• IISD urges African producers to strengthen tax policy, infrastructure, and local markets.

• Fiscal incentives alone have delivered mixed results across mining economies.

• Stable laws and reliable energy are essential to attract refining investment.

Improving regulatory frameworks, developing infrastructure, granting fiscal incentives for local processing, and expanding domestic markets to absorb refined products are the main conditions African mineral-producing countries must meet to capture more value from critical minerals, according to a report published on October 29, 2025, by the International Institute for Sustainable Development (IISD).

Titled “Tax Considerations for Critical Minerals Value Addition,” the report reviews the experiences of several countries, including Zambia, Chile, and Indonesia, that have used fiscal measures to promote local refining, processing, and manufacturing in an effort to increase national value addition along the critical minerals value chain.

These incentives range from South Africa’s variable royalty rates — higher for raw minerals and concentrates (0.5–7%) and lower for refined products (0.5–5%) — to Zambia’s tax deductions, including a 50% depreciation allowance on the cost of facilities and equipment used for mineral processing. Other measures include profit-based incentives such as Zambia’s reduced corporate tax rate of 15% for companies transforming copper cathodes into finished products, compared with 30% for other firms.

In theory, such fiscal tools can reduce upfront capital costs, improving cash flow for large investments in refining and manufacturing. However, the IISD analysis notes that their effectiveness has varied across countries, depending on factors such as commodity price volatility, transport infrastructure, energy supply reliability, domestic and foreign investment, and the capacity of tax and mining authorities to enforce regulations, as well as geopolitical developments.

The report also highlights that export restrictions on unprocessed minerals have produced mixed outcomes. Zimbabwe’s 2011 ban on chrome ore exports, aimed at stimulating domestic ferrochrome production, led to a decline in chrome ore prices, only a modest rise in sales to local ferrochrome producers, and an overall drop in the country’s chrome output.

As a result, fiscal incentives and export bans alone are not sufficient for critical mineral-producing countries to promote local processing, refining, and manufacturing to capture more value.

Modernizing infrastructure and improving governance

Three additional conditions are essential to achieve this goal as global demand for strategic minerals continues to rise amid the accelerating energy and digital transitions.

The first is the improvement of legal, regulatory, and institutional frameworks. A stable, coherent, and transparent environment is crucial to reduce risks for investors. Chile offers a relevant example: in 2023, it signed a strategic partnership agreement with the European Union on sustainable raw material value chains, requiring the creation of local processing, manufacturing, and recycling hubs, along with a firm commitment to export to Europe.

The second condition concerns the development of reliable infrastructure, particularly in transport, energy, and environmental management. A stable and affordable energy supply is vital for mineral processing operations, which are typically energy intensive. For instance, refining one ton of bauxite requires over 3,000 kWh of electricity — enough to power three to four households for a year in some parts of sub-Saharan Africa.

Well-developed roads, railways, and ports are equally important to facilitate the transport of raw minerals from mine sites to processing plants and export terminals.

Adequate water supply is also critical for mineral processing, especially in arid regions, while efficient wastewater management systems are needed to comply with regulations and minimize environmental impact. In Chile’s Atacama Desert, for example, lithium brine extraction has faced challenges due to water scarcity, prompting the government to invest in desalination plants to sustain processing capacity. In some cases, investors themselves are building or upgrading the infrastructure needed to make mineral processing operations viable. The China State Power Investment Corporation, for instance, has invested in both an alumina refinery and a power plant to supply it in Guinea.

Lastly, the availability of a domestic market for semi-finished and finished products derived from mineral processing plays a key role in determining how much local value can be generated, even when export potential is high. Taking copper as an example, the presence of industries producing finished goods such as wires, sheets, rods, nails, and screws can influence investment decisions further up the value chain, including in refining and the production of cathodes, bars, and billets.

The IISD concludes that only a combination of fiscal, regulatory, infrastructural, and industrial measures can enable African countries to build competitive local value chains and capture a greater share of the benefits from their critical minerals.