Chinese companies are making a major push into mining and related projects in Africa, using reserves of cash unavailable to Western competitors to scoop up assets at steep discounts, a seminar heard on Thursday.
With many mines struggling due to the slump in commodity prices that followed the global financial crisis, Beijing is seizing the chance to get its hands on the mineral resources needed to fuel its long-term growth and urbanisation. There is a very clear mindset in Beijing, Martyn Davies, head of African investment consultancy Frontier Advisory, said. They see this as the greatest opportunity for a very long time, and being so cash flush, it's all systems go.
Many Chinese companies are state-backed, giving them access to Beijing's massive funding reserves and freeing them from the need to placate shareholders.
Western companies are suffering from heavily depressed share prices and an inability to access loan finance due to the reluctance of European and U.S. banks to take on risk.
Chinese state-owned companies are walking around with massive cheque books and cheap debt. Western companies don't have access to cheap debt, said Nivaash Singh, a mining and resources specialist at South Africa's Nedbank.
Three months ago, Davies and other analysts noted the global slowdown had forced Chinese businesses to close operations in Africa and prompted rethinks of some multi-billion dollar deals.
The recovery off the lows in prices of key commodities such as copper has now given fresh impetus to the Chinese juggernaut.
Major Chinese-Africa deals range from a mines-for-infrastructure agreement with Guinea, the world's top bauxite exporter, to a $9 billion package signed in 2007 with Congo to build roads, railways, hospitals and schools in exchange for copper and cobalt. [nLL421175].
Earlier this month, copper producer Zambia picked NFC Africa, a subsidiary of China Non-ferrous Metals Corporation (CNMC), to run its Luanshya Copper Mines, a major operation that shut in December due to the economic downturn.
Underscoring the strategic importance Beijing attaches to Africa, Chinese President Hu Jintao toured the continent in February to reassure African governments that the forced closure of some Chinese concerns did not presage a wider withdrawal.
Last year, Industrial and Commercial Bank of China (ICBC) (601398.SS: Quote) also took a 20 percent stake in South Africa's Standard Bank as part of a plan to bring together Chinese capital and Standard's expertise in emerging African markets.
There are a number of deals that we're looking at together, and they're starting to come to fruition, said Standard Bank mining specialist Mark Cohen. He declined to give details. (Editing by Anthony Barker)
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