Why Africa can be the beating heart of South Korea’s technology industry

Tshepo Ncube, Head: International Coverage and Bhavtik Vallabhjee, Head: Power, Utilities & Infrastructure at Absa CIB reflect on their recent visit to South Korea, examining why investors in the region have their eyes set on Africa to nurture healthy investment possibilities.

South Korea is a blossoming region, with its economy achieving rapid growth since the 1980s. The country boasts huge technological prowess, showcasing global competitiveness across diverse sectors, including mobile phones, steel production, semiconductors, automobiles, and electric vehicles.

As the economy flourishes, so does its network of diplomatic ties across the globe. We recently had the pleasure of attending The South African Trade and Investment Seminar in Seoul, engaging with investors and stakeholders to discuss an optimistic economic outlook and spark valuable conversations about the long-standing relationship between South Korea and Africa.

The relationship has been growing from strength to strength. South Korea is South Africa’s fourth largest trading partner in Asia, investing in key areas like energy, infrastructure, health, digital technology, and agribusiness. Preparations are even underway in Seoul for the upcoming Korea-Africa Summit set to take place in June, gathering senior officials and ambassadors for discussions on building mutually beneficial collaborations between the two regions.

Despite decades of sustained growth in South Korea, reaching the next phase of economic prosperity hinges on the deepening of collaborative partnerships with other nations. Africa’s wealth of resources and potential presents promising avenues to propel Korea’s transition to the next level, offering huge opportunities for economic development.

Several South Korean industries stand to gain from the mutually beneficial investment ties with Africa. The challenge is pinpointing high-yield sectors and how to inspire investor confidence between the two nations.

Catalysing the high-tech industry

South Korea sits at the forefront of the global digital economy, boasting a world-renowned high-tech industry. Many of the biggest names in the industry have their roots in South Korea, such as Samsung and LG Electronics. There is also a thriving community of tech startups in the region, with many entrepreneurs flocking to Korea to build on the country’s chip manufacturing capabilities, including new firms producing next-generation AI chips.

However, the high-tech industry relies heavily on having a stable supply of critical minerals. Materials like lithium, cobalt, silicon, and copper play a vital role in the production of semiconductors, batteries, and electricity networks. Obtaining a reliable mineral supply is crucial to ensure the growth of the high-tech industry does not grind to a halt; however, natural resource reserves in the country are very few and far between.

With its plentiful critical mineral reserves, Africa offers a promising investment opportunity for savvy Korean investors. The continent contains around 85 percent of the world's manganese, 80 percent of platinum and chromium, and 47 percent of cobalt, as well as vast deposits of lithium, phosphate, and nickel – placing it as a key force to fuel the South Korea’s high-tech industry.

Driving the electric vehicle movement

Another key industry that would benefit from a reliable supply of critical minerals is the electronic vehicle (EV) sector. The EV market has skyrocketed in recent years as the clean energy transition picks up pace. EV sales have more than tripled in just three years, and this market is expected to sustain steady growth as the world moves away from oil.

South Korea is leading this trend in Asia, with its technological success and robust automotive industry spearheading its advancements in the EV sector. Key stakeholders in Africa are also striving to claim their stake in the rapidly growing EV market, although it remains at an earlier stage of development than its Korean counterparts. But while they are at different phases in their EV journeys, there is a real opportunity for a mutually beneficial investment relationship between South Korea and Africa to propel the industry to the next level.

Firstly, Africa holds critical minerals essential for EV production and battery manufacturing. Collaborating with African nations to responsibly extract and process these resources will offer a sustainable supply chain for Korea’s automotive industry. What’s more, Africa’s urban centres are flourishing – offering a burgeoning market for EV adoption. Africa is experiencing rapid urbanisation, with cities expected to be home to 900 million more people by 2050. By investing in infrastructure development, such as EV charging points and roads, South Korean investors could tap into this vast consumer base. This could prove to be a lucrative venture for these investors, with infrastructure projects in Africa often seeing high equity returns and low default rates.

Building ties through open conversations

The topic of strengthening the relationship between South Korea and Africa was a key part of our discussions during our trip to Asia. However, bridging this gap requires an effort to educate Korean investors about the vast opportunities awaiting them on the continent.

With the right guidance and insights, they can better navigate the intricacies and nuances of the African market, offering a perspective on risk ratings and a better understanding of its diverse business landscape. Collaborating with a strategic partner will help to pave the way for a symbiotic investment partnership that capitalises on Africa’s untapped potential, while also building investor confidence, and driving forward economic growth in Asia’s technology hub.