Digging deeper

Clarke, also chairman and CEO of Johannesburg-based Global Pacific & Partners and who was speaking on the windy terrace of the Best Westin hotel in Cape Town, says Chinese activity is surrounded by too much mystique.

"Many people think the Chinese have some megaplan, but I think independent observers don't see it that way because they do often stumble and run into brick walls. Companies like Sinopec, for example, have had bad luck both in Angola and in North America," he says.

Clarke says the Chinese attract attention because their deals are seen as opaque.

"Probably the big difference is that a large chunk of China's business is done state to state, whereas the Western footprint is more articulated through companies."

Dr Martyn Davies, chief executive of Johannesburg-based strategy and research Frontier Advisory who advised on the recent Wesizwe platinum deal, says the rhetoric about China is often "overblown".

"Chinese mining companies certainly have a very strong home game (in China) but they have had a less successful away game."

Davies, who is an authority on the China-Africa relationship, says China is not the colonial resources power in Africa some assume.

"We are not in the 19th century anymore. There will be no more Cecil John Rhodes in Africa. The market mechanisms are so much more entrenched," he says.

Humphreys at DaiEcon Advisors says that while some believe China is the neocolonial power in Africa, that does not fit the facts.

"When Western countries did this in the latter part of the 19th century they ended up running the countries, and I think this is the supposition that surrounds all of this," he says.

"There is an assumption that China is taking one step in the process of getting involved in the politics of Africa. There is, however, very little evidence of this. I just think it reflects on the West's own sense of vulnerability."

Humphreys believes that what really is happening is that China is moving away from going it alone and cutting its own deals in Africa.

"International mining is not a matter of putting a plate on the door and hiring a few people. Rio Tinto, which I used to work for, have always been an international company, and it is companies like these that have the expertise that China needs," he says.

He says Shandong Iron & Steel Group's recent $1.5 billion acquisition of a 25 percent stake in London-listed African Minerals' Tonkolili iron ore mine in Sierre Leone is a case in point.

"By harnessing on to these guys and taking a strategic shareholding, China gets the resources it wants but doesn't have to get strategically or politically involved," he adds.

Whether having resources is a bonus for Africa or, in fact, a curse is often debated.

Because of the commodities boom over the past decade, many African countries have experienced double-digit growth.

However, in a recent study by the United Nations Conference on Trade and Development, the share of manufacturing value added in Africa's GDP fell from 12.8 percent to 10.5 percent, indicating that its economy was actually going backwards.

During the same period MVA in Asia increased from 22 to 35 percent.

"What this means is that African economies are moving down the value chain and becoming more resource dependent. I find this deeply concerning," says Davies at Frontier Advisory.

China, however, is likely to need Africa's resources for a long time. It remains easier for it to import iron ore from many parts of Africa than mine it in western China and transport the resource to its coastal steel plants.

Humphreys at DaiEcon believes China will eventually reduce its own iron ore production from 300 million to 100 million tons and seek to bridge the gap by importing from Africa and elsewhere.

"When China was growing fast it couldn't get these raw materials, but now with all the concerns about environmental problems and pollution, it makes sense to do this. If it can buy raw materials cheaper than it can produce itself that is what it will do."

andrewmoody@chinadaily.com.cn

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