Tesla’s recent announcement that it has drastically reduced the amount of cobalt needed to produce batteries has triggered concern that the price of the metal could fall over coming years. Battery demand makes up about half of the total global cobalt consumption, due to the significant growth in electric cars over the past few years, most notably in the European market.

As chairman of MBI Group, a privately-owned group of companies rooted in Zambia, I have followed with great interest the price fluctuation of cobalt. For countries with significant cobalt reserves, like Zambia, it is a vital export commodity to support economic development.

The price of Cobalt has quadrupled since January 2016, and now sits at around $80,000 a ton. Unlike lithium, another crucial material required for batteries, cobalt is very rarely found in its raw form. Instead, approximately 97 per cent of the world’s supply of cobalt comes as a by-product of nickel or copper, almost all of which originates in the mines of the Copperbelt region, encompassing northern Zambia and the Katanga province of the Democratic Republic of Congo.

The overall consensus, Tesla aside, is that the long-term outlook for cobalt prices remains bright, and any anxiety should be mitigated by several factors.

First, despite the considerable global brand that Tesla has built, it remains a relatively small player in the global market holding around 10 per cent market share. In the first quarter of 2017, Renault and Nissan produced nearly 37,000 electric vehicles, nearly 50 per cent more than Tesla managed in the same period. The world’s second largest market for these vehicles, after China, is Europe, where Tesla cars are simply unable to compete with other established car manufacturers, who continue to rely on cobalt as a vital component of their batteries.

The second important factor which stabilises the price of cobalt is that 58 per cent of global copper production is used for many diverse industrial and military applications, such as mobile phone batteries, super alloys suitable for jet aircraft engines, medical equipment used to detect tumours and even in the sterilisation of surgical tools in hospitals around the world.

The importance of the metal will only increase, as surging demand for not just electric vehicles but mobile phones, laptops, and jet engines will naturally counteract any moves to reduce reliance on cobalt. As various studies have shown, replacing cobalt with a cheaper substitute can lead to lower performance and a worse product for consumers. Until anything like a viable alternative suitable for the mass-market is found, cobalt will remain king.

The third ingredient which will ensure cobalt prices continue to increase is the difficulties associated with extraction. Most future cobalt production would be as a by-product of another metal, and this process has several associated problems. For the process to be economically viable, reliance is placed on the price of base metals such as nickel and copper, which oftentimes adds to the supply side restrictions.

The demand, price security and essentiality of cobalt therefore shows no sign of decreasing. Instead, we are seeing companies such as Apple and BMW looking to work directly with miners to guarantee supply. For African businesses this is a significant opportunity. The global market is dominated by big players, and the economic benefits of vital commodities such as cobalt has been significantly watered down due to the dominance of multi-national corporations.

We are confident at the MBI Group about the role African companies can play in the market, and the future growth of extractive industries in the region. Many of the problems that the industry currently faces, and in particular issues in the supply chain, are caused by the absence of local knowledge and the failure to recognise the importance of fair pay, workers rights, and environment controls.

These are issues Europe and the rest of the world should care about given the everyday use of cobalt in our mobile phones and the cars that we drive. As MBI Group businesses and other African companies look to expand into the mining sector, increased global pressure should be placed on those international companies that are failing to comply with African labour laws.

Extractive industries are an inevitable and necessary component of the future economic development of Africa. The global reliance on rare metals found in their greatest abundance in sub-Saharan Africa puts African countries and African businesses in a unique position. It is high-time that the promise and capabilities are optimised to the greatest extent possible.