TRUMP FACTOR While still only the early days of the Trump administration, it has to date resulted in a ‘tumultuous’ period in global economic activity
The uncertainties surrounding geoeconomic trends, including Brexit, Donald Trump wining the US elections and increasing efforts by China to dominate the global economy, may not bode well for global political stability. However, Africa’s mining industry could well see favourable spin-offs from these new realities, says global law firm Baker McKenzie managing partner Morne van der Merwe.
Speaking on the sidelines of Investing in African Mining Indaba last week, he said that the conflicting views of the West and the East on economic globalisation could well present an opportunity for Africa.
“While there is continuing insecurity in the South African mining industry as a result of persistent regulatory insecurity, labour unrest and inadequate infrastructure, the different global headwinds could potentially drive foreign direct investment (FDI) into Africa’s mining sector and the development of infrastructure, in particular,”Van der Merwe suggested.
Baker McKenzie associate Janine Howard added that China was currently one of the largest trading partners with Africa, a relationship that was largely fuelled by China’s “insatiable appetite” for energy and minerals. She said that South Africa, in particular, was China’s largest trading partner in Africa and had solidified this position with significant encouragement for Chinese investment into various industries, including mining, beneficiation and manufacturing.
Further, Howard noted that developments over the past six months had seen a strong shift in the West towards greater contraction and nationalist agendas. “Brexit is aimed at separating the UK from the European Union in an attempt to, among other things, regain control over trade and immigration policy. At the same time,
Trump has shocked the world by following through with many of the plans espoused during his election campaign,” she explained.
Conversely, Howard noted that, in a “stark and surprising contrast”, China, the largest developing country worldwide and the second-largest economy after the US, had opted to take a strong stance in favour of globalisation and, in particular, economic globalisation.
She pointed out that this stance was evident in China’s approach to investment and was further cemented by China’s President Xi Jinping during his speech at the World Economic Forum, in Davos, last month. Xi acknowledged the controversy which economic globalisation is facing, but stated that “we should adapt to and guide economic globalisation, cushion its negative impact and deliver its benefits to all countries and all nations”.
Howard noted that Trump’s “pro-America policies” had included a strong stance taken against China and the import of Chinese goods into the US. “The controversial new President has even gone so far as to call China public enemy number one, thereby sparking fears of a trade war, including speculations that tariffs would be introduced for Chinese imports.”
However, she said that, despite Trump’s strongly expressed anti-China sentiments, his actions since taking office had actually benefited the Asian economic powerhouse. Howard highlighted that one of the first things Trump did was to ensure that the US formally withdrew from the Trans-Pacific Partnership (TPP) with immediate effect. The TPP was intended to be a trade agreement involving Australia, Brunei, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and the US.
She pointed out that this agreement purposely excluded China and was aimed at, among other things, promoting economic growth, good governance and labour and environmental protections and practices in the member States. However, the US’s withdrawal from the TPP was a “major blow” to the agreement and has created a trade lacuna in Asia that China will no doubt move to fill.
Howard said that, while it was still only the early days of the Trump administration, which was resulting in a “tumultuous” period in global economic activity, China’s strong supportive stance on economic globalisation and its clearly articulated and executed intentions to invest in Africa and, in particular, South Africa, boded well for the future of the local mining industry.