Reviewing the Lobito Corridor

By Ronak Gopaldas

The Lobito Corridor is an ambitious project by the US and EU countries ultimately intended to link West and Central Africa via rail, from the port of Lobito in Angola, into Zambia and the Democratic Republic of Congo (DRC) where some of the world’s largest rare-earth mineral deposits can be found. 

Critical minerals such as cobalt, graphite and lithium are used in fast growing, high demand sectors such as battery and electric vehicle technology as well as computing components. The US and EU are late to the party, with China already working to link the DRC and East Africa (Tanzania) for the same extractive purposes, and to fuel their tech drive. Moreover, many Chinese countries have already secured valuable mining concessions for these minerals. 

There are many challenges that face both the US/EU drive as well as that of their Asian counterparts, logistical, geographical, diplomatic and bureaucratic. Indeed, demand may quickly wane as technology rapidly evolves. Africa has a unique window to leverage the current commodity cycle for rare earth minerals but runs the risk firstly, of missing the window, and secondly, of overplaying its hand with both the East and the West. There is an equal danger they again realise little benefit or development from their mineral wealth. Important decisions will need to be made by the African states involved. Should they partner with the East or the West, is there enough space for both, and what are the longer-term implications for diplomatic relations based on their choices? This piece will examine how African states could possibly negotiate the best deal for themselves.

Something old, something new, billions borrowed, cobalt blues

The Lobito corridor is a nearly 1,300km rail network connecting the land-locked, mineral rich countries of the Democratic Republic of Congo (DRC) and Zambia to the Atlantic Ocean port of Lobito in oil rich Angola. It was originally constructed in the early 1900’s as the Benguela Corridor by the then colonial governments (Portugal and Belgium) to move valuable raw commodities from the three countries to the Atlantic coast for extraction to the West. It operated successfully and quite profitably until the 27 year-long Angolan Civil War disrupted the network in the 1970’s.  

By the end of the war (2002) only 3% of the rail infrastructure was still operational. Between 2006 and 2014, the network was rehabilitated by the state-backed China Railway Construction Corporation (CRCC) at a cost of US$2bn. It was just one of many infrastructure projects undertaken by the Chinese in the country (roads, housing, hospitals, oil refinery, hydropower plant), which now owes Chinese creditors approximately US$17bn (40% of its external debt).Without intervention and debt restructuring, Angola, which accounts for more than 25% of Chinese loans to Africa, would long have defaulted on its Chinese debt.

Against this backdrop, and with large parts of the extensive rail network and supporting infrastructure having since fallen into disrepair, the Angolan government issued a new 30-year concession to the US and European backed Lobito Atlantic Railway Company (LAR), a joint venture between Swiss commodity trader Trafigura, Portuguese construction company Moto-Engil and Belgian rail operator, Vecturis, after it outbid a Chinese backed consortium. The concession, which is extendable for a further 20 years depending on investment targets being met, is for the upgrade of existing infrastructure between Lobito and Kolwezi in the DRC and extension of the line to connect Zambia (figure 1).

While the motivation behind the rehabilitation and development of rail infrastructure connecting Zambia and the DRC to an Atlantic port remains efficient mineral extraction, cobalt, lithium and copper have become the primary mineral targets. These minerals are all used extensively by the technology sector to produce electronic components and the lithium-ion batteries that power electric vehicles (EVs), cellular phones and countless other portable devices. Three quarter of all the critical minerals that go into the production of such devices come from the DRC (figure 2).

While the DRC’s cobalt and Zambia’s copper are the jewels in the Lobito crown, the DRC, Zambia and Angola all have lesser deposits of equally sought-after rare-earth minerals such as lithium, nickel and graphite which are also used by the tech sector. So great has been the shift toward newer, greener technologies that the International Energy Agency (IAEA) projects demand for cobalt, graphite and lithium will increase by 20, 25 and 40 times respectively. Not only will a revamped Lobito rail network allow for the efficient extraction of these critical minerals, but it would dramatically reduce the cost and time associated with getting them to port. Currently, ore is trucked from the DRC and Zambia to ports in South Africa, Mozambique or Tanzania with the journey being up to 3,000kms long and ore taking as much as a month to reach port due to border and port bottlenecks. An efficient rail system would halve the distance and see cargo reach the Lobito port in just eight days.

The unprecedented demand for these minerals gives these countries an opportunity to leverage the competition between China and the west - both of whom are in a scramble to secure supplies of rare earth minerals to feed their respective battery and technology sectors. It is an enviable position for the African states but one fraught with danger. If they can artfully manage the great power rivalry to extract maximum economic and geopolitical gain, they will succeed in doing what their forebearers failed to do during the previous ‘scramble for Africa’.

A day late and a dollar short?

America’s explicit political and financial support of the Lobito corridor is a notable departure from their historically trade focused engagements with Africa (e.g. AGOA) and underscores just how strategically important the corridor is for the US in its critical raw materials (CRMs) supply security and tech rivalry with China. It also represents a marked directional shift toward the decades-long Chinese model of infrastructure investment in Africa that was accelerated under the “Belt and Road Initiative” (BRI), and one that the US has blamed for leaving African states heavily indebted. That the US is now embarking on a similar path reveals a great deal about Washington’s thinking:

• It is tacit admission that its trade-based approach has not been enough to give it sufficient economic and political influence on the continent.
• In its battery and energy transition technology race with China, it is decades behind and may struggle to recover without drastic intervention.
• A slowdown in Chinese lending to Africa, coupled with BRI investment fatigue on the part of African states due to crushing debt provides an opportunity to make up lost ground to China and secure access to critical minerals.

To be sure, the US and its allies are on the back foot. Even its massive infrastructure investment, at least in its current form, will not be enough to level the playing field. For a start, the LAR company has been emphatic that it will not hold a monopoly on which companies, Chinese or Western, will be able to use the Lobito Corridor. Indeed, the first trial shipment of ore along the corridor in late 2023 was not to western processors, but around the horn of Africa to China.As such, China and Chinese companies could be major beneficiaries of the US’s investment in the corridor. The West’s attempt to exert influence using the corridor is further stymied by the fact that China International Trust Investment Corporation (CITIC) and Shandong Port Group (SPG) won the contract in 2022 to manage the Port of Lobito for 20 years.

A bigger complication, however, is that China has the cobalt and copper production in the DRC virtually sewn up. 85% of rare earth minerals and nearly 80% of the cobalt in DRC is mined by Chinese firms. There are an estimated 38 Chinese mining firms operating inside DRC.

Despite their domination over African mining concessions in the DRC, the Chinese are leaving nothing to chance and have signed agreements with the governments of Zambia and Tanzania to upgrade and manage the Tanzania Zambia Railway Authority (TAZARA) line, which would connect the mineral rich regions of the DRC and Zambia to the Indian Ocean port of Dar es Salaam (figure 1). It is entirely conceivable that given their infrastructure experience in Africa, the TAZARA line could be completed before the Lobito Corridor becomes fully operational.

The final predicament for the US and its western allies is that China controls almost 80% of the world’s cobalt refining capacity (figure 4) and is the dominant processor of copper, lithium, graphite and a host of other critical rare earth minerals.

Given China’s overwhelming advantage and end-to-end value chain dominance of Africa’s critical minerals, from mining to processing and ultimately end-product, it is difficult to see how the western investment in just one of the logistics components of the value chain could yield any meaningful return for them. Even if Western mining firms do get to move minerals out through the Lobito corridor where will those minerals eventually be processed except, for China? At best, it seems a way of re-exerting Western soft power on mineral-rich Africa and a signal to China that the West will not be  beholden to Beijing for its mineral and technology requirements. If the US and its western allies do have an ace up their sleeve - one that could perhaps loosen China’s ‘grip’ on critical resource – they are not showing it. One such ‘ace’, if indeed there is one, is the prospect of generating sustainable new jobs and industries to the economies of Angola, the DRC and Zambia by drawing them into the mining and processing value chain. Thus far, there is very little said about value-added processing in-country.

The price of everything and the value-add of nothing

African states have for decades been calling on the likes of China and western nations to invest in value-added processing on the continent, rather than simply extracting minerals for export and beneficiation in the importing country. For the most part, these pleas have been side-stepped.

Firstly, the cost of setting up processing plants and the infrastructure and logistics networks required in Africa would be far more expensive than simply mining ore and exporting them to facilities that already exist in China. Mineral processing is very energy intensive and with Africa’s existing generation and distribution constraints, would require investment in purpose built hydro-electric plants, solar installations or other generation capacity. Roads, water infrastructure and even entire towns with schools and clinics would need to be built, and even then, much of the parts and machinery needed to run and maintain these processing plants would still need to be imported.

These challenges are not insurmountable but countries like China and the US already have the infrastructure in place, and are understandably reluctant to start from scratch, at enormous cost, thousands of miles from the end market. There is a myriad of other challenges to doing business in Africa, from a lack of skilled workers, corruption and foreign exchange controls to political instability and policy uncertainty. That said, it could be one of the few options the west could dangle in front of the DRC, Zambia and Angola to get an edge on Chinese dominance. Developing local refining capacity in-country is crucial for Africa. It would significantly boost infrastructure development and job creation, drive greater economic benefit from the export of higher value goods and sustainably lift the country’s growth trajectory.

To ban the export of minerals in their raw form would be a drastic step, but it has been done before, by countries like Zimbabwe and Indonesia. To secure supply of valuable critical resource minerals, China committed US$300m to building a lithium processing plant to refine offtake from its Zimbabwean lithium mining operations. The total value of Chinese lithium investment in Zimbabwe is estimated to be as much as US$2.8bn. In 2014, Indonesia banned the export of raw nickel to force local processing and beneficiation. With considerable investment from China, Indonesia now largely controls the global nickel market.

While it is too soon to gauge the long-term effectiveness of such a drastic step, or whether ordinary Zimbabweans and Indonesians will see any benefit from this is questionable, but it demonstrates that for such sought after commodities, countries in the race to secure critical technology inputs are prepared to adapt their investment strategy in Africa.

For the likes of the DRC, Zambia and Angola such a radical step would need to be carefully weighed, and may not even be necessary if the west, as it has suggested by an MOU with the three countries (but not committed to), would like to sweeten the deal with local processing plants and infrastructure.African governments have become more assertive in their dealings with foreign investors and starting to exercise greater sovereignty over their own natural resources. Addressing their economic and developmental needs would determine who will win the so-called critical minerals ‘race’. It need not be a binary “either/or” choice between the two great powers although political and economic competition suggestions that cooperation between the two nations for access to critical minerals is unlikely. For their part, African countries may need to do a lot more to allay investor fears by setting up policies that that meet legitimate domestic development needs and investment friendly at the same time.

US President Joe Biden is scheduled to visit Angola in December and the Lobito Corridor will be at the top of the agenda. This would be his very first visit to Africa, and at the very end of his term. Although his office is likely to present the occasion as him finally making good on his promise to ‘prioritise’ Africa, the fact that he chosen to do so only days before he moves out of the White House, is likely to be seen as an affront by many Africans. Be that as it may, President Biden will probably try to assuage African fears that the incoming Trump administration will take a more heavy-handed approach in its African engagements (especially its stance towards beneficiation and the Lobito Corridor).  Without such commitments, Africa will remain a site of extraction and realise little economic and developmental benefits from their mineral wealth.