The development of mines in sub-Saharan Africa by Chinese firms will slow in the coming quarters, before picking up again in 2021, says industry research company Fitch Solutions.

In addition to logistics challenges being faced by miners as a result of the global Covid-19 pandemic, the company says Chinese firms will suffer from reduced access to State-subsidised capital.

Over the past two decades, Chinese investment into African mining assets has been supported by concessional finance from State-owned Chinese banks helping to fund both mines and supporting infrastructure.

A sharp slowdown in Chinese economic growth this year will place downward pressure on State finance for foreign projects, Fitch Solutions notes.

The company expects China’s real gross domestic product (GDP) growth to decline to 1.1% this year, following a 6.8% year-on-year contraction in the first quarter of the year, making it the slowest yearly pace of growth in over 30 years.

This will lead to authorities prioritising financing domestic economic stimulus measures, such as front-loading infrastructure construction, Fitch Solution says.

Additionally, reduced access to capital will also slow the development of major logistical infrastructure intended to facilitate the delivery of African minerals to world markets. Considering the capital-intensive nature of rail and port projects, Fitch Solutions notes there will be longer delays in implementing such projects than road projects.

The development of mines could also be negatively affected by delays to the development of China’s Belt and Road Initiative (BRI) in sub-Saharan Africa. Slower development of BRI assets would have negative implications for logistics capacity in these markets, and a combination of domestic funding constraints and a reduced ability for BRI participants to take on debt “will see Beijing scale back the scope” of BRI investments in the next 12 to 24 months, says Fitch Solutions.

“We expect progress will largely be restricted to Asia in the near term, which implies potential delays in numerous sub-Saharan African markets with a heavy reliance on Chinese workforce and materials,” the company comments.

However, looking beyond the potential disruptions in the coming quarters, Fitch Solutions says the long-term trend of rising Chinese mineral investment in sub-Saharan Africa will remain intact.

It says China’s structural deficit in key minerals – iron-ore, copper and uranium – will sustain the long-held strategy of securing direct access to mines in the developing world.

“The investment appeal of sub- Saharan Africa to Chinese firms will actually increase as diplomatic relations between China and developed markets deteriorate.”

The screening of Chinese investment into sensitive sectors, including resource extraction in developed markets such as the US, the European Union and Australia, has been increasing since 2016, and mounting criticism by Western governments of China’s role in the global Covid-19 pandemic will exacerbate these tensions, the company notes.

As an example, Fitch Solutions notes that Australia has been “particularly critical” of China’s handling of the Covid-19 pandemic and is pursuing an international inquiry into the outbreak.

In response, China suspended meat imports from several Australian abattoirs and imposed elevated antidumping and antisubsidy duties on Australian barley in May.