From: Berhane Habtemariam (Berhane.Habtemariam@gmx.de)
Date: Wed Jan 28 2009 - 06:13:10 EST
FEATURE-China marches on in Africa despite downturn
Wed Jan 28, 2009 10:40am GMT
(Corrects former posting of ambassador Cui Yongqian; spelling of Chen
Deming)
By Alistair Thomson
DAKAR, Jan 28 (Reuters) - Chinese businessmen are taking a long-term view
and pursuing strategic expansion in Africa even though China's multiplying
investments on the continent have lost some lustre in the global downturn.
Beijing and Chinese companies have pledged tens of billions of dollars to
Africa in loans and investments mostly to secure raw materials for the
world's fastest-growing large economy.
That long-term interest remains intact, despite a worldwide economic slump
that has hit China's exports to the rich world and a sharp decline in
Africa's mineral shipments to China.
China-Africa trade has surged by an average 30 percent a year this decade,
soaring to nearly $107 billion in 2008.
"China is in Africa for the long term, and strategically," said David Shinn,
a former U.S. ambassador to Ethiopia and Burkina Faso who teaches at George
Washington University's Elliott School of International Affairs.
"They will not veer from this, in my view," he said.
Far from retreating, many Chinese businessmen are hunting for bargains.
Chinese and Indian firms have expressed interest in taking over Zambia's top
cobalt producer Luanshya Copper Mines since it halted operations in
December, Zambian state media reported.
South Africa's Standard Bank, itself 20 percent owned by the Industrial and
Commercial Bank of China (ICBC), said last month it was advising Chinese
mining clients on buying opportunities in Africa and elsewhere.
"They are looking at 2009 and saying 'This is a time we see as a very big
buying opportunity. We've got the backing from government, we've got the
financial means'," Thys Terblanche, the bank's head of mining and metals
investment banking, told Reuters.
Beyond mining, Chinese state companies are pushing ahead with strategic
energy sector investments and infrastructure; private outfits are continuing
to expand in technology areas.
"Some developed Western countries hit by the financial crisis are reducing
their investment in Africa. Objectively, this is a powerful opportunity for
Chinese businesses to expand their investment and market share in Africa,"
Cui Yongqian, a former Chinese ambassador to the Democratic Republic of
Congo and Central African Republic, told a China-Africa trade forum this
month.
Trade with Angola, China's biggest source of African crude oil, reached
$25.3 billion in 2007 and Beijing has offered Luanda $5 billion in
oil-backed loans.
Shenzhen-based Huawei Technologies, China's biggest telecoms equipment
maker, is pushing south from its established stamping ground in North
Africa.
"I see no reason why they would want to decrease their investments in the
telecommunications sector, because that's profitable for them," said George
Washington University's Shinn.
"It will vary according to sector and country ... It's very dangerous to
generalise about the China-Africa relationship," he said. "They will
certainly make tactical retreats where the economy requires it."
LONG-TERM VIEW
Even China's slower economic growth far outpaces that of other major
economies. Beijing says it can achieve 8 percent growth in 2009. The IMF
says it may cut its forecast to about 5 percent, from the 9 percent it
predicted in October.
While competitors lay off workers and delay new projects, China Non-Ferrous
Metals Corporation is opening a copper smelter this month in Chambishi town,
which Zambia has transformed into a tax-free economic zone to attract
Chinese investment.
Zambian President Rupiah Banda and China's Trade Minister Chen Deming
launched a second economic zone this month near the capital Lusaka, where
Chinese firms will assemble electrical goods such as television sets and
cellphones for export.
"Zambia is still an attractive investment destination (and this will give)
confidence to existing firms operating here not to start scaling down their
operations," Banda said.
Zambia's Copper Belt is witnessing a growth in Chinese deals.
"In Zambia, mining investment is large-scale and long-term," said Xing
Houyuan, director of multinational business at China's Academy of
International Trade and Economic Cooperation, which is affiliated to
Beijing's Commerce Ministry.
"I don't see any likelihood of a pullback ... Companies won't give up
investment plans because of the short term. The biggest impact is likely to
be on projects that are still in the planning stage, where the money had not
really been committed yet," Xing said.
In Liberia, China Union has just signed a $2.6 billion contract to develop
the Bong iron ore deposit.
CONGO AND GUINEA
China also insists the slowdown will not dampen interest.
"We will continue to have a vigorous aid programme here and Chinese
companies will continue to invest as much as possible in Africa because it
is a win-win solution," Chinese Foreign Minister Yang Jiechi said in South
Africa in mid-January.
However, the global slowdown has forced some Chinese businesses to close
operations in Africa and prompted a re-think of some of the
multi-billion-dollar mega-deals that blazed a trail across the world's
poorest continent.
Democratic Republic of Congo and Guinea are cases in point.
DR Congo rode the boom in commodities to attract a wave of foreign
investment in its rich but long-neglected copper, cobalt, gold and other
mineral resources after post-war elections in 2006. Now that dream is
fading.
"We have one processing mill and several workshops in Congo. We have closed
them. There are many Chinese-invested firms in Congo and I understand most
of them have shut down their operations," said a marketing director at a
private firm in China's eastern province of Zhejiang, which supplies cobalt
and nickel compounds for use in mobile phone batteries.
"I don't think we will resume production in the factories in Congo any time
soon. We expect the economic slowdown could worsen in this year and weigh on
the prices further," he said, requesting anonymity because he was not
authorised to speak to the media.
Africa's heavy dependence on resource exports means it feels any squeeze
more painfully. Global trade fell an annualised 3.7 percent between
September 2008 and November last year, its biggest drop since 2001.
Congo's franc has fallen 20 percent against the dollar in less than four
months and foreign reserves are at a five-year low. The government is
seeking a $200 million bailout from the International Monetary Fund's
Exogenous Shocks Facility.
A much-trumpeted $9 billion package of Chinese loans, investment and
infrastructure projects in return for Congolese minerals contracts may be
cut back to $6 billion, a diplomat in Kinshasa said, partly to appease the
IMF which has expressed voiced concern at Congo taking on such huge debts.
Guinea, the world's top exporter of bauxite aluminium ore, had hoped for its
own multi-billion-dollar deal with China to build hydropower dams, roads and
bridges in return for mines.
Talks have dragged as the economic climate has worsened, hampered by
Guinea's instability and a coup last month after the death of President
Lansana Conte, said Ahmed Tidiane Diallo, director-general for mining
projects at the Mines Ministry.
Gabon, similarly eager to cement a 1.6 trillion CFA franc ($3 billion)
contract to develop the 360-million-tonne Belinga iron ore deposit, has
accused its Chinese partners of dragging their feet amid the uncertain
economic environment. (Additional reporting by Joe Bavier in Kinshasa,
Saliou Samb in Conakry, Eric Onstad in London, David Lewis in Dakar, Lucy
Hornby and Chris Buckley in Beijing, Moumine Ngarmbassa in N'Djamena,
Antoine Lawson in Libreville, Alfred Cang in Shanghai, Mabvuto Banda in
Lilongwe, Daniel Wallis in Nairobi; Editing by Louise Ireland and Pascal
Fletcher)
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