China commits $10 billion to mining infrastructure growth

China and South Africa have cemented good relations by developing mining infrastructure through the progressive Belt and Road Initiative (BRI). The BRI is a project undertaken by the Chinese government to create trade routes to foreign countries, while also taking development projects in many of these countries to help them become self-sufficient and reduce poverty. Despite the BRI’s focus on similar routes in Europe and Asia as the old Silk Road, the modern road extends to Africa.

In addition to being BRICS partners, South Africa and China have a history with 20 years of diplomatic cooperation and frequent trading, reaching a bilateral trade value of $39.17 billion in 2017. While South Africa exports various goods, China’s interest lies in metals and the mining sector. Mineral products and precious metals make up approximately 85% of South Africa’s total exports to China. As a result, China specifically targets South Africa’s platinum and chrome, of which it is the largest exporter of both, to be used for catalytic converters and stainless steel production respectively. With previous trade relations, South Africa looks to continue the relationship with future investment in the mining industry.

South African President, Cyril Ramaphosa aims to improve the economy by attracting $100 billion in investments over five years, and some of this will come from projects in the mining sector. Chinese investors have agreed to build a $10 billion metallurgical complex in 2019. The complex would include a stainless steel plant, a ferrochrome plant, and a silicomanganese plant. The $90 million open cast mining project in Limpopo will produce hard coal and thermal coal. The deal will be between the Baobab Mining and the China International Railway Group. Many are concerned that the Chinese presence will lead to Chinese workers being imported to replace local workers, which the past contradicts. When a Chinese company purchased Palabora Mining company, it ensured its continued operation for 20 years and thus saved 5 000 jobs. Previous investments from the BRICS countries have resulted in an estimated 36 852 jobs from 189 projects. Chinese companies will also bring skills training when investing in South African companies to enhance future business in the country.

Further, Ramaphosa has charged that Chinese investment in mining companies would still have to comply with Broad-Based Black Economic Empowerment (BBEEE) policies. The need for development in this sector is made visible when considering that policy perceptions make South Africa the third worst country in which to own mining interests when compared to 15 African countries with significant mining interests. Therefore, with the untapped mineral wealth of South Africa coupled with a large amount of capital coming into the country, the future of South African mining looks bright.

Source:IOL