China to fuel Africa mining growth despite crisis

China, Africa’s biggest emerging market partner, will overcome the global economic crisis and resume its march into mining and infrastructure investments on the continent this year, but at a measured pace.

Even though the global slowdown has forced some Chinese businesses to close operations in Africa and prompted a rethink of some of the multibillion-dollar projects across the world’s poorest continent, it is unlikely to stop China’s advance.

China experts speaking at a mining conference in Cape Town this week said China’s ability to fuel Africa’s growth in the long term should not be discounted, but the Chinese would be more strategic on the use of capital from now on.

”There is a high-level intent to continue investing in Africa from Beijing. Even though this has become a little unfocused in recent times, it will come back,” said Martyn Davies, head of Frontier Advisory, a South Africa research firm.

Kobus van der Wath, founder and group managing director of Beijing Axis, said China was one of the top consumers for most industrial metals and that there was a lot of government support to see this trend continue.

”A lot of the players are government-linked or government owned and that makes it easier. But a lot of them have burnt their fingers and are rethinking,” he said at the conference.

”This is a global crisis, not a Chinese crisis, and that will drive the overall commodity confidence. Do not therefore discard China’s ability to fuel the market in the long term.”

Davies said China will seek to both reassure and temper hopes of investment when its high-profile interaction with Africa resumes this week during President Hu Jintao’s visit.

Hu visit
Hu is due to go to Mali, Senegal, Tanzania and Mauritius, ranked outside Africa’s economic and resource heavyweights, but nonetheless offering opportunities for increasing China’s Africa footprint and trade relations on the continent.

Trade between China and Africa rose to $107-billion last year, and Hu’s choice of smaller destinations appears designed to show China’s interest reaches beyond oil and mines.

Van Der Wath said China’s overseas foreign direct investment leapt from $700-million in 2001 to $50-billion last year.

”In resource investment abroad in the next two years, we don’t expect there will be a wave of investment and Chinese scooping up cheaply priced assets,” he said.

Resource-hungry China’s forays on the continent have already secured it key links to countries such as Angola, China’s biggest source of African crude oil after Saudi Arabia.

China has invested in diverse countries and resources, such as Liberia’s iron ore and Zambia’s Copper Belt, to secure raw materials for the world’s fastest-growing large economy — a presence that has worried the West where its ”no strings approach” had raised eyebrows.

But the economic slowdown has set back some of its advances including in the Democratic Republic of Congo, where some Chinese operations have been closed down after being attracted by the country’s booming copper, cobalt, gold resources.

Van Der Wath said China’s super-fast economic growth was not sustainable and despite dropping below 7% per year, it would still be a key player in the medium and long term.

”China will be more of a marathon runner, rather than a sprinter,” he said.

But China’s biggest barrier was that of building trust.

Davies said China’s presence in Africa would not be sustainable unless Africans accept it.

There was more acceptance among people in Africa if one talked about business relations with the West, while the media had created an image of China exploiting Africa, he said.

”The biggest challenge between Africa and China is that of trust. China has no intent to politically control the continent, but is facing issues of trust and perception,” Davies said.

Labour issues were a key concern in many African countries where China has brought its workers to help build mines and infrastructure, causing resentment.

”On labour, this has to be an issue the recipient government has to be comfortable with,” Davies said.

”It has to decide whether it wants to build roads, bridges or mines quickly or spend time training its own workers to do so. Some countries want rapid rollout of roads, its a choice each government has to make.” – Reuters

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James Macharia
James Macharia works from Johannesburg via Nairobi. Reuters Bureau Chief Southern Africa, ex-deputy chief East Africa. My views. James Macharia has over 5484 followers on Twitter.

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