Thursday, February 10, 2011

Chinese role in Africa’s mines raises eyebrows

February 10 2011 - By Ann Crotty and Londiwe Buthelezi

The “China story” remained a sticky point among participants at the Investing in African Mining Indaba in Cape Town this week when it emerged that few agreed on the influence and impact that country has on Africa’s mining industries.

While some speakers saw China’s interest in the continent as a boon, there were also voices of dissent decrying its low safety standards, negative impact on other sectors and role in setting the price trends in sales of commodities.

Kobus van der Wath of advisory firm Beijing Axis told representatives of the global mining industry that a number of factors underpinned the sustainability of China’s long-term growth prospects.

Growth, which had until now focused on the eastern coastal belt of the country, was spreading across other regions of the country. In addition, China was increasingly competing with top end producers across the globe, while also being able to compete with the traditional lower-end players.

Van der Wath said because China was a “marathon” player in terms of its growth path, it was insecure about its exposure to the international supply of the raw materials that it needed to support this growth.

Van der Wath advised mining companies to establish “strategic marketing” relationships with Chinese partners.

A contingent of mining law practitioners representing 11 African countries argued in a legal network debate that the influx of Chinese companies to the continent had hit quality not only in the retail sector, but also in the mining sector.

The lawyers believed China’s acquisition of a large stake in Africa’s mining industry would affect mining standards.

Sipho Ziga, a partner at Armstrong Attorneys in Botswana, said the Chinese presence posed a threat to safety and quality production.

“The quality of their work is still questionable. Since the olden days, everybody knew that anything made in China is of inferior quality,” he said.

But the argument is that Africa needs investment and at the moment most Western countries are negative about investing in gold which is one of the major resources mined in the southern African region.

Tom Kendall of Credit Suisse said China was the only foreign investor keen on buying and investing in gold and it had capital, which was what African countries needed.

Charles Mkokweza, a partner at Corpus Legal Practioners, said African companies had to realise that the Chinese were responsible for raising the prices of commodities from Africa.