The new industrial age, fueled by the manufacturing of several mineral-intensive transition technologies, offers potential opportunities for industrialization and structural transformation, particularly in mineral-rich developing regions such as Africa. This paper used data on critical minerals, trade, and investment flows in solar electric power sub-sector to explore how African countries can leverage their natural resource endowments, trade, and productive capabilities for the manufacturing of solar PV.
Our findings reveal a bleak picture for solar PV manufacturing-led industrialization in Africa, with countries having little or no opportunity to upgrade within the existing solar PV value chain. This is because the global solar value chain is welldeveloped and concentrated, with China controlling more than 80% of each segment. The rest are shared among a few firms in the global North. Even worse, African countries have limited related technological capability and investments crucial for developing solar PV. They also do not hold a comparative advantage in the key resources needed to produce the technology. While the latter conclusion draws from critical minerals data, export trade data reveals that each country in Africa exports at least one of the key raw materials in its primary or processed form. On the downside, a greater share of these exports goes to countries outside the region.
However, we observe some opportunities for solar PV electricity generation-led development on the continent, particularly in related activities in the module assembly and power generation stages of the supply chain, in line with other available evidence in the literature. This offers countries in the region an alternative pathway to address their energy deficit and an opportunity to build other linked local manufacturing capabilities in related and unrelated manufacturing subsectors. But does this mean African countries are or should be precluded from developing a viable solar PV manufacturing sector and integrating into downstream segments of the supply chain? There is no direct answer to this question based on the evidence revealed above. However, several lessons can be learnt from China in this regard.
Anecdotal evidence suggests an interplay of factors behind China’s eventual emergence as a global player and quasi-monopolist in the entire solar PV value chain. Amongst these possible factors, three are worth highlighting: preexisting related technological capability, availability of complementary resources, and intentional industrial policy. Regarding related technological capability, Chinese firms had a preexisting technological capability in the semiconductor and electronics industry, a sector most closely related to the solar PV industry. Accordingly, at the outset of solar PV industrialization, while Chinese firms mostly acquired PV technologies by purchasing production equipment from international suppliers (Carvalho et al., 2017), they leveraged their related technological capability to build a stronger domestic solar PV sector that dwarfed that of its contemporaries.
Concerning the availability of complementary resources, several activities in the solar PV value chain are energy intensive, including producing polysilicon. China’s coal deposits and their exploitation to power industrial activities enabled the country to overcome this hurdle along the value chain segments, thus providing the much-needed complementary asset to establish its own endto-end solar supply chain. Finally, regarding the Chinese government rolled out different strategies to encourage home-grown solar PV technologies, as per its industrial policy. This included offering cheap land and tax credits to solar-producing firms and startups, prioritizing polysilicon in public research funding, and providing loans from state banks (on friendly financing terms) worth tens of millions of US dollars to solar-producing firms, including startups with no proven track record. Additionally, the Chinese government created demand for the products with generous subsidies, while Chinese factories worked to improve efficiency and reduce costs (Dlouhy, 2021).
This highlights the importance of a solar PV strategy that any African country intending to develop a solar PV sector can emulate. Yet, this may be a tough route for any single African country given the international political economy implications, the low economic and bargaining power of African countries, and the several other challenges such as fiscal constraints and lack of political will that limit a country’s ability to solely propel the requisite solar PV strategy. For instance, diversifying into solar PV manufacturing competitively also means reaching scale-investment thresholds. For example, greenfield polysilicon plants are not usually bankable for capacities of less than 10 000 Mt (around 3 GW). In China, plant sizes ranges from 40 000 Mt to 100 000 Mt (IEA, 2022a). This entails a huge capital investment that Chinese entrepreneurs were able to achieve due to huge government direct and indirect support. Unfortunately, most African countries lack the fiscal space to follow suit as financial constraints remain a significant issue in the region (see Konte & Ndubuisi, 2021), exacerbated by long-term credit contract challenges (Maimbo et al., 2011). For many African countries, this is not simply a financial challenge, but also an organizational capability one (Andreoni & Avenyo, 2023). Additionally, energy poverty and poor infrastructure that plague the region (Maimbo et al., 2011) are major issues that need careful consideration. These factors call for a consolidated investment strategy rather than a scattered countryspecific investment focus across the continent.
Given the scattered nature of the opportunities in the solar PV value chain in Africa, we recommend a regionalized solar PV policy and strategy that consolidates the scattered mineral resources, latent productive capabilities, and limited investments for a continental solar PV agenda. Given that the prospects of one African country developing, integrating or upgrading in a solar PV manufacturing chain may be far-fetched, there is a need to consolidate the pockets of opportunities for a regional solar value chain strategy. Among other things, this will involve linking the countries that export the requisite key minerals and have emerging and revealed related technological capabilities in solar PV. In doing so, existing capacities and experiences in African countries such as Morocco, South Africa, and Egypt in the deployment of CSP technologies, for instance, need to be leveraged for a continental agenda. The experiences of Morocco, with its large corporations, megaproject management, and finance, and a robust regulatory framework could also be leveraged to diversify into solar PV production segments.
For Africa to avoid the solar PV manufacturing mirage and successfully ‘link up’, ‘break into,’ ‘link back,’ and ‘keep pace’ with and thrive in the global solar PV technology supply chain, a regionalized solar PV industrial strategy is imperative. However, we recognize that this regional approach is complex, given geopolitical interests at play. Hence, charting this new future for a regionalized solar PV manufacturing strategy in Africa will require the role of regional institutions and organizations, especially the African Union, African Development Bank, The African Continental Free Trade Area Secretariat, and Afreximbank cannot be overemphasized. While national governments can provide strategic support through direct and indirect interventions on both supply and demand sides needed to crowd-in resources (minerals, capabilities, and investments), regional organizations are critical in fostering the political, economic, social, and financial integration needed for an effective regionalized solar PV manufacturing strategy. The role of the African Minerals Development Centre, for instance, in coordinating and conducting advanced and systematic geological mapping of Africa’s natural resources would be a critical first step in dispelling the myth about Africa’s prospects in building a solar PV manufacturing value chain.
Excerpt of: Ndubuisi, G. and Avenyo, E.K., (2024). Solar photovoltaic manufacturing in Africa: Opportunity or mirage. Report. Africa Policy Research Institute.