The idea that African nations must process their minerals at home has gained increased policy traction, and for good reason. After decades of exporting raw materials and importing finished products, the argument that Africa must capture more value from its enormous mineral wealth is both compelling and necessary. But while the objective is right, the narrative risks oversimplifying the challenge.
The problem is not simply that Africa exports raw minerals. The continent has not yet built the industrial ecosystems needed to convert its natural resource endowments into sustained economic development. Developing processing and other forms of value addition can be an important part of this process, but they are not sufficient on their own. A country may refine its minerals domestically while remaining dependent on external technologies, capital, markets, and higher-value stages of production. The real challenge is therefore to use mineral value chains as a foundation for broader industrial capabilities, technological upgrading, and economic diversification.
Indonesia offers a pertinent example. In January 2014, the country banned exports of unprocessed nickel ore to encourage domestic value addition. However, domestic capacity remained insufficient to transform the country’s nickel resources at scale, so the restrictions were partially relaxed in 2017. When the export ban was reinstated in 2020, the outcome was markedly different: the investment ecosystem had matured significantly, the government had developed a broader downstreaming strategy, and foreign investors (particularly from China) had made substantial investment in domestic processing. As a result, the number of nickel smelters increased considerably, contributing to a sharp rise in the value of exports of nickel-derived products from about $4.5 billion in 2019 to $19.6 billion in 2022.
The Indonesian experience, therefore, illustrates that an export ban alone does not automatically create industrialization. Its effectiveness depends on the investment, infrastructure, technology, financing, and market conditions required to build a viable processing ecosystem.
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Yet Indonesia’s experience also reveals a second, more fundamental challenge. Although the country successfully moved away from exporting raw nickel ore towards domestic smelting and refining, much of this transformation has been driven by foreign investment, particularly from Chinese companies. Foreign capital and technology have therefore played a central role in the expansion of the Indonesian nickel processing industry. As a result, the country has succeeded in capturing a greater share of the value generated from its nickel resources, but this has not translated into a commensurate development of its domestic industrial capabilities. Domestic value capture and domestic industrial capability are not the same thing. Value can be added within a country, while the capital, technology, knowledge, ownership, and higher-value manufacturing capabilities required to generate that value may remain controlled from outside it. Developing a genuine industrial capability requires more than establishing processing facilities within national borders. It also depends on building the technological, financial, managerial, and productive capabilities that underpin value creation. The critical question, therefore, is not simply how much value is captured domestically, but who owns and controls the capital, technology, knowledge, higher-value manufacturing activities, and other strategic segments of the value chain.
This lesson is highly relevant for Africa. Foreign capital, technology, and skills can undoubtedly support industrial development by facilitating technology and knowledge transfer, workforce specialization, and the emergence of new domestic capabilities. The critical question is whether these capabilities can become firmly embedded in the local economy, strengthening domestic firms, building technological and human capabilities, and generating deeper linkages across the wider industrial ecosystem. Otherwise, processing risks becoming an enclave activity, with technologies, capital, ownership, and strategic capabilities concentrated outside the country where production takes place.
This points to a broader challenge: for processing to take root and evolve into a wider industrial ecosystem, certain conditions must be in place. Mineral processing requires reliable and affordable energy, efficient transport infrastructure, water, technology, skilled labor, access to capital, and competitive markets. Many African countries continue to face constraints across several of these dimensions. This also creates a fundamental scale dilemma for Africa. Not every country has the resource base, market size, infrastructure, skills, capital, or technological capabilities required to develop a complete processing ecosystem for every mineral it produces. Attempting to replicate entire value chains within each national economy could result in fragmented investments, underutilized capacity, and inefficient duplication. A more viable approach would be to build interconnected regional mineral value chains in which countries specialize according to their comparative capabilities and complementarities, while coordinating infrastructure, energy, skills, finance, technology, and markets across borders. In such a model, one country may provide the mineral resource, another the processing capacity, another specialized inputs or intermediate products, and others downstream manufacturing, logistics, marketing, or supporting services. The objective is therefore not for every country to process every mineral, but for Africa to develop the collective industrial capabilities required to retain and expand value across the continent.
This distributed regional specialization approach has an interesting historical parallel in the former Soviet Union, which was organized as a highly integrated economic space in which different republics specialized in complementary productive activities: some supplied raw materials or energy, others processed them or produced machinery or intermediate goods, while others contributed to final manufacturing. This system was, of course, centrally planned and politically imposed, and its institutional model cannot (and should not) be replicated in Africa. Its relevance lies instead in a different principle: industrialization does not require every territory to develop every stage of a value chain. It can emerge from the deliberate organization of complementary productive capabilities across interconnected territories, provided that the institutional, infrastructural, and market conditions allow these capabilities to function as an integrated economic system.
The implication for Africa is therefore broader than simply adding value to minerals. The objective should be to build the regional systems through which mineral resources can generate increasingly sophisticated productive capabilities, technological knowledge, skilled employment, domestic firms, and industrial linkages. This means designing value chains not only around where minerals are extracted but also around where capabilities can be built and connected across the continent. The ultimate goal is to ensure that the value generated by Africa’s mineral resources is not only merely captured within the continent but is increasingly translated into durable capabilities which create, retain, and multiply economic value across African economies.
