The EV revolution is gradually gathering steam on a worldwide scale. It is only a matter of time until the electric vehicle (EV) insurgence spreads to African nations like Zambia. As an emerging market, the nation faces challenges in transitioning to electric vehicles, and may take some time before the nation is entirely prepared for this change. Though the Zambian market may not be entirely ready for this shift, there is still an opportunity for the country to take part in the global trade of EV batteries.
It is no secret that Zambia is amongst the largest producers of copper in the world, giving it a major comparative advantage in the production of electric vehicle batteries on the global marketplace. Zambia also boasts a rich source of cobalt, another critical mineral in the EV battery value chain. The nation produced 251 tons of cobalt annually in 2022, up 2% from the 247 tons produced in 2021, according to official figures from the Ministry of Mines and Minerals Development.
On the other hand, the Democratic Republic of Congo hosts 70% of the world’s cobalt reserves. After realizing their potential to be leaders in the EV battery race, the two African countries signed a memorandum of understanding on the 13th of December 2022. This agreement declared a strategic partnership to engage in the mass production of EV batteries, elevating both nations up the value chain.
This could drastically boost foreign exchange earnings via the mass export of EV batteries to markets with a large consumer base such as Europe and the United States. The nations’ budget surplus is expected to rise therefore as a result lowering interest rates, lower inflation and higher economic growth. Doors are open for the private sector to participate in every step of the value chain to accelerate the economic growth and maximize the production capacity.
Does Zambia stand a chance in the EV race?
Despite the exciting news mentioned earlier, fierce competition remains in this industry. China is currently producing 56% of the world’s supply of EV batteries with Korea coming in second at 26% and Japan with 10%. That’s 92% of the world’s supply of EV batteries coming from Asia alone. The United States, which is significantly subsidizing the sector through the Inflation Reduction Act, includes $370 billion in renewable energy incentives, is another fierce competitor for Europe.
Furthermore, the European Union has set a deadline of 2035 for the phase-out of the sale of new fossil fuel vehicles; thus, Europe is rushing to increase its manufacturing of batteries and electric vehicles. According to the economy ministry, the French government has set a goal of generating two million electric vehicles annually by 2030. For Zambia to penetrate this market successfully, it will need to focus on developing a powerful value chain that competes with the major players in the industry.
The construction of battery manufacturing plants in Africa is hampered by substantial obstacles. African nations will need to combine their mineral supplies to build batteries at a minimal scale because not one African nation possesses all the necessary minerals. Additionally, they must watch out for exporting an excessive amount of their mineral resources. The market for four-wheeled electric vehicles in all of Africa is anticipated to be small for decades due to affordability and a lack of grid-scale charging infrastructure; as a result, the value chain for batteries made of nickel, manganese, and cobalt (NMC) may be limited to producing battery precursor material.
Unless the nation can partner up with key players dominating the market, it will struggle in capitalizing on the value addition of these resources due to its limiting production capacities. Zambia may succeed in penetrating the EV battery market successfully but may still be forced to export majority of its raw copper and cobalt to advanced players in the market like China and Korea. An opportunity for the nation may reside in collaborating with China, considering its very strong pre-existing relationship. However, the nation may need to tread carefully to avoid being exploited yet again considering debt restructuring has occurred.
Is the Zambian market ready for this shift?
Inadequate infrastructure is one of Zambia’s biggest obstacles to making the switch to electric cars. Electric cars, as opposed to conventional combustion engine vehicles, need a nationwide network of charging stations that must be established at key places. Electric car owners must have easy access to this infrastructure, which must be able to supply enough power to charge the batteries of EVs. The lack of adequate charging infrastructure in Zambia today is a major obstacle to the uptake of electric vehicles. Before the nation can develop the essential infrastructure to support the EV revolution, considerable time may pass. To promote the use of electric vehicles, the government must spend money constructing a nationwide network of charging stations.
Zambia’s readiness for the EV revolution will also largely depend on consumer sentiments toward electric vehicles. Customers must be well informed of the advantages of electric vehicles and ready to adopt this cutting-edge technology. Currently the cost of fuel is at k27.59 per litrewhile the cost of electricity is at k0.47/kWh, therefore driving an electric car would be extremely cheaper than a fossil fuel one of equivalent passenger size and weight. Hence, the service cost is also much lower over a comparable duration which makes electric vehicles unquestionably economical.
Several advantages come with electric vehicles, such as lower fuel costs, lesser pollutants, and higher performance. The public still has a lack of familiarity with electric vehicles, and there is a misconception that they are expensive and have a short range. Therefore, in order to alter consumers’ perceptions about electric automobiles and promote their adoption, education and awareness efforts may be necessary.
What is next for Zambia?
Zambia is now far from realizing its full potential in the mining sector, although still being the country with the highest foreign exchange earnings, with just about 800,000 metric tonnes of copper produced annually. The nation also keeps exporting raw copper, denying itself the opportunity to profit from the export of finished goods that can produce greater value than raw copper.
Therefore, Zambia must participate in value addition to these minerals in addition to dramatically boosting the nation’s yearly output of metals like copper and cobalt in the medium to long term (such as the objective to produce 3 million metric tonnes of copper in a decade). The nation will profit in this way from the rising worldwide demand for EV production. Zambia may enter the global EV value chain market, aiming for foreign manufacturers, by refining and adding value to copper and cobalt on a massive scale for use in making EV batteries among other things.
As of to date, there has been no official commencement on the construction of any EV battery factories or any announcement of special economic zones. For this reason, it is still reasonable to assume that although Zambia holds a large majority of key minerals in the value chain, its lack of infrastructure and production capacities will slow down the nation in catching up to the rest of its competitors in the industry.
As for the consumers market, a significant obstacle to the transition is the absence of government regulations and infrastructure that encourage the use of electric vehicles. However, Zambia may advance its readiness for the EV revolution with more awareness of and investment in renewable energy sources.