By Ed Cropley
JOHANNESBURG, July 6 – A century ago, it was the explorers and infantrymen of Europe’s great powers slugging it out for slices of Africa. Now, it is the agents of Chinese and Brazilian capital, but the competition is just as fierce.Underscoring the new world order of the 21st century, Brazil’s Vale, the world’s biggest iron ore producer, is going head-to-head with Jinchuan Group, China’s dominant nickel producer, in a fight for Metorex, a medium-sized South Africa-listed mining firm.
Although the saga still has at least a week to run, Jinchuan swung a hefty blow this week, with a $1.3 billion bid to trump a $1.1 billion offer from Vale.
Jinchuan’s juicy premium for Metorex, which operates copper and cobalt mines in Zambia and Democratic Republic of Congo, clearly demonstrates the lengths Chinese firms are prepared to go to secure natural resources for ravenous factories back home.
But it is also evidence of Chinese companies, in particular state-backed ones, being able to post top-dollar bids for foreign assets due to the cheap finance they can get from Beijing, rather than having to raise pricier commercial funding.
This aspect of Chinese growth in the new ‘Scramble for Africa’ is likely to fuel the sense of a playing field tilted unfairly towards Beijing, creating tension with other up-and-coming powers and undermining efforts to boost ‘South-South’ diplomacy.
“Chinese state-backed firms with access to cheap government export finance can easily trump the likes of Vale, who have to pay commercial, and thus more expensive rates, for finance,” said Markus Weimer of London’s Chatham House think-tank.
“State subsidies for national companies will continue to be watched with scornful eyes by Western governments, and increasingly by other emerging powers such as Brazil and India.”
INTO AFRICA
That Brazil is a rising player in Africa is nothing new.
During his time in office, former president Luis Inacio Lula da Silva made fostering commercial ties across the south Atlantic a major priority, visiting at least 25 African countries and doubling the number of embassies there.
Brazil now has 31 formal African diplomatic posts, behind the United States and Russia at 46 and 45 respectively, but well ahead of 26 for Britain, which is having to close embassies to cut costs in what used to be its backyard.
But against China, it still lags a distant second.
Source: Reuters Africa newsletter
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