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Monday, 20 April 2009 00:43

Chinese Presence in Africa Increases

By Jonathan Faurie


SOUTH AFRICA, February 27 (Mining Weekly) - The emergence of China as a force to be reckoned with on the African mining scene has altered the way contractors in the industry operate, with greater flexibility now required.

 

 


Roger Dixon, a director and corporate consultant of SRK Consulting, says this was one of the observations that emerged at the Mining Indaba, which was held in Cape Town earlier this month.

 

“In the past, consulting companies would negotiate African mining deals with com- panies based in South Africa; these companies have the advantage of a knowledge of mining in Africa, with sound African mining principles. “Now consulting companies have to negotiate African mining deals with companies in China that do business in a different way and often have little experience of mining in Africa.”


The main driver behind China’s expansion into Africa is the rapid growth of the export manufacturing industry.
In addition, significant urbanisation is taking place in China, creating demand for commodities such as copper and steel. Before the current economic crisis, Chinese economic growth was estimated at about 11%, but has since slowed down to about 6%. But this is still significantly higher than South Africa’s current growth target of 3%.

Dixon adds that another feature of China’s expansion into Africa is the importing of workers from China as opposed to developing local talent.

“Probably the main reason why the Chinese companies import labourers from China is the language barrier.
“The Chinese companies do subscribe to corporate social responsibility values in other ways, such as developing long-lasting infrastructure around a mining project,” says Dixon.

Another changing value in the industry is the liberality of governments where significant African projects are being developed.

Dixon reports that, in times of favourable economic trading conditions, African governments tend to be more liberal in their dealings with foreign mineral companies. However, the attitude becomes more inward looking during times of economic hardship.

Dixon says that the effects of the credit crunch in countries where mining is a significant contributor to gross domestic product have been significant.

“Gold and coal are still seen as positive markets to expand into, and mining companies in these commodities are not scared to initiate capital expansion projects.
“However, there is still a significant apprehension in the platinum market, where declining motor vehicle sales are a significant contributor to the declining platinum price,” says Dixon.

Platinum is used as a catalyst in the pollution-abatement systems of vehicles. (END/2009)

 
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