithium reserves in the world.

Lithium, a key component in the production of batteries for electric vehicles and renewable energy storage systems, has gained significant global demand.  However, most developing countries have not mastered how to leverage natural resources to drive economic development, which is lithium for Zimbabwe in this context. One of the largest lithium deposits in Zimbabwe is primarily located in the Bikita and Kamativi mines.

However, mining is considered highly capital intensive and therefore, the best current route the government can take to ensure economic-value creation from minerals is to attract foreign direct investment (FDI), who may or may not partner with local entrepreneurs.  This may include establishing a conducive investment environment, that is, streamlining bureaucratic processes, ensuring transparent regulations, and providing incentives, such as tax breaks or subsidies for lithium-related projects.

In one of the several lithium projects in the country, Bikita Minerals completed the construction of two lithium processing plants this year and has started production. A globally recognised metals-giant, Sinomine, acquired Bikita Mines in 2022 from African Metals Management Services and German investor Wilfried Pabst’s Southern African Metals and Minerals in a US$180 million deal.  The different players are all foreign. On the other hand, another foreign player in the Zimbabwe lithium industry, Premier African Minerals, missed key production deadlines and failed to meet the terms of the production offtake.

However, it is clear that despite challenges, foreign players in the lithium industry are injecting huge capital outlays for a plausible relative return, and it is thus imperative to assess how the locals and the overall economy will benefit from the activities of foreign investors.Rather than solely exporting raw lithium ore, Zimbabwe should promote downstream processing industries that add value to its resources. Establishing battery manufacturing plants or partnering with international companies can create job opportunities, boost local manufacturing capabilities, and enhance the country's lithium value chain.

Collaborations with international partners can facilitate knowledge transfer and technology exchange in the lithium business.  Investing in education and training programmes, focused on lithium extraction techniques, will enable Zimbabwe to develop local expertise in this field and benefit the country in the long run. Collaborating with established lithium-producing countries, such as Australia, Chile, and China can provide Zimbabwe with valuable insights into best practices. Engaging in bilateral agreements or joint ventures can facilitate knowledge sharing and attract foreign investment.

Outside of massive job creation, the development of Zimbabwe's lithium mining sector can attract more substantial foreign direct investment (FDI). International companies are increasingly seeking secure sources of lithium due to its critical role.  By creating an investor-friendly environment with transparent regulations and attractive incentives, Zimbabwe can entice foreign companies to invest in lithium mining projects.  This influx of FDI will not only boost the economy but also foster technology transfer and knowledge sharing.

Zimbabwe's lithium deposits can play a crucial role in supporting the country's transition to renewable energy sources. By investing in renewable energy infrastructure and utilising lithium-ion batteries for energy storage, Zimbabwe can reduce its reliance on fossil fuels, enhance energy security, and attract sustainable investments. Lithium mining also necessitates advanced technologies for exploration, extraction, processing and refining.

 The rapid growth of EVs is one of the primary drivers behind the increasing demand for lithium. Lithium-ion batteries offer high energy density, longer lifespan, and faster charging capabilities compared to traditional lead-acid batteries.

With governments worldwide setting ambitious targets to phase out internal combustion engines in favour of electric vehicles, lithium's importance in this sector is set to soar.

  • Duma is a financial analyst and accountant at Equity Axis, a leading media and financial research firm in Zimbabwe. — [email protected] or [email protected], Twitter: TWDuma_


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