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The USA Eyes LOBITO Corridor With US$ 250 Million Investment

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The United States is studying a US$250 million financing package to build a key transport corridor in southern Africa aimed at securing access to critical minerals like copper and cobalt used in electronics and batteries for electric vehicles.

US President Joe Biden said the US International Development Finance Corporation (DFC) was conducting due diligence for financing the Lobito Atlantic Railway Corridor, which stretches across Angola to link the Katanga mining regions in the Democratic Republic of the Congo (DRC) and the Zambian province of Copperbelt.

The Lobito corridor serves as the key route to transport minerals to export markets from inland mining sites in the DRC and Zambia to Angola’s Atlantic Port of Lobito. The project would cut transport times from weeks to days, according to mining companies in the region.

The DRC is by far the world’s largest exporter of cobalt, accounting for about 70 per cent of global production, while Zambia is rich in both copper and cobalt. Angola is one of the top oil producers in Africa and is also home to diamond mines.

But the deal would put the US in direct competition with China, whose companies have vast investments in Zambia’s copper-producing region and in the DRC, from where China sources more than 60 per cent of its cobalt.

“It is going to enable … us to better access clean energy and digital connectivity across the entire region,” Biden said at the recent Group of Seven summit in Hiroshima.

The investment is part of the Partnership for Global Infrastructure and Investment (PGII), a G7 flagship infrastructure initiative that aims to mobilise US$600 billion over the next five years, to rival China’s multibillion dollar Belt and Road Initiative.

The US has been trying to carve out access to critical minerals in Africa, but China controls most of the market for processing and refining the minerals, including cobalt, lithium and graphite, which are vital for the world’s transition to green energy.

One of the main segments of the Lobito corridor is Angola’s Benguela Railway, a 1,344km (835 mile) link that connects the Port of Lobito to the eastern city of Luau, on the border with the DRC.

The railway was the main transport link for minerals before it was shut down during the Angolan war from 1975 to 2002.

After the war, Angola rebuilt the railway using a US$1.8 billion oil-backed credit line from China Exim Bank. The reconstruction by China Railway 20 Bureau Group Corporation (CR20) was completed in 2014.

But the track in the DRC remains in bad shape and Zambia would have to build its own rail link to connect to it. Chinese mining firms such as China Nonferrous Metal Mining, which operates mines in the DRC and Zambia, have used the Lobito corridor as an alternative transport route. Currently, the DRC and Zambia transport their minerals by road to ports in South Africa and eastern Africa.

Tim Zajontz, research fellow at the Centre for International and Comparative Politics at Stellenbosch, South Africa, said Chinese investment to restore the Congolese portion of the Lobito corridor, or extension lines to the Zambian border and across Zambia’s North-Western Province, had so far failed to materialise.

“Chinese firms will continue to compete for infrastructure projects along the Lobito corridor. Chinese investments are likely to concentrate on improving transport connectivity along corridors that link the Zambian and Congolese copper belt with the Indian Ocean,” Zajontz said.

For example, Chinese investors are keen to upgrade the Tanzania-Zambia Railway Authority in the east through a public-private partnership.

Gyude Moore, a senior policy fellow at the Washington-based Centre for Global Development, and a former public works minister in Liberia, said reliable rail transport in the region would be a priority for G7 partners who wanted to de-risk critical mineral supply chains by shifting away from China.

“The Angolans are open to negotiating with other partners and not exclusively China,” Moore said, adding that countering China might be a part of the reason.

“But I think this interest is also driven by economic priorities … China has been the dominant player in the infrastructure sector across the region, over the last two decades. I doubt we are about to see a significant shift away because of Washington’s offer.”

Chinese companies are also making infrastructure upgrades to enable them to move minerals to port easily. In March, subsidiaries of Jiayou International Logistics and Zijin Mining Group announced a US$363 million joint investment to improve roads and infrastructure between the DRC and the Port of Lobito.

In November, Angola signed a US$450 million deal with Portuguese infrastructure group Mota-Engil – partly owned by China’s CCCC – to operate rail services and logistics in the Lobito corridor as well as other infrastructure linked to the Angolan coast. Mota-Engil will also maintain road infrastructure connecting Lobito to Luau as part of a 30-year concession.

US plans to invest in transport infrastructure along the Lobito corridor could be a geostrategic measure stemming from growing competition over sensitive supply chains, according to Zajontz.

“Boosting US investments in transport infrastructure and logistics along the Lobito corridor aims at securing access to critical raw materials like copper and cobalt which have become a vital interest in Western capitals,” said Zajontz, who is also a lecturer in global political economy, at Technische Universitat Dresden.

Zajontz said the planned investment package and the aim to close infrastructural gaps to establish a coast-to-coast corridor showed the growing importance the US now attached to infrastructure in Africa.

“Washington is keen to prevent situations in which Chinese firms control critical supply chains from the mines to the ports because of concerns that this could be leveraged by Beijing in case of worsening relations with the West,” said Zajontz, a co-editor of the book Africa’s Railway Renaissance: The Role and Impact of China.

Gilson Lazaro, an associate professor in the sociology department at Agostinho Neto University in Luanda, said although China’s loan was used in part to rebuild the railroad almost entirely, Beijing missed an opportunity to commit resources to the infrastructure on the scale of the Southern African Development Community (SADC).

“China was the biggest investor in Angola over the last two decades. And the Lobito corridor was part of this infrastructure. The works did not go beyond the partial reconstruction of the railway line and the supply of some locomotives,” Lazaro said.

“For that reason, I argue that China, as Angola’s largest trading partner since 2004, missed that opportunity that is now being seized by the United States.”

The US realised there was an opportunity to increase its trade partnership with Angola through that investment, insofar as the advantage does not only involve Angola, but a group of countries under its strategic axis of influence, Lazaro said.

“The Lobito corridor is not just a railway line. It is a geostrategic infrastructure with political and economic implications,” Lazaro said.

“It is also a way of influencing Angola’s political choices and its relationship with China.”

News Credit :This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP’s Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.