China and South Africa: An alliance of [mining] ‘pragmatism’ – by Kenneth Kidd (Toronto Star – November 12, 2011)

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JOHANNESBURG—Jianke Gao strolls into the boardroom of Wesizwe Platinum Ltd. wearing casual trousers and a short-sleeved shirt, as if he were heading to the links. It’s a marked departure from the traditional dour suit of Chinese business. It may also be apt.

Gao is just a couple of months into his new job as Wesizwe’s CEO, installed after China’s Jinchuan Group Ltd. and the China-Africa Development Fund teamed up to buy 45 per cent of the company for $227 million.

The Chinese consortium is now arranging $650 million in financing to develop Wesizwe’s Frischgewaagd-Ledig platinum mine in South Africa’s North West province.

As part of the deal, the Chinese loaned $27 million to Micawber 809, one of South Africa’s black empowerment entities, so Micawber could buy a 6 per cent stake in Wesizwe.

It all marks not just China’s second-largest investment in South Africa (after a 20 per cent stake in Standard Bank) but perhaps an emerging new style of bilateral business.

“Wesizwe is a South African company not a Chinese company,” Gao says, through an interpreter.

It’s a sensitive issue.

When an online news service reported in September that South African Airlines was about to commence direct flights to Beijing, one reader posted this comment: “Why on earth would I fly to China? To meet SA’s new bosses?”

Such is China’s clout that there was little surprise here when the Dalai Lama, invited to attend Archbishop Emeritus Desmond Tutu’s 80th birthday last month, was effectively denied a visa by the South African government. China views the Dalai Lama as a separatist bent on Tibetan independence.

Nor has Chinese popularity been helped by past projects in Africa, which have often involved an airlift of Chinese technology, equipment and even labour, leaving little of substance to boost the skills and expertise of Africans.

But there’s a reason South Africa was asked last year to join the so-called BRIC (now BRICS) economic block that combines Brazil, Russia, India and China — an invitation that wasn’t extended to such larger emerging economies as Mexico, Indonesia or Turkey.

The mutual attraction between South Africa and China, its biggest trading partner, is simply too strong.

China desperately needs Africa’s natural resources, including the platinum Wesizwe will be mining. Chinese demand for platinum vastly exceeds its domestic supply.

South Africa, by contrast, is already home to 80 per cent of the world’s production.

And many in the ruling African National Congress see China as an economic template worth emulating, not least because Western models have done little to alleviate South Africa’s punishing unemployment rate, officially pegged at 25 per cent.

At the end of his official trip to China last month, South African Deputy President Kgalema Motlanthe went out of his way to praise China’s use of state-owned enterprises to become an economic powerhouse.

“Markets alone cannot lead such fundamental change,” he said. “The state has to play a leading role in reshaping the economy so that it is better able to meet the needs of our people, particularly the working class, as well as the urban and rural poor.”

South Africa’s relationship with China wasn’t always thus.

Beijing’s approach to the African continent has been evolving for decades, largely shaped by the various domestic agendas and political intrigues of the Chinese capital.

A half-century ago, China’s African adventures were all about countering the influence of Russia and the West, partly as a way of lining up African votes to help fight off any international moves toward full diplomatic recognition of Taiwan.

Hence former Chinese premier Zhou Enlai’s “five principles” in dealing with Africa, which included support for liberation movements and anti-colonialism, as coined during his early 1960s tour of 10 African countries.

But as China itself began shifting from revolutionary ferment toward “open door” economic development, Africa duly moved from ideological ally to business opportunity.

After China and South Africa established full diplomatic relations in 1998, the talk was all about “mutual benefits” as Chinese direct investment in the African continent rose to $5.5 billion from just $75 million in the five years leading to 2008.

But just how mutual those benefits might be soon became suspect. For instance, loans made by the Export-Import Bank of China to Chinese companies with projects in Africa usually include a condition that the firm source nearly all equipment, technology and services from China.

In its section on sub-Saharan Africa, the 2010 UN Trade and Development Report went so far as to insist that “the production structure of the sub-region was reminiscent of the colonial period.”

South Africa may have moved away from the traditional north-south axis of trade, but the broad contours remained the same: gold, diamonds and platinum out, finished goods in, except now they increasingly came from China.

For as much as the left wing of the ANC might have admired the way China had become more prosperous using the state as an economic tool, there has also been dissatisfaction with past Chinese business dealings in Africa.

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