Key Takeaways:
Competition between Western and Chinese firms in Zimbabwe is expected to increase, just as competition between the US and China increases for critical resources in Africa, and across the globe.
China’s influence is unlikely to subside in the near future, and may likely increase based on recent Sino-Zimbabwean relations. However, Western companies do have opportunities for investment and business ventures within the current market.
Emirati investments in Zimbabwe are expected to continue their upward trajectory in the the next 1-4 years, presenting a third path between Washington and Beijing.
The Zimbabwean Government has worked to centralise control of its lithium, to not explicitly choose favourites, and set requirements that incentivize development in order to encourage investment and balance the demands of both the West and China to maximise its own gains.
Background:
Lithium mining in Zimbabwe has garnered significant attention due to both its vast mineral reserves, and the rising global demand for lithium spurred by the electric vehicle (EV) industry. Beyond EVs, lithium is essential for various appliances and technological items including consumer electronics, energy storage systems, medical devices, industrial processes, and aerospace. As countries around the world strive to transition to cleaner energy sources, lithium-ion batteries are becoming essential for storing energy generated from renewable sources like solar and wind. American firms (and Western firms generally) have sought to enter this Chinese-controlled market, as geopolitical competition increases between the West and China to secure critical minerals for the energy transition; Zimbabwe has become one such site of competition.
Despite its rich mineral resources, economic instability and political uncertainties have historically hindered the sector's development in Zimbabwe. Mining in Zimbabwe faces numerous challenges, including inadequate infrastructure, inconsistent regulatory frameworks, and political volatility. These factors create a challenging investment environment, deterring potential investors and slowing down sectoral growth. Issues such as opaque licensing processes and concerns over property rights further complicate efforts to attract and retain investment in lithium mining projects. Moreover, lithium mining opportunities in Zimbabwe require substantial investments in mining infrastructure, regulatory reforms to attract Western investors, and sustainable development practices to mitigate environmental impacts.
Western sanctions imposed on Zimbabwe and hurdles regarding investment have also severely constrained the country's ability to fully integrate into the global lithium supply chain. These sanctions, often imposed due to concerns over human rights violations and governance issues, restrict financial transactions, trade, and technology transfers. Zimbabwean Finance and Economic Development minister Mthuli Ncube stated that sanctions have cost the country $42 billion USD in opportunity cost. As a result, Zimbabwean firms face challenges in accessing international markets, securing financing for mining projects, and adopting advanced technologies crucial for lithium extraction and processing from Western companies. Major Western mining firms, which might have the capital and expertise to develop large-scale lithium mining projects, often avoid investing in Zimbabwe due to such risks - both legal and reputational ones.
Chinese firms, however, historically less concerned with environmental, social, and governance (ESG) standards, have poured millions into the Zimbabwean lithium industry. This is a connection that neither side will be quick to sever. KSG assesses that US-China economic competition for strategic resources, like lithium, is likely to increase over the next 4-8 years. The investment dynamics between Western and Chinese companies provide both opportunities and risks to future investors.
Investment Dynamics between Western and Chinese Companies:
Western Companies
Overall, Western companies are less invested in Zimbabwe than Chinese companies, and face an array of challenges to their operations. Due to sanctions and reputational fears which forestall investment, KSG’s discussions with several Western mining companies revealed a hesitancy to invest in the historically volatile country even if political stability improves. However, our interviews showed these companies have a deep recognition of the need to secure diverse sources of lithium as the task of de-risking from China looms larger for Western governments. As global competition for lithium intensifies, some Western firms are challenging Chinese domination of the Southern African lithium industry. Western-aligned companies in various stages of expansions in lithium production in Zimbabwe include: UK-based firm Cluff Africa; Premier African Minerals (PAM); and, Bravura Holdings, a South African enterprise. PAM currently operates the Zulu Lithium and Tantalum Project outside Bulawayo, which recently began to function at full capacity. Bravura Holding’s Western ties stem from the owner, Nigerian tycoon Benedict Peters, who was appointed to the Board of Advisors for the US-Africa Business Center by the US Chamber of Commerce in 2019.
KSG assessment uncovered several advantages for Western companies seeking commercial investment opportunities in Zimbabwean lithium. Such advantages include: proven success in previous business ventures, trust and willingness to cooperate with state interests, and an aspect of African social investment that China has struggled with. For example, UK-based firm Cluff Africa recently agreed to partner with Zimbabwe’s state-owned Mutapa Investment Fund to mine lithium at the Sandwana mining complex. Cluff Africa has a long history of successful ventures and economic presence in Africa, pioneering Zimbabwe’s now-indispensable gold industry, and establishing deep connections with the state despite its turbulent politics throughout past years, as well as profiting from endeavours in European coal and oil markets. Perhaps most importantly, Cluff prioritises the incorporation of local communities into company developments by making Cluff tradeable on local stock exchanges and generating income for host governments through the significant amount of labour required for mining. KSG assesses it is likely that Western companies who follow Cluff’s example of demonstrating non-predatory practices, collaborating with local governments, and prospering in energy sector projects, will be welcome in Zimbabwe and Africa as a whole in the long-run.
However, KSG also observes several issues with current investment approaches. For instance, there are some risks associated with Premier African Minerals (PAM) including the mine’s proximity to South Africa, which could invite the temptation to smuggle out raw lithium to circumvent Zimbabwe’s ban on the export of raw materials in order to utilise China’s fully-developed lithium processing infrastructure. Another potential issue is tremors in relations with PAM’s business partner, the Chinese-owned Canmax Technologies; processing issues resulted in PAM’s failure to produce Canmax’s advance order of lithium on time, which nearly caused a termination of the contract stipulating Canmax’s exclusive access to PAM-produced lithium. Co-ventures between China and the West represent only a small portion of lithium projects, but are likely to incur future risks as competition for global lithium resources increases. PAM’s Zulu Lithium and Tantalum project may not have been possible without Canmax’s investment of $35 million USD, which will be repaid to the Chinese firm in lithium. Therefore, China’s influence proves omnipresent and often necessary, even inside projects managed by Western companies.
2. Chinese Companies
Despite promising investment opportunities, Western countries lag behind China’s scale of investment. Trade between Zimbabwe and China over the last decade has consistently outstripped trade flows between Zimbabwe and the US by an overwhelming margin. Moreover, despite Zimbabwe’s debt to China now at $2 billion USD, China still views the Sub-Saharan nation as an ‘all weather friend,’ displaying no indications of retrenching in its investments in Zimbabwean lithium.
Chinese investment has become increasingly influential in Zimbabwe's lithium sector. Chinese companies have engaged in joint ventures and direct investments, bringing substantial capital, advanced technology, and operational expertise to the country. For instance, Beijing Pinchang's $100 million investment in Zimbabwe's Kamativi lithium project exemplifies China's strategic interest in securing access to Zimbabwean mineral resources. In comparison, US investment has been dwarfed by Chinese private capital, partially due to previous US sanctions on many prominent Zimbabwean figures.
The continuation of Chinese investment in Zimbabwe’s lithium is underpinned by two factors. First, China’s desire to maintain its advantageous standing in the global EV market and in the production of other high-tech industries like semiconductors necessitates their active participation in the international race to secure lithium resources. Second, projects like the Belt and Road Initiative (BRI) provide a framework for infrastructure development, supporting mining operations and enhancing economic ties between China and Zimbabwe. Chinese investment also brings technological advancements, which the Biden administration has worked hard to match through initiatives like the G-7 Partnership for Global Infrastructure and Investment.
However, Zimbabwe has imposed an export ban on raw lithium, meaning that lithium ore must at least be processed into spodumene or petalite concentrate at the bare minimum. Some companies have found ways to circumvent this ban however, as raw lithium can still be exported by companies who are in the process of building processing plants or who have obtained special permission from the Zimbabwean government. KSG assesses this indicates bolstered Chinese influence in Zimbabwe, as the Chinese lead in mining infrastructure investment allows for the continuation of raw lithium exports, with comparatively more Chinese companies developing/having built processing plants.
The geopolitical landscape surrounding Zimbabwe's lithium sector is thus shaped by competition and collaboration between Chinese and Western companies. Chinese investment, bolstered by initiatives like the BRI, strengthens economic ties and infrastructure development in Zimbabwe but also increases dependency risks. Conversely, Western countries seek to promote good governance and transparency in Zimbabwe's mining sector while navigating sanctions and political tensions. For instance, the US has reformed its approach to sanctions in Zimbabwe in 2024. KSG assesses this reform may be a strategic acknowledgment of the need to gain access to key resources in Zimbabwe (and across Africa), at the detriment of insisting on ethical standards.
3. Investment from the United Arab Emirates: An Emerging Middle Ground between China and the US
The rising interest from the United Arab Emirates (UAE) in Zimbabwe adds a third dimension to the US-China rivalry. In 2018, the UAE and Zimbabwe signed a bilateral Promotion and Protection of Investments Agreement. Lovemore Mazemo, Harare’s ambassador in Abu Dhabi, stated that 28 UAE companies are currently investing in Zimbabwe, focusing on mining, agriculture, and renewable energy. As the world transitions away from oil, the UAE is diversifying its sovereign wealth and economy by investing in energy transition minerals.
KSG assesses that the prospect of increased UAE investments holds significant economic potential for Zimbabwe. The Gulf nation can negotiate government-to-government deals, investing billions of petrodollars into mining at a time when Chinese loan supply is declining, and private capital markets are hesitant to support potentially risky mining projects. Logistics investments will be crucial for transporting ores from landlocked Zimbabwe. Logistics companies like Dubai-based DP World, which provide logistics for port development, distribution infrastructure and storage, are interested in expanding Zimbabwean supply-chain capacity. DP World has invested in eight terminals in Sub-Saharan Africa over the past two years, including a container terminal in Maputo, an important southern African export hub. However, pouring sovereign wealth into African mineral assets risks appearing exploitative. Chinese investments have raised questions about pollution, local employment, debt transparency, and political dependence, and there are risks that Abu Dhabi will replicate such problems.
KSG anticipates that Emirati investments are set to offer Zimbabwe a chance to steer a middle course between Beijing and Washington. The Gulf state offers cash and political coverage to invest in risky jurisdictions such as Zimbabwe and a relatively neutral hub for headquarters as well as for exporting and processing ores. Given the importance of lithium to the energy transition and the UAE’s interest in diversifying its oil-dependent economy, KSG expects a high likelihood of the monarchy becoming a major actor within Zimbabwe in the next 5-10 years. Furthermore, KSG assesses that there is a high likelihood of Harare using Emirati investments as a counterweight to US and Chinese interests. Such manoeuvring would advantageously position Zimbabwe to benefit from high investments, high ESG standards, and transparent debt.
Looking Forward:
Key points:
Zimbabwe is highly likely to continue to be of significance to the US and China. However, both nations likely consider Zimbabwe to be a low-level priority in the short run, even in the race for lithium, as domestic and Latin American lithium reserves offer more potential to both states.
Western governments are likely to see increased pressure from Western mining companies to provide incentives and policies which benefit mining projects. Moreover, Western mining companies’ ventures are more likely to receive support or funding from these governments.
Chinese economic influence in Zimbabwe is not expected to recede in the coming decade.
There are opportunities for Western companies to gain influence in the current market.
Zimbabwe is highly likely to attract increased Emirati mining investment over the next decade, offering Harare and foreign miners a third option that is not overtly pro-US or pro-China.
Zimbabwe is likely to benefit most from regulatory reforms, and by balancing the interests of Chinese and Western companies for its own economic growth and development.
A. Zimbabwe likely to remain of high importance to the US and China:
Over the coming decade, Zimbabwe is likely to become a major ‘battleground state’ in Africa as part of the geopolitical rivalry between the US and China. KSG assesses that the increasing need for the US and Western Allies to have access to key lithium supplies will compel Western governments into facilitating Western companies’ investment in Zimbabwe. This might include increased investment into transparency and humanitarian aid, but also starting to de-prioritize some of the factors which originally prompted sanctioning. Given the clear acknowledgment by Western governments that lithium is critical, KSG assesses that investing in government lobbying efforts by mining companies is likely to have increasing success out to 2030. Moreover, in the coming few years, Western mining companies may face increased pressure by Western governments not to undertake co-ventures with Chinese companies.
Ultimately, KSG assesses lithium mining in Zimbabwe is highly unlikely to see a dramatic change in the presence of both the West and China. Both Western and Chinese companies are likely to play a role in the future, and one is unlikely to completely supplant the other. KSG assesses that it would likely require a deliberate and prominent act of Chinese or Western aggression in Zimbabwe or Sub-Saharan Africa to prompt Zimbabwe to block or limit investments from Western or Chinese firms in the short term. Demand for lithium globally is set to continue rapidly, and KSG assesses the trajectory of Chinese investment in Zimbabwe's lithium sector is likely to continue, driven by strategic interests and the need to secure mineral resources.
B. Opportunities and Challenges for Western Firms:
Despite the Chinese command of the sector, there is still room for Western firms in the current market. Zimbabwe is keen to work with companies that would be willing to engage in adding value to lithium mined domestically, particularly in the realm of battery manufacturing. By being willing to invest in mutually beneficial long-term ventures like mining and processing lithium to battery-grade level or even battery production, Western companies could garner support from Zimbabwe and gain first mover advantages as a local battery supplier in Sub-Saharan Africa. To further ingratiate themselves with the Mnangagwa regime, firms could work out arrangements with artisanal miners to supply raw lithium to be processed in Zimbabwean plants; this may also de-incentivize the smuggling of raw lithium across South Africa’s border and revitalise the artisanal mining sector, which was devastated by the raw mineral export ban.
Western companies are highly likely to face infrastructural issues which would require additional investment in mining projects. China’s head start and BRI means that it has been developing streamlined transportation and investing in Zimbabwe’s infrastructure for several years, giving China another advantage in the race for lithium. For example, The Chinese-owned Arcadia mine is ideally located near a highway that allows for the lithium product to be shipped from the port of Beira in Mozambique, as opposed to Western owned mines, which have yet to extensively invest in more efficient lithium transport to ports.
C. Implications for Zimbabwe - Assessing the Potential Benefits of Regulatory Reforms and Strategic Adjustments:
From the Zimbabwean perspective, the sector will likely benefit from regulatory reforms. For instance, enhancing transparency, streamlining regulatory processes, and improving governance may contribute to attracting diversified investments and fostering sustainable sectoral growth. KSG believes that regulatory reforms may contribute toward creating a stable and predictable investment environment, ensuring that licensing processes are transparent and that property rights are protected. This in turn is likely to help mitigate the perceived risks associated with investing in Zimbabwe and attract a broader range of investors. These actions may help avoid dependency on China. KSG believes that a diverse stream of investment may also help usher enhanced infrastructure and access to new technologies.
KSG assesses that there is a high likelihood of Zimbabwe leveraging the UAE as a third bargaining position to balance Washington and Beijing in the next 2-5 years. By soliciting package offers that include infrastructure and value-added processing investments, while negotiating transparent and sustainable debt, Harare can reap the maximum benefit of its lithium reserves. Exporting raw lithium to the UAE allows Harare to sidestep the US-China rivalry over critical resources. In the long term, Zimbabwe’s goal will likely be the establishment of a domestic lithium processing industry.
Finally, KSG recommends that Zimbabwean companies and public administration take a balancing strategy with Chinese and Western interests. Competition between the US and China creates opportunities and challenges for Zimbabwe. For instance, the fear that foreign exploitation of Zimbabwean lithium wealth will result in continued economic floundering as the state is stripped of its mineral resources has led some, such as the former energy and economic planning minister Elton Steers, to question if Zimbabwe should forestall mining until further industrialization occurs. However, Zimbabwe can leverage Chinese investment to develop its lithium sector while using the prospect of Western engagement as a bargaining chip to negotiate better terms and drive reforms. Balancing these interests requires astute diplomacy and a sharp vision for the sustainable development of the mining sector. By placating the imposed Western standards, significant investments, financing, and technology access may be unlocked. By doing so, Zimbabwe can leverage global demand to achieve sustainable development and economic growth.
By Carter Morton (Africa Analyst) & Hadrian von Kuenheim (Geoeconomics Analyst)