The United States is stepping deeper into Africa’s rare-earth sector, committing public money to projects that private investors remain reluctant to finance as Washington races to reduce its dependence on China for minerals vital to advanced industry and national security.
Reuters reported on August 19 that the US International Development Finance Corporation (DFC) has committed $62.8m to rare-earth projects in Malawi, Angola, Madagascar and South Africa. None of the projects has yet entered production, highlighting the gap between geopolitical ambition and commercial reality.
The financing points to a fundamental challenge facing Washington. Africa possesses potentially important sources of rare earths, but strategic importance alone has not been enough to persuade conventional investors to accept the technical, financial and market risks involved.
The largest share of DFC’s African rare-earth exposure is linked to South Africa’s Phalaborwa Rare Earths Project.
Reuters says about $50m of the agency’s commitments is tied to Phalaborwa. DFC and company documents describe the financing as a proposed equity investment or funding option through strategic investor TechMet, rather than money that has necessarily already been fully disbursed.
Phalaborwa is being developed by Rainbow Rare Earths, with TechMet among its strategic shareholders. The project plans to recover rare-earth elements from historic phosphogypsum waste created by previous phosphate-mining operations, rather than establishing a conventional new mine.
DFC documents put the project’s overall funding requirement at about $317m, illustrating the scale of capital needed even after government-backed financing has helped reduce early-stage risk.
Africa Briefing has previously examined how Washington maintained its backing for South Africa’s rare-earth ambitions despite broader strains in relations with Pretoria, signalling the growing strategic importance attached to critical minerals.
The investment is particularly significant because DFC executives have openly acknowledged the reluctance of private capital.
One senior executive told Reuters that the agency was trying to move projects to a more de-risked stage where commercial investors might eventually be willing to participate.
Private financiers remain concerned about project risk, uncertain returns and the possibility that Chinese intervention in rare-earth markets could weaken prices and undermine project economics.
China still shapes the economics
That concern goes to the heart of Washington’s challenge.
China remains overwhelmingly dominant in rare-earth refining and downstream supply chains, giving Beijing enormous influence over markets that feed electric vehicles, wind turbines, electronics and sophisticated defence systems.
The International Energy Agency says China accounts for more than 90 percent of global rare-earth refining supply, underlining how difficult it will be for Western-backed projects to build alternative supply chains quickly.
Beijing has also tightened export controls on a range of strategic materials in recent years, reinforcing concerns in Washington and other Western capitals about dependence on Chinese processing capacity.
For African projects, this dominance creates a difficult commercial equation.
A deposit can be geologically attractive and strategically important while still struggling to compete against established Chinese mining, processing and manufacturing networks that have been built over decades.
Reuters cited Olimpia Pilch, head of strategy at Critical Minerals Africa, as warning that there are more announced rare-earth projects than current demand can support in some parts of the magnet market, particularly for neodymium-praseodymium.
That helps explain why government-backed capital is moving ahead of private investors.
Madagascar provides another example of how Washington is attempting to close the financing gap.
DFC has committed up to $4.84m towards early development work at the Ampasindava rare-earth project, including pilot-plant activity, laboratory testing and environmental programmes.
The development is expected to cost roughly $150m, with developer Harena Rare Earths targeting production around mid-2028.
Ampasindava is expected to produce rare-earth elements including neodymium, praseodymium, dysprosium and terbium, all of which are important for permanent magnets used in industrial, clean-energy and defence applications.
As Africa Briefing reported on Washington’s backing for the Madagascar project, one of the key unresolved questions is where those minerals will ultimately be processed.
Harena has been assessing refining options in the US and Europe.
That issue may prove as important for African economies as who finances extraction.
Credit: Africa Briefing
