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The Lobito Corridor, a Route to African Development?

In this article, Veronica Bolton Smith makes the case that the participating countries in the Lobito Corridor need to do more to become part of the $60 billion Electric Vehicle (EV) battery supply chain. The stakes are high for Africa as the EV battery market is anticipated to more than double in size to $141.6 billion by 2032, according to Apollo Research.


A primary goal of the Lobito Corridor initiative is to improve and expand the existing railway and supporting infrastructure to allow efficient flows of critical raw materials from mines in Zambia and the DRC to Angola's port city of Lobito. Presently, the minerals mainly travel eastward via trucks towards ports in South Africa, Tanzania, and Mozambique. Poor road infrastructure leads to delays and traffic jams, and once at port further delays are not uncommon due to them being overwhelmed, mismanaged, or lacking in capacity.


The Lobito Corridor establishes a westward path for the minerals providing optionality to producers and easier access to markets in the United States and Europe. The United States, the EU Commission, the African Development Bank, and the African Finance Corporation have all pledged significant funds towards the project.


sun rising over railway in nature


The Lobito Corridor is an ambitious public-private-partnership to develop infrastructure linking the copper and cobalt mines of Zambia to key markets in Europe and the United States. Made possible through multi-stakeholder agreements, the venture has been hailed by the governments of Zambia, the DRC and Angola as crucial for future generations and economic growth. Alongside the fanfare and big dreams, however, it is important to understand where the greatest value of the Corridor may lie, who stands to benefit the most, and how impact might be measured against expectations.



What is the Lobito Corridor?

Officially termed the Lobito Atlantic Railway Corridor, this is an agreement between Zambia, the DRC and Angola, and a consortium of three companies (Trafigura, Mota-Engil and Vecturis) to allow for the construction of a railway and all its support infrastructure, so as to transport materials from the mines in Central Africa to a point as close as possible to the markets in the USA and Europe. This point is the Angolan port city of Lobito.


The Corridor will be used as the route to transport critical raw materials (CRMs), strategic minerals and products of the EV battery value chain. As demand for CRMs increases, EU and US markets need to access these quicker, more reliably and competitively.


An Atlantic port significantly shortcuts the current Indian Ocean ports of Beira, Dar-es-Salaam and Durban. Currently trucks transport these materials, placing shipments at risk of hijacking, border delays, capricious political delays and under-performing unloading at overwhelmed ports. The railway, which exists historically and has already completed a trial journey, will still require further development.


What are the planned benefits?


While it primarily seeks to deliver critical minerals to western markets, the knock-on effect within the countries of the DRC, Zambia and Angola will foreseeably be increased employment in the region and infrastructure improvements. It is expected that SMEs will flourish along the railway routes thereby spurring economic growth at the local level. Furthermore, critical sectors should benefit from the railway, including logistics and transportation, CRMs supply chains, and even agribusinesses that may be able to take advantage of the better transportation facilities.


At the G20 meeting in September 2023, both the US and EU announced a feasibility study on activating the corridor. An initial load of over 1000 tons of copper from Ivanhoe Mines was delivered along the railway in December 2023. It is currently estimated that the entire project will be complete in 2029, pending the outcome of the feasibility study.


 

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Who has invested?


Investment in the Corridor is compelling. The EU Commission announced a €50 billion Financial Framework Partnership Agreement with the Corridor as the main beneficiary. The African Development Bank and African Finance Corporation plan to supply $500 million from sovereign and non-sovereign sources, as well as granting concessions.


In November last year, a 30-year concession was granted to a private consortium to operate and offer logistical support to the initiative. The consortium will be responsible for the operation, management and maintenance of the 1067 mm-gauge railway, with the agreement requiring the consortium to transport 1,677 million tonnes of freight per year by the fifth year of the concession. This will rise to 2,982.31 million tonnes by the tenth year, while 4,979.23 million for the 20th and 30th year of the agreement. There is an option to extend the contract by a further 20 years should the concessionaire commit to building a 200km line from Luacano to Jimbe in Zambia.


The consortium comprises three companies, namely multinational commodities trader Trafigura, and Portuguese construction and engineering company Mota-Engil, which each hold a 49.5% share in the concession. The third company is Belgian private railway operator Vecturis, which holds one percent. The consortium has plans to invest $455 million in Angola, and up to $100 million in the DRC, including the procurement of locomotives. The consortium will also channel substantial investment towards training and skills development, making use of existing training centres in Huambo and Lobito.


Value Addition: How can we ensure that the African region benefits?


While the commitment to invest is extremely positive for the region, all three participating countries, namely the DRC, Angola and Zambia, have made several statements to the effect of not simply wanting to ship the extracted materials out, but to add value along the EV supply chain. The amount of extracted CRMs to be shipped out of the region is significant. At face value the immediate benefit lies with the EU and the US. Without clear and coordinated initiatives and strategies to ensure that the region benefits from the Corridor, and particularly in terms of local contribution and enhancement opportunities within the CRM value chain, this initiative could be seen as an exploitation of Africa’s resources for the benefit of global actors. Africa has danced this dance before.


To ensure that the region benefits as planned by the Lobito Corridor, it will be up to governments and regional stakeholders to ensure fairness and balance in agreements with international governments and corporations. Significant focus and expertise should be invested into understanding how to guide frameworks that will govern the area, and a firm understanding should be applied in the negotiation with new global entrants who may likely jockey for position in the region as demand for CRMs continues to increase.


This article was originally published on LinkedIn by Veronica Bolton Smith. She has held previous roles including working at the United Nations, the UK Department of International Development, the UK Houses of Parliament, a Silver Circle law firm, Kenya’s Ministry of Defence, Chief Operating Officer of Invest Africa, and is currently leading a multi-million FCDO-funded programme supporting the Government of Ghana to attract industrial investors into key sectors of growth. Veronica was recently recognised by the United Nations as a Top 100 Most Influential Person of African Descent in Business.

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Lobito Corridor IPA

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Lobito Intro Report

The Lobito Corridor Investment Promotion Authority ("LCIPA" or "the IPA") is a permanent multi-stakeholder engagement agency tasked to link all public and private entities interested in advancing and participating in the Lobito Corridor. Its main goals are to maximize and promote trade, investment, and economic integration among and between the three African nations of Angola, the Democratic Republic of Congo, and Zambia. 

Download our official Lobito Corridor report to learn more about the initiative and why it matters. Follow our social media and subscribe to the newsletter to stay up-to-date and join the community.

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