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China's race for resources 'deliberate'

Feb 06 2013 14:08
Mining

(Picture: Shutterstock) (Shutterstock)

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Cape Town - “China’s campaign and race for resources globally is systematic and deliberate. Not since the era of colonialism have we seen a campaign on such a scale,” said Dambisa Moyo in a keynote address at the Investing in African Mining Indaba.

Speaking on the theme Winner Takes All: China’s Race for Resources and What It Means for the World, Moyo challenged those who claim China’s investment in Africa is a new form of colonialism to invest in the opportunities that abound in Africa today.

“If you’re concerned about Africa being recolonised by China, then put your money where your mouth is.”

Moyo, named by Time Magazine as one of the “100 most influential people in the world” in 2009 and a best-selling author, said concerns from the West about neo-colonialism and environmental degradation are exaggerated or just plain wrong.

She did, however, add a note of caution to be “vigilant and ensure that they gain something from their engagement with the Chinese”, saying that African governments must articulate their policies clearly.

She pointed out double standards, saying that China is the biggest foreign lender to the United States today, yet “no one complains about human rights violations, but when it comes to Africa there are claims of re-colonisation”.

Moyo described China’s approach to investing in Africa as a symbiotic relationship, with China offering host nations what they need.

She pointed to the vast financial resources at China’s disposal, saying that China’s “deep pockets mean that they can go where others like the US and Europe cannot go.

“People question China’s ability to value an asset; they should ask why they are willing to pay a premium for an asset. The answer lies in the utility model.” 

She said China is simply interested in ensuring that they secure the natural resources, so they will pay what they must.

“As competitors fall away, China will have less competition and will end up paying less for resources.”

She contends that China has become a monopolist in some areas of the commodities market, including copper and coal.

Moyo remarks that the world is nowhere near the end of the commodities super cycle. She expects significant price increases for the foreseeable future, as well as volatility in commodity markets.

This will be driven by factors like population growth, a growing middle class in emerging markets and urbanisation policies in developing countries.

She did however point to some supply-side constraints, citing land, water shortages and energy. She added it is becoming harder to access minerals due to difficult terrain and political tensions: “There has been an increase in conflicts around the world due to resource constraints.

"Since 1995, there have been 25 commodity-based conflicts around the world.” She said future conflicts would revolve largely around water resources, but that minerals and energy would also generate their fair share of conflict around the world.

Moyo also spoke of an increase in natural resource nationalisation, citing the examples of Mongolia, the Dominican Republic, Argentina and Australia. She said: “Governments are taking on more responsibility for mineral resources.”

She cautioned governments embarking on this path to be careful, citing difficulties that may arise such as raising capital due to uncertainties created by government policy changes, particularly in mining, which is a long-term investment sector.

- Fin24



 
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