China dominates both the production and processing of critical minerals such as cobalt and lithium that are key to the energy transition. That has led to growing concerns among Western governments, including in Washington, about their dependence on Beijing. 

Now, some Western companies and investors are starting to build processing plants in Africa so they can refine the raw materials they mine on the continent locally and export them directly to Europe and the U.S.

The investments show how Western executives have become more willing to swallow the risks associated with many African countries, including poor infrastructure, limited skilled labor and, in some places, a reputation for government corruption. By building processing facilities, companies are also meeting demands from African governments that have long called for more local processing for metals and minerals extracted from their soil. 

Australian mining behemoth BHP Group has invested $100 million since 2022 in a nickel mine in Tanzania along with U.S.-based Lifezone Metals, with plans to build a processing plant to refine the metal in the country. The plant, which the company says will be the first of its kind in Africa, is expected to deliver battery-grade nickel to the U.S. and global market in 2026.

“The timing is great for us right now,” said Chris Showalter, chief executive of Lifezone. “It will be pretty sought after.”

Investments in processing facilities in Africa are likely to rise given the expected boom in demand for battery metals and China’s current dominance of the industry, said Jacques Nel, head of Africa Macro at Oxford Economics Africa. Those dynamics “indeed make this seem like the beginning of a trend,” he said.

Vision Blue Resources, a London-based $650 million fund, has invested in a new graphite mine in Madagascar and a related processing facility in nearby Mauritius, which it says will be the first of its kind outside of China. The company is also backing a cobalt refinery in Zambia that it says will be the world’s third largest and the biggest outside of China once it is completed around the end of next year.

Andrew Trahar, Vision Blue’s co-founder, said he expects Western companies to pay a premium for materials that meet certain environmental and labor standards, are traceable and are produced outside of China. “If we can deliver that kind of product to them in the Western world, we think Western customers will be particularly excited,” he said.

Vision Blue said its cobalt refinery in Zambia will process cobalt from mines vetted for their environmental and labor standards, so it can be exported directly to electric-car makers and other green-tech manufacturers in Europe and the U.S. 

“Our aim is to give Western auto manufacturers an alternative to China,” said Johnny Velloza, chief executive of Kobaloni Energy Holdings, which will run the plant in Zambia.

Despite growing interest from investors, huge challenges remain for companies that want to do business in Africa. Countries such as the Democratic Republic of Congo, Guinea and Namibia have sought to carve out a bigger slice of mining companies’ revenue for themselves in a new wave of resource nationalism. Zimbabwe, for example, banned the export of raw lithium in December, effectively forcing foreign companies to process it there. And often, Chinese competitors still have the upper hand because they are more established on the ground given their bigger appetite for risk.

“Within Zimbabwe, there’s a lot more Chinese capital around,” said Sam Hosack, managing director for Prospect Resources, an Australian company focused on battery and electrification metals in sub-Saharan Africa. In April 2022, Prospect sold its 87% stake in the Arcadia hard-rock lithium mine in Zimbabwe to China’s Zhejiang Huayou Cobalt for $378 million. 

Raising debt in particular for a Zimbabwean asset has been an “extremely challenging process,” Hosack said. Development finance institutions were concerned with policy instability in Zimbabwe and, when combined with a volatile lithium sector, it presents a risky investment environment, he said. 

Still, many Westerners say the opportunity now outweighs the risks. 

“Doing business in Africa isn’t quite as scary as a lot of people believe,” said Chris Moorman, chief commercial officer at ReElement Technologies, a U.S.-based refiner of critical battery and rare-earth elements, that recently signed an offtake agreement to process lithium mined in South Africa. The company is building a processing facility in South Africa to refine the lithium to battery grade—more than 99.9% pure—which is expected to be completed in 12 to 18 months. 

Moorman said the company is in talks with four Western automotive manufacturers that are interested in buying its African-sourced lithium. 

“In the past, no one thought twice about sending tin concentrate to China to smelt,” said Boris Kamstra, chief operating officer at Toronto-based Premium Nickel Resources, who previously ran a company that developed a tin mine in Congo. “People are now starting to look for non-Chinese sources of battery metals.”