China is now a clear leader in the race for Africa's resources and can be expected to continue developing these interests for the mutual benefit of both Africa as well as China's surging economy.
George Fang, Standard Bank's Head of Mining and Metals China told the Mining Indaba in Cape Town on Wednesday: “The race for Africa's mineral resources continues to gather momentum. Continued growth in consumption resources is being driven by growth in China and the rest of Asia. Chinese companies are increasingly acquiring assets, as are Indian companies, prompting other global miners into a race to secure mineral assets of their own. This movement for resources can be to the benefit of the African continent.”
China was again expecting growth of 10% plus, and for its exports to surpass the volume of pre-financial crisis in 2008. China had recovered from the global economic slowdown far faster than even the most ardent optimists could have anticipated. But the China of 10 years time would be a far different one than the export-based economy of today, as internal consumption accelerated.
Underpinning Standard Bank's projection that growth would continue for decades and possibly still accelerate further, Fang said the rate of urbanisation in China was still well below the rate of other countries at a comparable period in their development. China's urbanisation was 45%, compared to 73% in the US (at the comparable development era), 88% in the UK and 74% in Japan.
The scale of China's urbanisation had never been seen before and was still accelerating. Every year approximately 27 million people moved from the countryside to cities. China already had some of the biggest cities in the world, and people were increasingly being attracted not to the massive coastal cities, but to second and even third-tier inland cities. There were 90 cities in China with populations of one million, and these were beginning to feel the influx. Fang said some of the strongest economic growth was occurring here.
One symptom of this unprecedented growth was an almost insatiable demand for natural resources to feed expansion, and China had the capital to acquire them. “Historically, China has not been a major foreign investor in mining, but over the past five years that has changed. The number of deals that China is initiating has grown exponentially on every continent, but especially Africa,” explained Fang.
“China is adding infrastructure capacity to link resources in countries as diverse as Mauretania, Sudan, Nigeria, DRC, Gabon, Angola and Zambia. This type of strategy is key to China's investment on the continent. Thus making the investment viable but also leaving a future economic legacy for the host country, “ said Fang.
He said the major underpins of this extraordinary growth within China were urbanisation and infrastructure development, and in both cases they were rapidly accelerating. Some cities were growing at eight times the rate that Chicago grew at the height of its growth, a growth that author Mark Twain said made the city unrecognisable from one visit to the next.
“China is creating more dollar billionaires than any other country, and this is a sign of a consumer market of some buoyancy. China will soon overtake Japan as the second biggest market in luxury goods,” said Fang.
Even more startling in its scale, said Fang, was China's ascent up the technology ladder. He believed China would accomplish within years what took other countries decades. This would not be achieved by original research, but by using its massive foreign currency resources to cooperate with foreign companies and their technology.
He gave the example of China's auto industry. “Decades ago this industry barely existed, yet within three years there will be no significant gap in technology between Chinese domestic cars and their foreign counterparts, except in the luxury car market niche. China is also implementing green technology faster than any other country.”
It was this ascent that Fang believed would enable China to take its place as a global financial leader, as Chinese exporters started evolving into more value-added manufacturers able to command premium rather than discount prices.
It was this growth from which Africa would derive benefit. Now was Africa's time. For many years Africa had been excluded from the economic growth experienced in the more developed world. However, Africa was resource rich, had a growing educated population, and would prove to be the engine that would provide growth to world economies for the next few decades. The benefits to Africa were clear. Resource and infrastructure investment would be followed by the development of a growing industrial and services sector.
Fangs said: “The African picture is changing. Spearheading Africa's aggregate growth performance are the relatively low-cost providers of natural resources that have benefited from the surge in Asian demand. Along with this demand has come the reciprocal development of infrastructure by the likes of China. Physical infrastructure is essential to propel agriculture, manufacturing, services, trade and even human capital enhancements, while rising incomes and rapid industrialization drive demand for electricity, transport, telecoms and housing. Resource and infrastructure investment will leave a legacy that will continue to build and enhance the economic status of the continent, drive economic growth and ultimately benefit the continent's people.”
Geographically, Standard Bank was positioned as the institution of choice for mining transactions and investments into Africa. Standard Bank had a presence in 17 countries on the African continent and in 15 countries outside of Africa. Natural resources were an established element of Standard Bank's DNA. - I-Net Bridge