Railway Projects
The Lobito Corridor
The Lobito Corridor is conceptualized around a 1,300 km stretch of railway line from the port of Lobito, on the Angolan Atlantic Ocean coast, to the town of Luau on the north-eastern border of Angola with the DRC and within easy reach of north-western Zambia. The railway line extends a further 400 km into the DRC to the mining town of Kolwezi. The Corridor has recently been concessioned to a consortium comprising the commodity trader Trafigura (49.5%), and European partners Mota-Engil (49.5%) – construction, and Vecturis (1%) – railway operations.
While the consortium has targets for the movement of cargo on the railway line and through the dedicated port terminal, it is envisaged that the surge in demand for critical minerals, particularly from the EU and the US, will in a way drive increased volumes of traffic onto the railway line.
MoUs and Agreements
Several MoUs and agreements focusing directly or indirectly on the development of the Lobito Corridor have recently been signed. Common among them is a sharp focus on the use of the Corridor as a route along which strategic minerals, CRMs, and EV battery value chain products can be transported to the EU and the US.
For example, an MoU signed by the EU, the US, the DRC, Zambia, Angola, the African Development Bank (AfDB), and the Africa Finance Corporation (AFC) describes an extension of the railway line to Zambia. Meanwhile the Lobito Corridor Transit Transport Facilitation Agency Agreement (LCTTFA) – signed by the governments of Angola, the DRC, and Zambia – will accelerate domestic and cross-border trade along the Corridor and foster the participation of small and medium enterprises (SMEs) in value chains.
MoUs and Agreements Related to Lobito Corridor
EU, US, DRC, Angola, Zambia, AfDB, AFC MoU – Development of LC
Angola, DRC, Zambia Agreement (LCTTFA) – Trade and Development
EU, DRC MoU – Critical Minerals and Value Chain Development
EU, Zambia MoU – Strategic Minerals and Value Chain Development
US, DRC, Zambia MoU – Support EV battery value chain
DRC, Zambia Agreement – EV battery value chain
Angola, Trafigura, Mota-Engil, Ventricles – Concession agreement
More recently, the EU has also signed specific MoUs with the DRC and Zambia. The latter, titled “Partnership on sustainable raw materials value chains”, outlines how the EU is seeking to secure the supply of strategic minerals and CRMs.
That the unprecedented agreement between the DRC and Zambia based on the development of the EV battery value chain and clean energy has spurred the signing of other MoUs and agreements with relation to the Lobito Corridor is not farfetched. To this effect, the EU in its MoU with Zambia seeks that the partners are committed to local value-addition, and to respecting each other’s right to extend the raw material and net-zero-technologies value chains within their countries, among other objectives.
In addition, the US has signed a tri-lateral MoU with both the DRC and Zambia supporting the development of a value chain in the Electric Vehicle (EV) battery sector. In this case, the US is very deliberate that it is about supporting the development of a value chain in the EV battery sector and commits to promoting the Zambia and DRC EV Battery initiative within the US private and investment sectors.
Why now?
The International Energy Agency (IEA) has estimated that between 2020 and 2040, demand for nickel and cobalt will increase by twenty times, for graphite twenty-five times, and for lithium more than forty times. This projected surge in demand for CRMs has fuelled great interest in the Lobito Corridor, and with it an inevitable scramble for access. The DRC, as the world’s largest producer of cobalt (estimates are consistently around 70% of global production), has found itself at the epicenter of this scramble, as has, by association, Zambia.
The EU and the US are among those vying for a place at the table, indicating that they will explore the development of green power projects and support investment in CRMs and clean energy supply chains along the Corridor. The awarding of the Lobito Corridor operation concession to the above-mentioned three-member consortium (comprising two European partners) has also added impetus to the renewed focus on the Corridor from the EU perspective.
Challenges to the Lobito Corridor Proposition
There are several challenges to basing the Lobito Corridor development on transporting CRMs and products of the EV battery value chain to the EU and the US. Firstly, not only are the Chinese ubiquitously present on the African continent, but China is already far ahead in building supply chains for cobalt, lithium, and several other essential metals and minerals. And what is more, China is moving to take over the running of the TAZARA railway line, which runs from central Zambia to the port of Dar es Salaam on the Indian Ocean, as a way of ensuring effective transportation of materials and minerals from the DRC and Zambia. It is also not insignificant that China signed MoUs with most African countries a decade ago. The fruit of some of these are infrastructure developments that have already been rolled out on the continent through the Belt and Road Initiative (BRI).
The other challenge is that the EV battery value chain is not only complex, with almost 300 players already involved and regionalization being a big factor, but that the EU and the US are not currently leaders in EV technology. It is reported that almost 90% of cell component manufacturing, the most significant step in the battery value chain – 30% of players in the six-stage value chain are concentrated here – is undertaken in Asia. Indeed, two major European car manufacturers have recently been reported to have acquired stakes in Chinese EV manufacturers to gain access to their EV technology. In addition, the largest Chinese EV manufacturer, BYD, has surpassed Tesla in terms of EV production as per the Q4 2023 figures. Both TESLA and BYD are also major players in EV battery technology.
Expansion all the way to Tanzania
The U.S. government says it is set to expand the Lobito Corridor – a railway project that runs from Angola to Zambia through the Democratic Republic of the Congo – all the way to the Indian Ocean through Tanzania. The railway would connect African countries to global markets and enhance regional trade and economic growth, supporters say.
The USA is focused on “relaunching our partnership with the DRC and engaging with the Tanzanian government and private sector on next steps towards extending the economic corridor to the Indian Ocean. As President [Joe] Biden has said from day one of the launch of this flagship effort, this corridor has never just been about building infrastructure. It’s about offering high-quality, sustainable infrastructure projects that deliver lasting economic growth.”
The U.S. government, with the support of the European Union, African financial institutions, and the governments of Angola, the DRC and Zambia, is working to rebuild and revive the Benguela railway line that the countries used to export materials and minerals even before independence.
The project will be financed by $250 million supplied by the U.S. International Development Finance Corporation.
U.S. officials say the improved railway line is meant to enhance export possibilities for Angola, the DRC and Zambia. The partly refurbished railway has already carried shipments of Congolese copper to Angola’s Lobito port for shipment to the city of Baltimore on the U.S. East Coast.
Erastus Mwencha, former deputy chairperson of the African Union Commission, said transport systems like the Lobito Corridor can help improve trade among African countries.
“One of the reasons intra-Africa trade is low is because of poor transport networks,” Mwencha said, adding that goods can sometimes be brought from Europe to Africa at more competitive rates than goods being moved from one African country to another.
But Mwencha is worried that the ports and railways used to export Africa’s raw materials remain largely the same as they were during colonial times, and that Africa is also still operating on a colonial-era business model.
“Are we going to follow the colonial model of just bringing these raw materials and minerals and exporting them or are we going to add value?” he said. “To me, that’s the more important aspect.”
Studies show that a poor transportation network in Africa adds 30 percent to 40 percent to the cost of goods traded among African countries, hampering the development of the private sector.
“When you bring trade routes down from 45 days to 36 hours,” a U.S. representative said, “it opens up a whole new world for markets, and that’s what we’re testing here today: How can we help new agribusiness develop? What are the right places to think about cold storage, warehousing, logistics? What local food producers can we help support along the way?”
In addition to refurbishing existing lines, the project envisions adding 1,300 kilometers of railway from Zambia to Tanzania. The project is slated to be finished by 2029.