Looming China/Africa head-on collision – Solomon

17th April 2013 By: Martin Creamer - Creamer Media Editor

JOHANNESBURG (miningweekly.com) – An economic head-on collision was looming between Chinese business imperatives and Africa’s aspirations to derive more benefit from their continent’s minerals, J&J Group executive director Michael Solomon warned on Wednesday.

Speaking at the Frontier Advisory China-Africa Business Summit, Solomon said that while Chinese investment was premised on the offtake of raw materials needed to drive China’s thriving economy, where costs were lower, Africans were wanting to see not only primary benefits from mineral resources but also minerals-based secondary and tertiary development.

He told the well-attended conference - see video attached - in the auditorium of South Africa’s State-owned Industrial Development Corporation that Africans were expecting participation of their own people in not only mining but also local value addition and sustainability of investments.

“That tension is not simple. It goes into different dimensions, and we need to appreciate that,” said Solomon, who took part in a panel discussion together with Dr Liu Dong, MD of the China-owned Sinosteel Tubatse Chrome, a long-standing Southern African producer of chrome and ferrochrome, which employs 6 500 Southern Africans and only 20 Chinese expatriates; Frontier Rare Earths South Africa senior project manager Gan Shengfei and Webber Wentzel partner Jonathan Veeran.

Solomon told the conference, which was moderated by MoneyWeb’s Hilton Tarrant, that he did not believe that the tension was necessarily conflictual.

But at the same time he was not seeing the attainment of the necessary balance.

The current Chinese investment in Africa was not that different from the European push of 100 years ago, except that today’s world demanded far greater transparency.

There was also tension between the Western imperative for short-term value growth and the Chinese imperative to long-term value growth.

Shengfei said that Africa would have to create a better investment environment if it wanted a greater inflow of Chinese investment.

Veeran said that South Africa needed to deal with its legislative, labour and electricity issues to encourage more investment.

Dong said Sinosteel Tubatse, which mined a million tons of chrome a year and produced 380 000 t/y of ferrochrome locally, had opted to employ local people, even though it would be able to recruit Chinese personnel at a fraction of the cost.

Tarrant made the point that Africa had the world’s highest transport cost per unit, which presented an opportunity for the provision of competitively priced infrastructure.