China-Africa: China must improve corporate responsibility in African mining projects - expert
The Chinese government needs to intervene to ensure that its mining firms behave responsibly at their projects in Africa, according to an expert in the sector.
Martyn Davies, the chief executive officer of the South Africa-based Frontier Advisory Ltd, said at an industry conference that China needs to do as much as it can to ensure that its role in developing the continent’s vast and largely untapped mineral reserves is not affected by political issues both in Africa itself and in the west.
“There are 60 to 70 downstream Chinese smelters in the Democratic Republic of Congo alone that aren’t upholding certain developmental and social standards,” Davies said.
“The Chinese and African governments need to force better operational practices on the ground in those countries.”
China is learning quickly when it comes to Africa, and its efforts to tie long-term commodity and energy deals with social and infrastructural investments on the continent are “rewriting the rules of the global commodity game,” said Davies.
China is expected to become Africa’s second biggest trading partner behind the US by the end of this year, despite having virtually no business at all on the continent only 15 years ago.
Around 80 pct of its total trade with Africa consists of just four commodities, including crude oil, copper, iron ore and cobalt.
China’s growing presence in Africa has drawn criticism from western governments, and the Chinese government has sought to allay the concerns by setting up aid and investment funds, building infrastructure and establishing several “special economic zones” aimed at improving local manufacturing capacity.
The US government has castigated China for failing to play by the rules of the international commodity market. Instead of buying resources on the open market, China has sought long-term purchase or off-take agreements backed by the country’s policy banks and linked to massive investment programs in roads, railways, ports and power stations throughout Africa.
And the scale and speed with which China has strengthened its grip on Africa’s oil and minerals have led critics to suggest that they are taking advantage of institutional and regulatory gaps across the continent.
Furthermore, investments in schools and hospitals in Congo and Gabon could be overshadowed by how private Chinese miners operate in those countries, Davies said.
While Africa is generally very positive about what China is bringing to the continent, Chinese companies need to improve their image, he said.
African suspicions of Chinese mining activities came to a head in 2006, when Zambian opposition leader Michael Sata narrowly lost an election campaign built around local hostility to the activities of Chinese copper firms in the country.
China has subsequently sought to emphasize that its dealings with Africa are based on “mutual benefit”, but accusations of “colonialism” have continued.
“The c-word gets bandied about a lot,” said Davies. “Is China a progressive development partner or does it have a colonialist, exploitative intent? Perhaps we in Africa are more sensitive to this issue.”
He pointed out that despite the concerns about Chinese firms eating up African resources, there were only around 1,000 Chinese enterprises doing business in a continent of 53 nations.
“People are constantly looking for ulterior motives, but the only motive is to look for capital,” he said.
Nevertheless, Chinese companies need to be careful about their corporate practices because “Chinese activities in Africa have been exaggerated and highly politicized,” said Davies.
“This can be countered by good news stories, and developmentally-inclined CSR (corporate and social responsibility) programs.”
(XFN-ASIA )