Commodities | Feb 01 2007
By Greg Peel
On Tuesday FNArena brought news that the West is crying foul on China’s moves to secure African resources, and that the World Economic Forum meeting in Davos, Switzerland, has placed the problem high on the agenda. (Could Africa Bring Down The Super Cycle?, Commodities, 30/01/07). Fears have now turned to more action as the world’s top mining CEOs meet in secret.
Leading mining companies may attempt to appeal to the UN and the World Bank in order to stop China moving into Africa and securing that continent’s vast, untapped mineral resources, reports The Times’ David Robertson (before they can). It is seen as sufficient and immediate a problem that the heads of more than a dozen companies held a secret six-hour meeting to nut out a cooperative solution to this frightening situation, among other items on the agenda.
Among those companies represented were Rio Tinto, Anglo American, De Beers, SeverStal and Newmont. Dubbed “the governors”, the group is highly concerned that state-owned Chinese companies are doing deals and freezing out Western miners. (Ayn Rand might well say: And what if Atlas shrugged?)
The problem the West has it that the playing field is not seen as a level one. Individual miners cannot compete with deals backed by the Chinese government, in which China offers huge incentives to African nations. The World Bank estimates that China spent US$10 billion in Africa last year, building dams, telecommunication infrastructure, roads, railways, power stations and even football stadiums, across the continent. This in exchange for access to much-needed resources such as copper, nickel and zinc.
China is also putting in a diplomatic effort as well, notes Robertson, with president Hu Jintao about to commence a ten nation African tour.
Is this just a case of sour grapes? The governors wouldn’t be about to admit it, but one solution suggested was to call in the UN. A bit akin to lining up your big brother when the school bully wants to meet you behind the bike sheds after class.
The governors do, however, believe they have substance to their argument, and that is one of environmental considerations. One CEO said Africa was being “raped and pillaged” by China, without a hint of irony.
Mining companies argue that they have borne the brunt of lawsuits and environmental legislation for many years as a result of their global developments, thus requiring them to now meet high (and costly) environmental and safety standards. This is not the case for the Chinese.
Moreover, China has arguably the worst record of environmental destruction and rampant pollution in the world today.
If the UN can do little, another tack considered is to bring in the World Bank, which itself invests in projects in developing nations, as a partner. That way the sort of incentives China can offer could be met by the West. Another suggestion was to work with global environmental organisations such as Oxfam to lobby African leaders to demand more guarantees out of China.
While such foot-stamping is going on, reports Robertson, other “governors” are taking a less confrontational approach. At least one large miner is looking to set up joint ventures with the Chinese, rather than trying to call in the umpire. The one great hold the West has over the Chinese is know-how. By comparison, the Chinese are only just moving through the Industrial Revolution era.
Perhaps there is a less hysterical solution after all.