China and India home in on copper boom

Multi-pronged approach ranges from military assistance to political sweetening
KEVIN MAYHEW
THE STRENGTHENING of the kwacha is not solely the result of debt relief but also of the extremely high price of copper on the London Metals Exchange, with predictions that this will rise even further. Zambia expects to lift copper production by 8.7% to 485 700mt in 2006 against the previous year, according to projections from the Ministry of Finance and National Planning. The Finance Bank Treasury Report stated that Zambia was targeting
852 000mt a year by 2010. This increase will be achieved by mining companies boosting capacities and with the expansion of new mines such as Equinox Resources’ Lumwana Copper Project, which are expected to come on stream soon. The demand for resources from Zambia and the Democratic Republic of Congo (DRC), which transports through it, is coming mainly from the two present economic juggernauts, India and China. The world’s two most populous nations that physically share a common border have embarked on a mad scramble to secure the resources to maintain the explosive growth. It is developing into a multi-pronged assault on the sub-Saharan region to cash in on its natural resources and markets. In achieving favour, both are almost shamelessly undertaking the battle on a number of fronts, from military assistance to political sweetening. China – not big on democratic elections – even gave money to help finance the next Zambian presidential elections when they happen. China leading The consensus of opinion is that China is leading in this quest. Its White Paper on Africa, released in January, got no attention in India and reflects the sad story of Beijing racing ahead of Delhi on this new frontier. China, meanwhile, has put Africa at the top of its strategic priorities. The White Paper provides a larger political framework for China’s rapidly expanding commercial, cultural and military profile. Last month FTW reported that China had trebled its investment in Zambia. The counsellor of the Chinese Embassy in Zambia, Zhao Zhanbin, told the Chinese news agency Xinhau that Chinese investment in the country had trebled to US$41m (R265.27n) to bring its accumulated investment to close to R2bn. This makes China the third largest investor in Zambia after South Africa and the United Kingdom. Chinese investors employ over 10 000 local workers. China is consolidating its hold on the rich mineral resources of Africa. One of the biggest Chinese mining operations on the continent is the Chambishi copper mine in Zambia. China’s interest covers the entire range of African minerals. Chinese-funded enterprises throughout Africa will be increased with a projected injection of a further US$400m in the immediate future, according to Chinese officials. Although a fraction of China’s commerce with Africa, India’s non-oil trade with the continent has grown significantly. In a comment on the state of relations, the Zambian Commerce Gazette believes the difference is that China is seen to take Africa more seriously. It sent its big guns – its foreign minister Li Zhaoxing set out on a nine-day African tour within hours of the White Paper being announced. For some time now Beijing has been hosting an annual ministerial meeting of the China-Africa Forum. Li prepared the ground for the first China-Africa summit scheduled for Beijing at the end of this year. The Chinese influence is certainly being seen on the road infrastructure, with that country’s expertise being selected for stretches of new roads and road upgrades. They apparently bid at 30% less and provide a comparable quality to companies from other countries. India on the other hand has failed diplomatically. Its leaders tend to limit African visits to South Africa and Mauritius which both have significant numbers of the global Indian diaspora. In the past two decades the only two visits at the level of prime minister were to Nigeria and Angola, which have vast oil reserves. All this attention for its resources – and for those in the DRC – is one thing, but supplies are being stretched tight and there are complaints that the rules of business are being circumvented. There have been complaints that this clamber for resources has meant some unhealthy developments regarding financing and transportation such as overloading. Shady cash deals The magazine ‘Focus on Africa’ referred to the beleaguered central African giant of DRC as ‘Kabila’s Congo, Looters’ Paradise’ in a cover story in the April-June 2006 edition. Tales of shady cash deals with aggressive and dollar-laden Chinese and Indian operators abound, with blatant disregard for financial procedures and transparency and overloading requirements have been reported. Where it is all leading is somewhat scary. Analyst Dan Rolling of Merrill Lynch & Co believes copper production levels will need to rise 12 to 21% from 2005 levels to accommodate accelerating demand in the second half of the decade. His research suggests that large mines are generally older and susceptible to disruption while newer ones do not have sufficient incremental supply to meet demand. Given this prognosis, one can only believe that Zambia is sitting pretty if it can get its act together now and use its excess cash wisely to establish the necessary transport infrastructure to handle future capacity. This means an active drive to enable road and rail to share the burden, despite rail having generally fallen into disrepair throughout the sub-continent.