JOHANNESBURG (miningweekly.com) – "If you believe in the long-term urbanisation success story of China and India, you buy Africa, because that’s where the commodities are going to come from", Frontier Advisory CEO Dr Martyn Davies told mining investors in Johannesburg on Thursday.

Davies had earlier heard McKinsey principal Dr Heinz Pley tell the same Frontier Advisory/JSE Africa Board seminar that there was great potential for Chinese demand to rekindle the commodity supercycle, which came to an abrupt halt in October 2008.

Rather than harp on the debunked word “decoupling” when referring to the potential of China to provide markets larger than the traditional Western economies, Davies urged that recognition be given to “the new coupling”, of the economies of Africa and Asia.

“The capital is coming in from China and India and not from traditional Western economies,” he reiterated

He said that China and India were taking full advantage of current depressed commodity prices and lack of activity in the commodity sector to invest in mining opportunities in Africa.

“Being so cash-flush and liquid as they are, it’s all systems go,” Davies said, adding that senior Chinese delegations were currently visiting the Democratic Republic of Congo and Mozambique to make commodity-related acquisitions.

Pley flashed a 100-year graph on to the screen showing how the US industrial growth, the rebuilding of Europe and Japan’s industrialisation had stimulated commodity prices and the potential of China to “kick in” once more.

“The Chinese have a long way to go to reach the personal income levels that Europeans and Japanese had. There is a lot of room left for growth in China and there is India in the wings and actually also Africa, in the long-term, will create significant demand for commodities, and no longer merely produce commodities for the rest of the world,” Pley said.

Standard Bank African mining specialist Mark Cohen reiterated that the African continent is endowed with 30% of the world’s minerals and African governments had begun building enabling regimes and policies to foster investment in mining.

“We are sitting today in the world’s greatest mining town, Johannesburg, talking about the future of commodity-mining projects on our continent at probably the worst economic crisis any of us will see in our lifetimes. For every formal job lost in the mining sector in South Africa between eight and 11 people lose an income, and there is no reason why it should be any different in other parts of Africa," Davies said.

Nedbank Capital mining banker Nivaash Singh said that the South African government, through the Department of Trade and Industry, had the Export Credit Insurance Corporation (ECIC) export credit incentive, which supported projects anywhere in the world that had a 50% South African content. The ECIC support provided 100% political risk insurance and 85% commercial risk insurance. Singh said that ECIC also provided subsidised interest rates on project borrowings.

Africa project specialist Paul Runge described the ECIC as a “very important instrument”, but pleaded for South Africa’s instruments to be coordinated and for an end to the disparate approach of South Africa’s developmental institutions to investing in Africa. He said coordination was making the Chinese successful in Africa: “The Chinese go in like an armada,” he added.