Africa holds some of the world's largest reserves of critical minerals, including cobalt, copper, lithium, manganese, graphite, rare earth elements and iron ore. Yet the continent continues to capture only a fraction of their ultimate value. This paradox between resource endowment and value capture is not incidental, it is structural, and it has shaped Africa's economic trajectory for generations.
Economists describe this phenomenon as "value leakage", the systematic transfer of economic benefits from resource-rich jurisdictions to those controlling downstream processing and manufacturing. This structural imbalance is not new. Writing in 1965, Kwame Nkrumah argued that Africa's development challenge lay not in the absence of natural wealth, but in the externalisation of value creation, where extraction occurred domestically while higher-value processing and industrial activity took place elsewhere.¹
The global reconfiguration of supply chains, driven by the energy transition, geopolitical upheaval and the search for secure, diversified mineral sources, presents significant opportunities for structural economic transformation. Demand for critical minerals is rising, diversification of supply is now a strategic priority for industrial economies, and Africa’s mineral endowment has moved from peripheral to central in global industrial policy debates.
The question, therefore, is no longer whether Africa should move from extraction to value addition, but how African economies can do so at the speed and scale required to seize this moment. This article argues that regional integration and the deliberate construction of continental value chains are no longer optional policy aspirations, they are the precondition for meaningful value addition. It examines the legal and commercial architecture required to move beyond fragmented national approaches and build integrated, bankable value chains capable of attracting sustained investment.
STRUCTURAL BARRIERS TO VALUE ADDITION
Africa's mineral-rich countries possess substantial resources and sizeable economies, yet their ability to host competitive processing and manufacturing industries is often constrained by fragmented markets, inadequate infrastructure, high energy costs and policy inertia.
No single constraint is decisive on its own. It is their cumulative effect that undermines competitiveness. Downstream processing requires scale, predictability, and cost efficiency. Fragmented national markets, uncoordinated industrial policies, and inconsistent regulatory regimes make it difficult to achieve any of these conditions. Overcoming these constraints requires more than incremental reform. It demands co-ordinated investment, reliable low-cost energy supply, efficient multinational logistics infrastructure and harmonised regulatory frameworks. Equally important is the development of minerals trading infrastructure that provides clear paths to market and localise trading-related economic activity on the continent. Concrete legal and commercial instruments that enable minerals extracted in one jurisdiction to be processed in another must need to be established and, where they already exist, enhanced to operate seamlessly and predictably.
Against this backdrop, economic integration is an enabling condition for building globally competitive mineral-based value chains. The African Continental Free Trade Area (AfCFTA), now the world's largest free trade bloc by number of participating countries, provides the overarching framework. Progress on tariff reduction has been made, and pilot trading under the Guided Trade Initiative continues to expand. Regional Economic Communities (RECs), including SADC, ECOWAS, EAC and COMESA, have achieved varying degrees of success in streamlining customs procedures, developing regional infrastructure corridors and establishing frameworks for co-operation in mining and industrial development.
MINERAL BENEFICIATION: FROM FRAGMENTATION TO FUNCTIONAL HARMONISATION
Among the structural barriers to value addition, divergence in national mining codes poses a significant obstacle to the development of cross-border value chains. Notwithstanding continental and regional frameworks, the legal regimes governing mineral extraction, beneficiation and trade remain highly divergent across the continent.
Mining codes differ widely in ownership models, licensing conditions, royalty structures, beneficiation requirements and transfer pricing rules. For investors seeking to develop multi-country value chains, this divergence creates uncertainty that is often fatal to investment decisions. Processing facilities require predictable, long-term access to feedstock. However, inconsistent policies, including unilateral export bans, sudden changes to beneficiation mandates and varying interpretations of local content obligations, undermine the security of supply required for smelters, refineries and fabrication facilities.
This fragmentation creates what can be described as a sovereignty trap. Each country, acting rationally at national level, seeks to maximise individual benefit through localisation mandates, export restrictions and discretionary licensing controls as instruments of industrial policy. In practice, these measures may generate short-term domestic gains, they often impose negative spillovers on neighbouring jurisdictions and deter the co-ordinated investment required for regional value chains. Policies that are individually rational at national level become collectively sub-optimal, foreclosing integrated processing and manufacturing ecosystems that could deliver significantly higher aggregate returns.
Full harmonisation of mining codes is neither realistic nor necessary. What is required is functional harmonisation, alignment of specific provisions that enable cross-border value chains to operate. This includes frameworks for feedstock security, REC-led model mining laws and AfCFTA-supported mutual recognition of permits, technical standards and mineral certification. Treaty-level commitments that export restrictions will not apply to intra-African trade should be rigorously enforced.
The emerging copper-cobalt-battery corridor linking the Democratic Republic of Congo (DRC), Zambia and Angola (the Lobito Corridor) illustrates both the potential and the challenges of transnational value addition. The DRC accounts for over 70% of global cobalt production, Zambia offers established smelting capacity and technical expertise, and Angola provides strategic port access through the Port of Lobito. Recent policy initiatives aimed at co-ordinating beneficiation and battery precursor production signal a shift from competitive localisation to collaborative industrial planning. However, the corridor's success depends on legal and commercial co-ordination: predictable cross-border feedstock flows, stable fiscal and export regimes, interoperable licensing frameworks and bankable offtake arrangements. The corridor, if successful, will demonstrate that where mineral endowments, infrastructure and industrial capabilities are complementary, regional value chains are economically viable. It also underscores the limits of unilateral beneficiation policies and the necessity of legal frameworks that enable capital, minerals and intermediate goods to move seamlessly across borders.
COMMERCIAL ARCHITECTURE ENABLING TRANSNATIONAL VALUE ADDITION
Downstream processing facilities require large, stable and predictable volumes of feedstock to justify capital-intensive investment. Many African mining operations are mid-scale and geographically dispersed. Individually, they often lack the scale to anchor economically viable processing facilities. Collectively, they could do so, if appropriate coordination mechanisms are in place.
Several commercial models can facilitate this aggregation:
- Consortium-based offtake structures aggregate supply from multiple mining operators to reduce volatility for processing plants. These arrangements are typically underpinned by standardised quality specifications, price-adjustment mechanisms linked to benchmark indices, take-or-pay commitments with force majeure carve-outs, and jurisdiction-neutral dispute resolution mechanisms.
- Joint venture processing entities combine upstream mining assets with shared downstream processing or logistics infrastructure, enabling risk-sharing and economies of scale.
- Tolling arrangements allow processors to refine ore or concentrates on behalf of multiple producers, separating ownership of the commodity from ownership of the processing capacity. This model reduces capital requirements for miners while ensuring utilisation of processing capacity.
- Commodity aggregation hubs provide a physical and legal platform for consolidating mineral flows across jurisdictions. Such hubs typically combine bonded warehousing, quality testing and certification facilities accredited to international standards, and digital tracking systems to ensure traceability and compliance. By enabling blending, pre-processing and standardisation of feedstock, aggregation hubs reduce variability for downstream processors. Integrated customs pre-clearance, supported by pre-arrival processing and transit regimes, facilitates the seamless movement of minerals across borders. Strategically located along multimodal transport corridors, these hubs function as value-chain orchestrators, matching aggregated supply with processing demand while lowering transaction costs and regulatory friction.
From a project finance perspective, these commercial models are critical to bankability. Lenders and equity investors require long-term feedstock security, predictable revenue streams and clearly allocated risks. Consortium-based offtake agreements, tolling arrangements and aggregation hubs enable processing facilities to demonstrate diversified supply, reduce single-asset dependency and stabilise cash flows through take-or-pay or minimum volume commitments. When combined with jurisdiction-neutral dispute resolution and transparent pricing mechanisms linked to international benchmarks, these structures materially reduce political, operational, and market risks, thereby lowering the cost of capital.
Beyond mineral feedstock, processing plants depend on secure access to water, energy, processing chemicals and reagents, and skilled professionals. Value-chain planning must therefore adopt a total input security approach, mapping not just mineral feedstock but the full spectrum of operational inputs. Regional frameworks should address these dependencies through transboundary water agreements that prioritise industrial use, harmonised import regimes for processing chemicals, regional professional recognition frameworks for metallurgists and engineers, and coordinated skills development programmes aligned with planned processing capacity.
Development finance institutions (DFIs) play a catalytic role in this ecosystem. Through subordinated debt, blended finance structures and political risk mitigation instruments, DFIs can anchor early-stage investment and crowd in private capital, particularly for shared assets such as processing facilities, aggregation hubs and transport corridors. Their contribution extends beyond capital provision, to include standard‑setting and transaction structuring.
Transnational infrastructure projects, including transport corridors, port facilities and power transmission lines, constitute the physical backbone of regional value chains. However, such projects raise a fundamental governance challenge: how to establish legal entities with the authority to plan, finance, build and operate infrastructure that spans multiple sovereign jurisdictions. Purpose-built legal and institutional arrangements provide a solution. Typical structures include corridor authorities or intergovernmental agencies vested with delegated regulatory, permitting and coordination powers, enabling coherent development and long-term operational stability across borders.
ALIGNING POLICY: FROM COMPETITION TO CO-ORDINATION
Infrastructure and commercial structures alone are insufficient without aligned industrial policy. Incoherent policy signals, uncoordinated localisation strategies and subsidy competition undermine even well-designed projects.
For transnational value chains to function effectively, industrial policy must extend beyond the national level to the regional scale. Parallel localisation ambitions pursued by neighbouring states, risk duplicating capacity, fragmenting markets and eroding competitiveness. At the same time, the design of competition and state-aid regimes, particularly within special economic zones (SEZs) and industrial parks, must strike a balance between attracting investment and avoiding subsidy races that distort location decisions without generating durable regional value creation.
Regional industrial compacts, under which countries commit to specialisation agreements, can alleviate competition and duplication. These compacts can provide harmonised incentives, benefit-sharing mechanisms between upstream and downstream jurisdictions and co-ordinated branding of "Made in Africa" processed minerals supported by ESG certification.
BORDER EFFICIENCY: THE HIDDEN TAX ON VALUE CHAINS
Even where policies are aligned, operational inefficiencies at border crossings impose a significant hidden tax on intra-African trade. Procedural delays, fragmented administrative processes and inconsistent application of customs rules impose significant transaction costs on intra-African trade, eroding the competitiveness of regional value chains disrupt feedstock flows and increase working capital requirements.
In practice, these inefficiencies manifest in prolonged truck queues, multiple and duplicative inspections, divergent interpretations of customs requirements and continued reliance on paper-based documentation. Transit delays of days or even weeks are not uncommon. For time-sensitive value chains, particularly those serving capital-intensive processing facilities operating on just-in-time inventory models, such border frictions disrupt feedstock flows, increase working capital requirements and can render processing operations commercially unviable.
Reform priorities include single-window systems, pre-arrival processing and risk-based inspections, digital certificates of origin and e-logistics platforms, authorised economic operator (AEO) programmes with regional mutual recognition, bonded corridor regimes allowing sealed containers to transit multiple countries without inspection.
Digital trade corridors for priority mineral value chains offer a particularly promising solution. Interoperable digital platforms can enable real-time data sharing, reduce duplication and improve compliance without undermining national customs sovereignty. Comparable systems in the European Union and ASEAN demonstrate that incremental implementation can deliver measurable gains.
INDUSTRIAL CLUSTERING AND SPECIAL ECONOMIC ZONES
Strategic industrial clustering can amplify the benefits of streamlined customs procedures and shared infrastructure. Value-chain-focused special economic zones (SEZs) can streamline customs processes, reduce compliance burdens and create environments conducive to integrated mineral processing and manufacturing.
Value-chain special economic zones (VC-SEZs) designed for mineral processing typically exhibit several features that reduce transaction costs and facilitate coordination. These include tax benefits for companies integrating multiple stages of processing; shared infrastructure such as common utilities, waste treatment and logistics facilities; regulatory streamlining through one-stop permitting and harmonised environmental standards; co-located technical training centres aligned with industry needs; and research facilities focused on processing technology and efficiency improvements.
Additional integration mechanisms may include standardised contracts for offtake, haulage, processing and power supply; regional certification schemes for quality standards, ESG compliance and origin verification; coordinated investment promotion through joint marketing of value-chain opportunities; knowledge-sharing platforms for technical expertise and best practices; and joint procurement initiatives aggregating demand for equipment, chemicals and services to achieve cost efficiencies.
FROM VISION TO EXECUTION
Africa's mineral endowment is a foundation, not a destiny. The continent can capture significantly more value from its natural resources, but only through deliberate co-ordination. The legal frameworks, commercial structures and technical solutions exist. What has been missing is operational integration, the detailed, unglamorous work of aligning regulations, standardising contracts, building corridor governance and creating the transactional infrastructure that allows capital to flow and value chains to function.
The AfCFTA and regional bodies provide the enabling framework, private capital and public governance reforms provide the engine. The window of opportunity is time-bound. Global supply chains are being reconfigured now, and investment decisions are being made now.
The choice is clear. Continued fragmentation will entrench limited value capture. Co-ordinated integration can position Africa as a global hub for mineral-based value chains and a central player in the industrial economy of the future. Achieving this requires collective will, not grand declarations, but disciplined execution.
The shift from extractive to additive economic models is achievable. However, it requires integration not only of markets, but of infrastructure, institutions and industrial strategies. If pursued collectively and deliberately, Africa can position itself as a global hub for mineral-based value chains and as a central actor in the industrial economy of the future.
1 - Nkrumah K, Neo-Colonialism: The Last Stage of Imperialism, 1965
