The US development finance agency has committed US$62.8 million to rare-earth projects in Malawi, Angola, Madagascar and South Africa, although none of the projects has reached production, according to two senior DFC executives who spoke to Reuters.
The latest move highlights the growing importance of rare earths, essential minerals used to produce powerful magnets for electric vehicles, wind turbines, electronics and defence systems.
Their strategic importance has increased as countries seek to reduce dependence on China, which dominates the global rare-earth supply chain and has tightened export controls in recent years.
DFC steps in as private capital stays away
The largest share of the DFC funding, about US$50 million, has gone towards the Phalaborwa rare-earth project in South Africa, which is backed by Dublin-based mining investor TechMet.
However, the agency said private investors have remained cautious about entering Africa’s rare-earth sector because of the risks involved.
“We do not see private capital coming in,” one of the executives said, requesting anonymity because they were not authorised to discuss the matter publicly.
“We’re trying to help projects reach a more de-risked stage and become attractive for private-sector investment.”
The comments represent a rare acknowledgement from a US government-backed institution that private financing remains limited despite growing global demand for critical minerals.
Africa emerges in global critical minerals race
China’s influence in Africa’s minerals sector is already significant, with countries such as the Democratic Republic of Congo (DRC), Zambia, Guinea and Zimbabwe among the major destinations for Chinese-backed mining investments.
Chinese companies have played a leading role in copper, cobalt, lithium and other critical mineral projects across the continent, giving Beijing a strong position in global mineral supply chains.
Unlike China’s model, which relies on state-backed financing from institutions such as the China Development Bank and Export-Import Bank of China to support African projects, the DFC uses public funding to reduce risks and attract private investors.
Similarly, institutions such as the European Investment Bank and the UK’s British International Investment have increased support for African mineral projects as countries compete to secure supplies needed for clean energy technologies.
Investment risks slow rare-earth development
Despite growing interest in Africa’s rare-earth sector, many projects continue to face challenges, including high development costs, limited infrastructure and uncertainty over future demand.
One DFC executive said investors remain cautious because of the risks associated with African projects and concerns that Chinese market influence could affect prices and the economic viability of new developments.
Analysts have also warned that some proposed rare-earth projects may struggle to become commercially viable because planned supply could outpace demand.
“There are far more announced rare-earth projects than there is demand for neodymium-praseodymium (NdPr) magnets,” said Olimpia Pilch, head of strategy at advocacy group Critical Minerals Africa.
Source: Africabusinessinsider