Every Friday morning, SAfm’s AMLive’s radio anchor Xolani Gwala speaks to Martin Creamer, publishing editor of Engineering News and Mining Weekly. Reported here is this Friday’s At the Coalface transcript:
Gwala: Africa is now where China was in the 1970s – ready for major growth, says the new head of the giant Anglo American Corporation.
Creamer: This is an immense point made by the new head of the Anglo American Corporation Kuseni Dlamini. He has a great passion for Africa, of course, and Anglo is in fact the biggest employer in Africa. Dlamini is trying to make a point that Africa is at present, where China was in the seventies.
The people that spotted that China was a sleeping giant were the American leaders, Richard Nixon and Henry Kissinger. They saw the potential of China coming up, which we no see being rolled out. Others, looking at Africa, now see Africa in the same position that China was, a sleeping giant ready to emerge.
What Dlamini says needs to take place is the proper conversation so we get the proper regulatory environment within Africa and then the talk about the social infrastructure and physical infrastructure. We already see that other transnational corporates are coming in to Africa and they come in mainly from China itself and from India. They do some very good parallel and barter deals and it is normally around mining.
They will go in and say that they will be mining in that area and therefore there are going to be roads and rail needed, and they will put that in as sort of a parallel development. Otherwise they go in and barter and say that they need water infrastructure, transport infrastructure and telecoms infrastructure, if you give us the rights to extract certain metals and minerals, we will put those in.
We see that that is having a very good spin-off effect. Indians and Chinese come in and the next minute other boats are floated. Very important period of time in Africa and if it is tackled properly, people see that it could emerge like China did.
Gwala: Competition authorities the world-over are baring their teeth, with the European ruling against Sasol the ultimate wake-up call.
Creamer: That’s right. You see the baring of teeth by these competition authorities, even in South Africa. We saw it with food prices and medical collusion. We saw heads roll in certain companies, we even saw the first case against excessive steel prices and we saw the stopping of certain corporate activity and mergers and take-overs, because of suspicion of collusion.
But, the biggest wake-up call of all has come from the European Commission and its impacted in South Africa on Sasol and it is around this wax cartel which Sasol has been involved in rather unwittingly, it seems. They took over a German company and that German company was engaged in cartelised price-fixing.
Now, it is very difficult to pick this up in the balance sheet, you don’t see it written in any minutes, because these people meet in smoke filled rooms late at nigh with their hoods on. How do you actually get to them? One of the mechanisms that all these authorities are using now is called corporate leniency.
It seems to be working, because in the case of Sasol and the wax cartel, they afforded complete immunity to Shell, and of course, Shell come in and blew the whistle rather loud. Shell is not paying any fine, Sasol is going to have pay something like a R4-billion fine that has been imposed on them.
All nine of the people are going to have to pay something beyond R8-billion. So, Sasol almost paying half. It is about the fourth biggest, but last year the European Commission imposed massive, even bigger fines on some of the German companies.
So we see this atmosphere now that if you are going to move in to take over a company you must make sure that there are no skeletons in the cupboard. It is even difficult to find that because of the secret way that they go about it. But, with this corporate leniency policy throughout the world, people are coming forward and blowing the whistle.
Gwala: Steel prices – like oil prices – are now poised to come down after years of upward movement.
Creamer: ArcelorMittal South Africa, which is the biggest steel producer in the country in October reduced steel prices by 5%. That looked good, they are coming forward now in November and say that steel prices will come down again.
The base price they say will be across R1 000 per ton, but that works out to about 10%. So, already we are seeing a trend developing, not just a seasonal adjustment, which we normally get in the price of steel, but a downward trend in the price of steel.
Against this background of world turmoil we might even see more. South Africa’s buffered a bit, because it has this infrastructure development coming up now, a lot of power stations being developed and a lot of transport infrastructure, also with the 2010 World Cup.
But, we see less of a demand from the automotive sector and the white goods sector. This is prompted this downward movement in price, which could be accentuated even further in the months ahead as we see the word recession being mentioned around the world.
Gwala: Thanks very much. Martin Creamer is publishing editor of Engineering News and Mining Weekly, he’ll be back with us at the same time next week.