South Africa Has the Critical Minerals, But Is That Enough to Become a Global Battery Storage Powerhouse?

Modern battery storage is crucial for achieving net zero, as it improves renewable energy efficiency, supports the use of electric vehicles (EVs), and keeps the electricity supply steady.

An abundant and secure supply of the minerals essential for the production of these batteries is needed for a successful transition to clean energy. Without them, progress towards net zero will be significantly hindered.

South Africa's mineral advantage

South Africa has large reserves of two critical minerals, manganese and vanadium, allowing the country to play a bigger role in the battery storage sector.

Manganese is a crucial component of lithium-ion batteries, which power EVs and renewable energy grids. In 2023, South Africa was the world’s top producer of this essential mineral, followed by Gabon and Australia, according to the U.S. Geological Survey (USGS). 

South Africa is also the third vanadium producer, behind Russia and China. The mineral is used in vanadium redox flow batteries (VRFBs), which are known for their efficiency in storing large amounts of data, says Mikhail Nikomarov, the CEO of Bushveld Energy, a company that produces these batteries.

A global landscape

China dominates the battery storage sector, producing nearly 85% of the world’s cells and storage. Europe, the US and Korea each hold 10% or less of the supply chain for some battery metals and cells, according to a report by the International Energy Agency (IEA)

South Africa's role in this landscape is primarily as an exporter of raw materials.

Only about 10% of the country’s vanadium is used domestically, the rest is exported, says Nikomarov.

Louis Nel, the CEO of Manganese Metal Company which processes raw manganese into pure manganese metal, says 90% of the manganese electrolyte that his company produces is exported, leaving only about 5% of domestic use.

China is the main destination where South Africa exports manganese consistently accounting for nearly 60% of the total exports. However, the exports have declined by 21.63% between 2019 and 2023 with South Africa focusing on exporting its manganese to India and Singapore.

The main destination for South Africa’s vanadium is the Netherlands which has increased by nearly 56% between 2019 and 2023.

The challenge of local manufacturing

South Africa lacks the manufacturing capabilities, so the production scale of green batteries is still relatively small and it remains to be proven whether such an activity would be competitive domestically, says Nikomarov.

Limited local manufacturing means that the country misses opportunities for job creation. China has created about 3 million jobs in clean energy manufacturing, with 80% of these jobs making modern battery storage, according to the IEA.

A study by CES Energy Solutions commissioned by the World Bank in 2021, estimates that battery manufacturing could create up to 60,000 new jobs in South Africa. But for this to happen, the country needs to build factories within a decade.

Natasha Ross, a senior lecturer at the University of the Western Cape, highlights that developing manufacturing facilities requires a lot of capital and advanced technology. Bushveld Belco, a production facility for Bushveld Minerals located in Gqeberha, demanded a combined investment of $13.6 million.

Given the high costs of developing local manufacturing plants, Nikomarov suggests focusing on areas where South Africa holds a competitive advantage, such as the production of raw materials, rather than attempting to dominate the entire supply chain.

Nel points out that refining raw materials into products that have a high profit margin or market value compared to the raw materials used to produce them strengthens local and regional supply chains.

The CES study highlights that refining key battery raw materials in a short-term period of one year could lead to 2,500 new jobs directly and 23,000 more jobs indirectly, and add R18.8 billion to the economy.

Balancing exports and domestic development

South Africa exports its battery minerals mostly to China which has well-established battery production facilities. To balance exports and domestic development, the country imports battery packs for assembly mostly from China.

As the imports increase, more battery-related jobs will therefore come from assembling imported battery packs for local use and distribution to neighboring countries.

According to Gaylor Montmasson-Clair, a senior economist at Trade and Industrial Policy Strategy (TIPS). South Africa imported $1.1 billion (4.4 GWh) of lithium-ion cells and batteries in the first six months of 2023.

South Africa’s transition from coal-dominated electricity generation to renewable energy sources such as wind and solar presents an opportunity to increase demand for imported battery packs that are assembled locally.  At present, over 80% of SA’s energy is produced from burning coal and solar and wind contribute around 12%.

The increase in EV sales in South Africa is also driving an increase in imported battery packs. In the first half of 2024, EVs reached almost 3% of new passenger vehicle sales, driven by hybrid cars, says Montmasson-Clair. This trend is expected to continue, with an annual growth rate of almost 17% projected between 2024 and 2028, according to market insights from Statista, a global data platform.

Battery boom fuels demand for critical minerals

The South African government’s electricity supply roadmap, the 2019 Integrated Resource Plan) has set a target for a battery storage capacity of 6.6GW by 2032, up from 2GW (in 2019?). This aligns with the global push for a 25% annual growth in battery storage to reach 1,500 GW by 2030, according to IEA.

To increase battery storage production, more minerals like manganese are needed. The global demand for manganese is expected to grow by ninefold by 2030, according to BloombergNEF.

South Africa, as the world's leading producer of manganese, contributing 36% of global supply, has the potential to meet some of this surging demand. The country has already witnessed growth in manganese mining in recent years.

Nel notes “as manganese producers we continue to ramp up production and look for more opportunities.”

Most of the world’s battery minerals come from only a few countries. This highlights the fragility of the global supply chain. While South Africa has substantial battery minerals, it is important to expand production responsibly to safeguard local communities and the environment.

Environment and health threats

“Communities already face a wide range of direct and indirect threats from mining in general, including pollution causing illnesses, affected water resources and agricultural land lost to mining sites,” says Jordan McLean, a researcher at the Southern African Institute of International Affairs (SAIIA).

Miners and processors of manganese in Kalahari already grapple with illnesses caused by breathing in too much dust which harms the brain, spinal cord and nerves.  As manganese mining intensifies to meet global energy demands, these health risks are expected to escalate, says McLean. 

The challenges caused by manganese mining extend far beyond the mining communities. Gqeberha is the main export port for manganese. Mthokozisi Nkosi, a consultant at Aluzar Systems Consultants (ASC) notes during the transportation of manganese, some dust is released from the trucks. Communities living near the port face symptoms of asthma associated with breathing in air that has manganese particles.

Harmful emissions, infrastructure decay and soil/water contamination are prevalent. Residents face health risks from air pollution and hazardous road conditions.

Manganese refining produces toxic waste that is frequently dumped in landfills. Improperly managed landfills can pollute soil and water, and displace communities, says Nel.

The manufacturing process for vanadium batteries involves handling sulfuric acid and waste materials, necessitating strict environmental compliance to prevent contamination and ensure safety, says Nikomarov.

While renewable energy and EVs promise a cleaner future, they introduce a new set of environmental concerns.

With the increased use of lithium-ion batteries, these batteries are not easily recyclable, leading to growing stockpiles. 

South Africa lacks local recycling facilities and regulations to manage this [renewables-related] waste, says Hector King, power division product manager at Dartcom, a network components distributor.

Lithium batteries contain small amounts of toxic substances that, when disposed of improperly, can cause a risk of fire hazards and contaminate groundwater.

South Africa currently lacks the technology to process the hazardous battery waste mixture, forcing the country to export it overseas. This is costly and poses environmental risks during transportation, says King.

South Africa has implemented policies such as waste classification regulations and extended producer responsibility (EPR) rules. However, poor compliance among companies undermines these efforts.

“Many businesses avoid paying the EPR fee, creating an uneven playing field for those who adhere to the regulations. This lack of enforcement allows irresponsible companies to undercut competitors and exacerbates the environmental problem,” says King.

Unless stricter regulations are enforced and investments are made in domestic recycling infrastructure, South Africa will continue to grapple with the mounting consequences of lithium battery waste.

UN Secretary-General António Guterres recently established a panel to develop global guidelines for responsible mining of energy transition minerals. With such initiatives, there is only hope that mining companies in South Africa will comply.

Mining is unavoidable but needs strong policies in place

To become a player in global battery storage requires more targeted policies. A report by TIPS highlights that South Africa has competitive labor, skilled workforce, and market access, but current policies have not fully supported the local battery manufacturing.

Government initiatives like the Just Energy Transition Investment Plan and Renewable Energy Master Plan prioritize local battery manufacturing to boost the economy and create jobs. However, the country also needs policies that improve the overall business environment for battery storage companies.

“The government should simplify the process of getting permission to build battery storage plants, and provide more incentives specifically targeted at manufacturers to increase local production”, says Nikomarov.

McLean notes that “there is a high level of corruption in the mining industry which threatens reinvestment into communities.”

The government and mining companies must demonstrate real effort to lessen these negative impacts on communities.

“This can be done through effective communication with local communities and  strengthening mining governance to ensure corruption risks are reduced and real investment is made back into local communities.” These investments should extend beyond job creation to create lasting benefits for communities, even after mine closure, notes McLean.

While South Africa has made strides in global research in energy, with universities and the Council for Scientific and Industrial Research (CSIR) leading, there is still significant room for growth.

"At the moment, there is a lack of substantial research”, says Nikomarov. Increasing research on materials like nickel and vanadium capitalizes expertise in mining, ideally, we would look to universities to conduct more studies on such minerals, he says."

Nikomarov notes that research should not happen in isolation. Aligning research efforts with the needs of established industries, like car manufacturing, can create a market for new technologies and products. Extensive research should be ongoing to develop new battery chemistries that rely on fewer transition minerals, he says.

Innovations in recycling and reusing battery materials can help reduce reliance on mineral extraction.

"We must recognize that the minerals in batteries can be recycled and reused provided the technical expertise in this area is nurtured," says McLean.

Nikomarov points out that vanadium redox flow batteries offer a major advantage as their electrolyte can be reused in new batteries. This significantly reduces waste and lowers long-term costs compared to lithium-ion technology, he says.

This story was produced with support from Internews' Earth Journalism Network. It was first published in IOL on September 8, 2024. It has been lightly edited for length and clarity.

Banner Image: Ongoing research is essential to develop battery chemistries that reduce reliance on transition minerals / Credit: Sven Musica.