South Africa’s new critical minerals and metals strategy is an ambitious shift, designed to turn the country from being a raw exporter into an industrial contender.
By designating 21 minerals, among these manganese, platinum group metals (PGMs), vanadium and rare earth elements, as “critical”, the country aims to become a key global supplier of materials vital for clean energy, advanced manufacturing and digital infrastructure.
Yet beneath the policy fanfare lies a familiar fault line: value is still overwhelmingly captured offshore.
South Africa boasts 80% of global manganese, 88% of PGMs, and untapped rare earths, but beneficiation remains the exception. Across Africa the pattern repeats. The continent holds nearly 30% of global critical mineral reserves but processes less than 12%.
Cobalt from the Democratic Republic of Congo, lithium from Zimbabwe and graphite from Mozambique are shipped elsewhere to be refined, then imported at a premium. Without co-ordinated regional demand, integrated infrastructure and aligned policy under the African Continental Free Trade Area, South Africa’s strategy risks becoming another island in a sea of missed industrialisation.
The strategy outlines six catalytic pillars: geoscience mapping and exploration; value addition and localisation; research & development and skills development; infrastructure and energy security; financial instruments; and regulatory harmonisation.
Special economic zones like OR Tambo and Musina-Makhado promise tax breaks, accelerated depreciation and customs relief. But are such incentives working?
“The short answer is no,” says Hugo Pienaar, chief economist at the Minerals Council South Africa. “If the incentives were adequate, or sufficient to offset power costs and Transnet’s rail and port failures, we wouldn’t be seeing the notable decline in chrome and manganese smelting capacity.”
Pienaar supports proposed fiscal levers but questions the National Treasury’s commitment.
Electricity costs are arguably the biggest reason behind the drop in local beneficiation
— Hugo Pienaar
“We broadly support incentives such as corporate tax reductions and accelerated depreciation. But the big unknown is how far the Treasury has been consulted and whether it actually supports these measures.
“Access to raw materials isn’t the problem, so there’s no guarantee that export restrictions will drive local value addition. Export taxes could cut into producers’ margins, and if those costs are passed down, it could erode competitiveness and shrink market share.”
The burden of electricity costs looms large. “Electricity costs are arguably the biggest reason behind the drop in local beneficiation. If industry and the government can collaborate to limit or reduce power costs across the economy, that would be a win for smelters and other industries,” says Pienaar.
Even fiscal tools like royalty rates aren’t structured to drive downstream reinvestment. Roshelle Ramfol of Unisa, whose field is energy transition, says: “Royalties reduce risk-weighted investor returns but are not structured to support reinvestment in processing capacity, technology upgrading or low-carbon industrialisation actively.”
As for energy storage, Mikhail Nikomarov of the Boston Consulting Group says: “We’ve got the upstream covered: vanadium mining, processing and even an electrolyte production facility. But demand is the missing link. Flow batteries are significantly more expensive than lithium alternatives, and without targeted policy they won’t be commercially viable.”
Nikomarov identifies a critical bottleneck: procurement momentum. “Almost every electrolyte inquiry came from Europe or the US. We have materials and deployment capacity, but unless the [independent power producers office] allocates at least 20% of [battery energy storage systems] tenders to flow batteries, the domestic market will stay dormant.
“We already prescribe technologies in solar and wind procurement. Why not for storage? It’s not the cheapest technology, but it’s strategic.”
Lithium battery assembly is already under way, but South Africa lacks cell manufacturing, the high-value heart of the battery industry.
“We’re assembling lithium-ion batteries for forklifts and mining gear,” says Nikomarov. “But cell manufacturing requires scale of at least 8GWh-10GWh and investment of about $500m.
“Unless we manufacture electric vehicles [EVs] locally, there won’t be enough demand to justify a cell factory. Our auto sector is large, but only Ford Silverton makes hybrids. We’d need two to three original equipment manufacturers to pivot to EVs or hybrids.”
Nikomarov says South Africa is not far from the levels of peer economies such as Morocco and Thailand, and has some strategic raw materials, though others would need to be imported.
Without coherent tax reform, South Africa’s beneficiation push could backfire. Ramfol warns: “Beneficiation mandates without tax offsets or processing allowances can increase compliance costs and deter private sector investment.”
Nikomarov’s prescription is direct: “We were early movers with EV tech and battery storage testing, but policy didn’t keep pace. Batteries still get lumped in with renewables, missing their unique synergies with EVs and the broader industrial strategy. That gap is costing us scale.”
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