Why investors are betting on the Lobito corridor

By Bonface ORUCHO

Much fanfare surrounded US President Biden’s inaugural Africa trip, with debate over the United State’s commitment to Africa and competition in Africa between the US and China taking centre stage.

Yet the focus of the trip – a rail corridor joining mineral-rich African countries with Lobito Port in Angola – is also being seen as an opportunity that is drawing in more and more international investors.

According to Daniel Mamadou, director at Welsbach Holdings, a Singapore-based Metals and Mining Corporate Advisory firm, European countries are keen to invest in the corridor because it “is much more than just a transport infrastructure project; it represents a beacon of hope for economic transformation in Central Africa.”

“This project is a testament to the power of collaboration between governments, private sector players, and international partners, with the potential to uplift entire regions and their people,” he noted.

During Biden’s state visit, a Partnership for Global Infrastructure and Investment (PGI) meeting was held co-hosted jointly by Angola and the US on December 3.

The meeting saw leaders reaffirm their commitment to continue developing the Corridor and invest in infrastructure to connect the Atlantic and Indian Oceans.

According to a press statement from the White House, “President Biden announced over $560 million in new funding, including commitments expected to generate at least $200 million in additional private sector capital, for infrastructure projects along the Corridor.”

Last year, the US International Development Finance Corporation committed US$553 million in loan financing to upgrade and operate a 1,300-kilometer rail line connecting the Lobito port to Luau, a town on Angola’s border with the DRC.

While US agencies such as the US Agency for International Development provided funding for the first phase of the planned upgrade, the second phase, launched in October, also saw wide-ranging commitments from European countries.

The US is also encouraging individual companies to invest in the mineral-rich region. In October 2024, KoBold Metals, a U.S. firm utilizing artificial intelligence to develop critical mineral sites, signed a Memorandum of Understanding (MOU) with the Africa Finance Corporation (AFC).

The agreement commits to supporting the Zambia-Lobito rail project’s commercial viability by transporting over 300,000 tons of copper annually from its Mingomba mine in Zambia.

AFC will continue to collaborate with KoBold to support the Mingomba project, through a combination of project development funding, equity, or debt financing as required.

US interests and investments in the region extend to other sectors such as agriculture, clean energy, critical minerals supply chains, health, digital access, and investment.

“With these announcements and together with G7 partners and regional development banks, international investment in the Lobito Corridor has exceeded US$6 billion,” the White House statement reads.

The Lobito Corridor is a 1300km cross-border railway line between Zambia and Angola. It extends 400km into the DRC connecting Kolwezi, the heart of the Copperbelt to Lubumbashi to the south of DRC before entering Zambia.

The region boasts some of Africa’s largest mineral reserves, including copper and cobalt. However, with the 100-year-old Lobito rail line currently unusable, mineral exports rely on alternative routes, such as the ports of Dar es Salaam in Tanzania, Beira in Mozambique, and Durban in South Africa.

The US, EU, and Italy have shown growing interest in the region due to its strategic mineral wealth. They aim to leverage projects like the Lobito Corridor not only to strengthen their access to critical minerals but also to counter China’s established influence in the continent.

However, beyond the diplomatic relevance of the corridor, successful rehabilitation of the railroad is a milestone for the rail system network in Africa.

Zambian President Hakainde Hichilema, speaking at the event noted the opportunity to link the Lobito Corridor with the Tazara railway, a bi-national railway linking the Southern Africa Regional transport network to Eastern Africa’s seaport of Dar es Salaam.

“This will mean that we can connect our continent from the west to east coast,” Hichilema explained.

At the Forum for China-Africa Cooperation in Beijing in September 2024, China committed US$1 billion to revitalize the 1,860-kilometer TAZARA railway. President Xi Jinping witnessed the signing of the memorandum of understanding by his Zambian and Tanzanian counterparts.

Other anticipated benefits of the project include job creation. President Felix Tshisekedi of the DRC noted that the project would create more than 30000 direct employment opportunities.

“It will also reduce logistics costs, increase export revenues and offer a strategic alternative to other exportation corridors,” Tshisekedi noted.

The US Geological Survey estimates that DR Congo holds nearly half of the world’s cobalt deposits. The country supplies about 63% of the global cobalt demand, with most of it exported as raw material.

However, partnerships with the US and other stakeholders are driving efforts to establish local processing facilities in Africa, ensuring more value from the critical minerals supply chain is retained within the region.

For instance, the Kabanga Nickel project, LifeZone Metals Ltd., a company listed on the New York Stock Exchange, is investing in bringing critical mineral value addition to Tanzania.

“The United States and Angola are collaborating on principled investments to advance critical minerals projects along the Lobito Trans-Africa Corridor,” White House reported.

This is evident through initiatives like the US Development Finance Corporation’s US$3.4 million grant to Pensana PLC for a feasibility study. The study aims to double the capacity of its Longonjo rare earths mine, establish in-country refining facilities, and explore new ore bodies.

The Lobito Corridor is expected to be fully operational by 2028, with key milestones achieved in phases. Early mineral shipments have already taken place, including the first shipment of copper cathodes destined for the United States, which departed Lobito Port in August.

According to the Southern African Research and Documentation Centre, the Angolan government alone is expected to earn over US$2 billion from the Lobito Corridor over the next 30 years.