The United States has committed $62.8 million in four African rare-earth projects amid growing efforts to reduce dependence on China for critical minerals and concerns over private investors’ reluctance to enter the sector.
The US International Development Finance Corporation (DFC) is investing $62.8 million in rare-earth projects across Africa to help build mineral supply chains independent of China.Despite rising global demand, private investors remain cautious about funding African rare-earth projects due to high risks and uncertain returns.China currently dominates the global rare-earth supply chain and has significant influence in Africa’s mining sector through major financing and investments.Africa’s rare-earth sector faces challenges such as high development costs and market uncertainty, but there is also a push to develop local processing industries to capture more value from resources.
The US development finance agency has committed US$62.8 million to rare-earth projects in Malawi, Angola, Madagascar and South Africa, although none of the projects has reached production, according to two senior DFC executives who spoke to Reuters.
The latest move highlights the growing importance of rare earths, essential minerals used to produce powerful magnets for electric vehicles, wind turbines, electronics and defence systems.
Their strategic importance has increased as countries seek to reduce dependence on China, which dominates the global rare-earth supply chain and has tightened export controls in recent years.
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The largest share of the DFC funding, about US$50 million, has gone towards the Phalaborwa rare-earth project in South Africa, which is backed by Dublin-based mining investor TechMet.
However, the agency said private investors have remained cautious about entering Africa’s rare-earth sector because of the risks involved.
“We do not see private capital coming in,” one of the executives said, requesting anonymity because they were not authorised to discuss the matter publicly.
“We’re trying to help projects reach a more de-risked stage and become attractive for private-sector investment.”
The comments represent a rare acknowledgement from a US government-backed institution that private financing remains limited despite growing global demand for critical minerals.
China’s influence in Africa’s minerals sector is already significant, with countries such as the Democratic Republic of Congo (DRC), Zambia, Guinea and Zimbabwe among the major destinations for Chinese-backed mining investments.
Chinese companies have played a leading role in copper, cobalt, lithium and other critical mineral projects across the continent, giving Beijing a strong position in global mineral supply chains.
Unlike China’s model, which relies on state-backed financing from institutions such as the China Development Bank and Export-Import Bank of China to support African projects, the DFC uses public funding to reduce risks and attract private investors.
Similarly, institutions such as the European Investment Bank and the UK’s British International Investment have increased support for African mineral projects as countries compete to secure supplies needed for clean energy technologies.
Africa’s rare-earth sector faces challenges such as high development costs and market uncertainty, but there is also a push to develop local processing industries to capture more value from resources
Despite growing interest in Africa’s rare-earth sector, many projects continue to face challenges, including high development costs, limited infrastructure and uncertainty over future demand.
One DFC executive said investors remain cautious because of the risks associated with African projects and concerns that Chinese market influence could affect prices and the economic viability of new developments.
Analysts have also warned that some proposed rare-earth projects may struggle to become commercially viable because planned supply could outpace demand.
“There are far more announced rare-earth projects than there is demand for neodymium-praseodymium (NdPr) magnets,” said Olimpia Pilch, head of strategy at advocacy group Critical Minerals Africa.
The challenges come as Africa remains a key focus for the DFC, accounting for about 20 per cent to 25 per cent of its global investment portfolio, making the continent one of the agency’s largest regional priorities, the second DFC executive said.
