Africa's Mineral Leverage Amid US Trade Policies

Africa possesses substantial reserves of minerals critical to global industries, including the United States economy. During the Trump administration, Section 232 tariffs were imposed on steel and aluminium imports globally, impacting several African exporters such as South Africa. This raises the question: could African nations leverage their mineral exports to counter such US trade policies? A balanced analysis reveals significant complexity.

The Case for Potential Leverage:

- Criticality and Concentration: Minerals such as cobalt, platinum group metals (PGMs), and manganese are not only essential for advanced manufacturing (aerospace, defence, EVs, electronics) but also highly concentrated in specific African countries. The DRC dominates cobalt; South Africa dominates PGMs and chromite. This creates potential supply chokepoints.
- Limited Short-Term Substitutes: For many applications (eg, cobalt in specific battery chemistries, PGMs in catalysts), viable substitutes are either non-existent, significantly less efficient, or much more expensive in the near-to-medium term. Developing new sources takes years.
- Disruption Impact: Any significant disruption or deliberate restriction of these mineral flows could cause substantial price volatility and supply chain bottlenecks for US industries, potentially impacting economic growth and strategic sectors.

Significant Constraints on Leverage:

- Dispersed Interests: Africa is not a single actor. Mineral wealth is spread across numerous countries with differing political agendas, economic priorities, and relationships with the US. Achieving coordinated action across the continent on trade policy, especially targeting the US, is highly improbable. The African Continental Free Trade Area (AfCFTA) is nascent and focuses on intra-African trade.
- Mutual Dependence: Many African economies are heavily reliant on mineral export revenues. Restricting exports to the US (a major market) could inflict severe economic damage on the exporting countries themselves, potentially destabilising economies and governments. This creates a significant disincentive.
- US Mitigation Strategies: The US is acutely aware of these supply risks. Responses could include:
- Increased Domestic Production/Recycling: Incentivising mining within the US or allied nations (though challenging and slow).
- Stockpiling: Using the National Defense Stockpile.
- Allied Sourcing: Strengthening supply chains with friendly nations (e.g., Australia for some minerals).
- Technological Innovation: Accelerating research into alternative materials or battery chemistries (e.g., cobalt-free batteries).
- Financial/Political Pressure: Utilising tools like sanctions or leveraging international financial institutions.
- AGOA Factor: The African Growth and Opportunity Act (AGOA) grants many Sub-Saharan African countries preferential tariff access to the US market for non-mineral exports (textiles, agriculture, etc.). Threatening mineral exports could jeopardise these valuable benefits.
- Specificity of Tariffs: The Trump-era tariffs targeted specific products (steel, aluminium), not the raw minerals themselves. While tariffs hurt African aluminium exporters (like South Africa) processing bauxite, the primary bauxite producers (eg, Guinea) were less directly impacted. Leveraging unrelated minerals (like cobalt) against aluminium tariffs would be an indirect and legally/politically complex strategy.

A Balanced Perspective:

While Africa holds globally significant reserves of minerals critical to the US economy, the notion of the continent wielding this as a unified, effective bargaining chip against specific US tariffs like those imposed under Trump faces substantial hurdles.

The concentration of certain minerals provides theoretical leverage points. However, the fragmentation of African nations, their own deep economic dependence on mineral exports, the existence of mechanisms like AGOA, and the US's capacity to pursue mitigation strategies significantly weaken the practical ability to translate this mineral wealth into tangible trade concessions on unrelated tariffs.

Attempting aggressive leverage could easily backfire, harming African economies more than the US in the short-to-medium term, while accelerating US efforts to reduce dependence on African minerals in the long term – an outcome contrary to Africa's interests in sustained mineral revenue.

A More Pragmatic Path:

Rather than confrontation, the more viable strategy for African mineral-rich nations lies in:

- Value Addition: Processing minerals domestically before export (e.g., refining cobalt, manufacturing battery precursors) to capture more economic benefit and create jobs.
- Stable Investment Frameworks: Attracting responsible investment for exploration and mining through predictable, transparent regulations and reduced political risk.
- Strategic Partnerships: Negotiating mutually beneficial, long-term supply agreements with consumer nations and companies, potentially linked to infrastructure development or technology transfer, rather than reacting to specific tariffs.
- Intra-African Coordination (where possible): Collaborating on policies like environmental standards or local beneficiation goals to strengthen their collective position within global value chains.

Conclusion:

Africa's mineral wealth grants it inherent economic significance, particularly concerning specific critical minerals. However, translating this into leverage against US trade policies like the Trump tariffs is fraught with practical difficulties and significant risks for African economies. The path to maximising Africa's benefit from its resources more likely lies in internal development, value addition, and fostering stable, mutually beneficial partnerships, rather than in attempting short-term, high-stakes leverage that could undermine long-term economic stability and growth. The relationship remains one of complex interdependence, not one where Africa holds a simple, decisive upper hand.

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Unlocking Trade: Introducing the PAPSS African Currency Marketplace

The Pan-African Payment and Settlement System (PAPSS), working alongside African deep-tech firm Interstellar, unveiled the PAPSS African Currency Marketplace (PACM) during the recent Afreximbank Annual Meeting (AAM2025). This new Financial Market Infrastructure aims to tackle the persistent challenge of currency convertibility hindering trade within Africa.

For years, intra-African commerce has been hampered by the continent's 41 diverse currencies, varying regulations, and limited convertibility. Businesses frequently resorted to using external hard currencies like the US dollar for transactions between neighbouring nations. This practice, known as the "hard and costly currency bottleneck," is estimated to drain approximately R90 billion annually through fees, delays, and lost opportunities, impacting the competitiveness of African enterprises and slowing progress under the African Continental Free Trade Area (AfCFTA).

PAPSS CEO Mike Ogbalu III explained the new marketplace's function: "The PAPSS African Currency Marketplace is fully transparent, order book-driven, and operates with trusted counterparties, strictly adhering to local regulatory frameworks and global best practices. By creating a single, continent-wide liquidity pool, PACM serves as a key liquidity engine for intra-African commerce." 

Ogbalu noted that while PAPSS, operational since 2022, has enabled real-time payments across 17 countries, connecting over 150 banks and 14 national switches, the issue of limited currency convertibility remained. "We soon realised that solving for payments alone was not enough," he stated, highlighting problems like over R36 billion in airline revenues currently 'trapped' in certain African countries due to exchange restrictions.

The PACM, developed jointly by PAPSS and Interstellar, allows the direct exchange of African currencies without converting through hard currencies. Functioning as a transparent, peer-to-peer platform across Africa, it enables businesses to trade in local currencies in near real-time while complying with national rules. This approach aims to unlock liquidity, release trapped capital, reduce foreign exchange costs, and support financial sovereignty.

Interstellar's Founder and CEO, Ernest Mbenkum, emphasised the vision during the launch: "PACM was built from the ground up to serve Africa’s specific needs. PAPSS and Interstellar are co-architects of a new financial future... African currencies deserve a better place in the world. With this marketplace, your local currency is no longer just a medium of exchange, it becomes a vehicle of opportunity." The platform utilises Interstellar's enterprise-grade, blockchain-agnostic infrastructure for security, scalability, and rapid settlement.

Haytham El Maayergi, Executive Vice President of Afreximbank, commented: “The PAPSS African Currency Marketplace gives us the power to transform trade dramatically, bringing us to trade with each other with a key benefit that we can now accept each other’s currency.”

Initial results from a pilot phase are promising. Over 80 African corporates conducted transactions across 12 currency pairs, settling entirely in local currencies. Kenya Airways, for instance, can now directly exchange Nigerian Naira earned from ticket sales for Kenyan Shillings via PACM, bypassing a third currency. Early adopters like ZEP-RE (PTA Reinsurance Company) and Access View Africa have expressed strong support. Ogbalu added that interest is also coming from institutions outside Africa seeking to join the ecosystem.

AfCFTA Adjustment Fund Makes First Investment

In related news at AAM2025, the Credit Fund of the AfCFTA Adjustment Fund announced its first investment closure. It committed R180 million to Telecel Global Services Ltd., a subsidiary of the Mauritius-based Telecel Group, through a senior secured amortising loan.

Telecel provides wholesale voice, SMS services, and enterprise connectivity to over 250 telecom operators globally, with a significant African presence. The investment will support Telecel's expansion in Ghana and Liberia, strengthen infrastructure, and help bridge Africa’s digital divide – a critical factor for AfCFTA success.

Jean-Louis Ekra, Chairman of the Board of the AfCFTA Adjustment Fund Corporation, stated: “This R180 million investment in Telecel Global Services demonstrates how targeted capital can drive meaningful impact—accelerating digital connectivity, enabling intra-African trade, and supporting private sector-led development.” AfCFTA Secretary-General Wamkele Mene noted the deal shows the Fund starting to support State Parties and the private sector in making the Agreement "commercially meaningful."

Afreximbank President Prof. Benedict Oramah said the investment strengthens the digital economy and regional connectivity, reinforcing a commitment to transforming Africa's economic structure. Marlene Ngoyi, CEO of Fund Manager FEDA, highlighted the strategic intent to catalyse growth in vital sectors.

The Credit Fund will prioritise commercially viable investments enabling trade, diversification, and inclusive growth aligned with AfCFTA goals. Meanwhile, the PAPSS African Currency Marketplace is now open to eligible corporations, financial institutions, and market participants continent-wide.

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US Tariff Impact on South African Automotive Industry

The recent announcement of a 30% tariff by the United States on goods imported from South Africa has created significant concern within the global motoring industry. This substantial increase in tariffs is expected to have far-reaching implications for South African car manufacturers, exporters, and the broader economy. The auto industry is now preparing for the substantial adjustments that this policy shift will necessitate.

Key stakeholders are paying close attention to how these changes will play out, as the new tariff introduces a host of challenges for South Africa's automotive sector, impacting everything from production costs to market competitiveness.

South Africa's automotive exports to the United States have been a crucial component of the country's export portfolio. In fact, the export of vehicles and parts from South Africa to the US is valued at over $2-billion. The introduction of the tariff is poised to disrupt this flow significantly. Notably, automobile exports accounted for 64% of South Africa's exports under the US African Growth and Opportunity Act (AGOA) in 2024. With such a substantial reliance on the American market, the potential impact of the tariff cannot be underestimated.

Industry experts and economists are weighing in on the situation. Some predict a decrease in South African vehicle exports to the US, which could lead to surplus inventory and financial losses for manufacturers. Additionally, South African cars could become less competitive in the US market due to increased costs, further exacerbating the situation.

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The new tariff brings numerous difficulties for South African car manufacturers. An immediate concern is the rise in production costs, which stems from higher expenses for raw materials and components. This escalation in costs could lead to increased vehicle prices, potentially dampening demand in both domestic and international markets.

Manufacturers might need to reconsider their production strategies to stay competitive. This could include relocating manufacturing to countries with more favorable trade terms or investing in technologies that cut costs. However, such shifts require significant time and resources, adding to the industry's existing challenges.

Additionally, the uncertainty surrounding international trade relations could make it harder for manufacturers to plan for the future. The industry may face financial strain and operational disruptions as it navigates these complex issues.

Effects on the South African Economy

The broader South African economy is poised to experience significant repercussions due to the new US tariff. The automotive industry is not only a major contributor to South Africa's GDP but also a substantial employer, so a decline in exports could trigger widespread economic consequences. Potential job losses in the auto industry are a serious concern, as reduced production and export volumes may compel manufacturers to downsize their workforce.

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Additionally, the uncertainty surrounding trade relations with the US might dampen investor confidence in South Africa's automotive sector. This could lead to reduced investment, stalling the industry's growth and innovation. Companies may also face increased financial strain, making it harder to maintain operations and fund new projects.

The knock-on effects could extend to related industries, such as suppliers and logistics providers, amplifying the economic impact. Overall, the new tariff introduces a layer of complexity that the South African economy will need to navigate carefully, affecting everything from employment rates to future investment opportunities.

Responses from Industry Stakeholders

Industry stakeholders are actively addressing the tariff announcement, with varied reactions across the sector. Renai Moothilal, CEO of the National Association of Automotive Component and Allied Manufacturers, emphasized the need for more details, stating that the association will await further information on the specific components affected by the tariff proclamation.

Government officials and industry leaders are expected to pursue diplomatic discussions to negotiate the tariff's terms with the US, aiming for potential exemptions or revisions. Some stakeholders are urging the South African government to strengthen trade agreements with other countries to offset the impact of the US tariff.

There is also a call for increased investment in domestic technologies and alternative markets to reduce dependency on US exports. This multi-pronged approach could help mitigate some of the tariff's adverse effects on the South African automotive sector.

Chairperson of the federal council of the Democratic Alliance (DA), Helen Zille says the global tariffs unleashed by US President Donald Trump spell disaster for South Africa, amid the souring bilateral relationship.

“What can one say? It is going to be disastrous for our automotive industry in particular if they have 30%  tariffs slapped on our motor vehicles that are made in the facilities of Pretoria and Nelson Mandela Bay. Obviously, it is going to be terrible for us,” she said.

“The government won't learn. There is tension between the ANC and just about every democracy in the world, and there is certainly profound tension between the ANC and democrats in South Africa.”

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In the long run, South African car manufacturers will need to rethink their strategies to adapt to the new trade environment. They might start exploring untapped markets and diversifying their export destinations to reduce their reliance on the US This could involve strengthening trade relations with other countries and regions, potentially opening new avenues for growth. 

Additionally, investing in advanced manufacturing technologies and improving efficiencies could help mitigate the increased production costs imposed by the tariff. Collaborations with local and international partners could further enhance competitiveness and innovation within the industry. The South African auto industry's ability to navigate these changes will significantly influence its future trajectory.

The 30% US tariff on South African goods presents substantial challenges for the nation's automotive sector. The immediate consequences include a rise in production costs and potential job reductions, putting significant pressure on manufacturers to adapt swiftly.

Over the long term, the industry will likely need to diversify its export markets to lessen dependence on the American market. This shift could open new opportunities but will also require strategic investments in technology and efficiency improvements.

Stakeholders, including government officials and industry leaders, are working on responses to mitigate these impacts. Efforts are underway to negotiate better trade terms with the US and strengthen trade agreements with other countries. Additionally, there's a push for increased investment in domestic capabilities to reduce external dependencies.

The resilience of South African car manufacturers will be critical in navigating these changes. By exploring new markets and investing in advanced manufacturing technologies, the industry can adapt to the evolving trade landscape. While the road ahead is fraught with challenges, the potential for innovation and growth remains. The South African automotive sector's ability to pivot and respond strategically to these new conditions will significantly influence its long-term success and stability.

Colin Windell for Colin-on-Cars in association with

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