AFRICA-CHINATRADEFINANCIAL TIMES SPECIAL REPORT | Monday June 14 2010

www.ft.com/africa­china­trade­2010 | twitter.com/ftreports

InsideBattle commencesfor influence inNiger, a destitutecountry sittingabove copiousseams ofuranium, writesTom BurgisPage 3

Continent drives a harder bargain

If China’s courtship ofAfrica had been for-malised in marriage,then the bride might

be developing early symp-toms of the seven-year itch.

The relationship is stillevolving fast. The revivalthis year in two-way trade –after a dip during the globalrecession – and a flurry ofprospective mineral andinfrastructure deals, haveunderlined the central placethat Chinese investment,financing and commoditydemand are assuming inAfrica’s future.

But competition is inten-sifying. African countriesare increasingly the objectof seductive advances byother emerging powers –including India, Brazil,South Korea, and Malaysia– drawn to the continent’sprodigious mineral wealthand billion-strong market ofpotential consumers.

Traditional partners suchas France, the US and mul-tinational miners are alsostaging something of afight-back in defence of oil,influence, and markets.

In parallel, a more vigor-ous debate has begun aboutthe nature of African tieswith China and how benefi-cial these will prove inyears to come.

Hyperactive Chineseinvolvement in construc-tion projects is undoubtedlyhelping address the infra-structure shortcomings thathold up growth – withroads, dams and pipelinesappearing with astonishingspeed, and railways in partsof Africa chugging alongbehind. Put together, allforms of Chinese financingmore than match inflowsfrom traditional sourcesand multilateral donors.

Meanwhile, in some coun-tries, the flood of Chineseémigrés already far sur-passes that of European set-tlers during colonial times.As well as working on bigstate-backed projects, large-scale trading ventures andcommercial farms, they canbe found selling car parts inAccra, growing vegetablesoutside Khartoum and run-ning restaurants in mostAfrican capitals.

Altogether, it is now diffi-cult to consider Africanprospects without mentionof its pre-eminent foreignsuitor, which in the pastdecade has increased tradewith the continent 10-fold –from $10bn to more than$100bn – and has overtakenthe US and Europe as thelargest trading partner insome important economies.

For many African coun-tries, there is good reasonto fear that a double diprecession in Europe wouldlead to fresh risk-aversionamong investors or a dilu-

tion in official developmentaid. But in a sure sign ofpower ebbing from west toeast, the prosperity of thepoorest continent is nowequally – or more – depend-ent on demand and invest-ment from developing worldcountries – China foremostamong them.

From the outset, the fierc-est critics of China’sadvance into Africa havebeen in the west. China-bashers see in Beijing’smercantilist expansion thesame exploitative patternsthat typified Africa’s pastrelations with Europe.

They worry too that Bei-jing’s engagement is under-mining western proselytis-ing about democracy andletting corrupt and murder-ous leaders off the hook,just as governance wasbeginning to improve.

But there has alwaysbeen a strong whiff ofhypocrisy about this argu-ment. A recent study byacademics in Norway, forexample, concluded that theUS had a greater propensitythan China to sell weaponsto repressive regimes. Bei-jing’s arms transfers toAfrica were roughly on apar with those from Bela-rus, the study found.

As might be expected,Chinese officials are alsocritical of the west’s recordand vigorous in their owndefence. “Western countriesshould set an example bymaking public theresources they havegrabbed in Africa in thepast 400 years. Only afterthat can we come to theissue of China’s transpar-ency,” Li Ruogu, presidentof the Export-Import Bankof China, said recently.

However, the soul-search-ing, is now taking place asmuch among Africansthemselves. Many fear that,while the direction of tradeis changing, its nature,involving raw materialexports and the import offinished goods, is not.

“If we go on like this,African resources will beused for Chinese develop-ment like they were forEuropean developmentbefore,” warns J H Mensah,a former minister in Ghana.

Increases in commercehave turned out to be some-thing of a mixed blessing.

On the one hand, themany African countriesthat depend on raw com-modities for export earningshave found their bargainingpower greatly increased.

Chinese interest helpedNiger to foist tougher termson Areva, France’s atomicenergy group, for its ura-nium, Zambia to raise cop-per taxes, and Nigeria tohold out for hefty paymentsfrom western energy groupsseeking to renew oil blockleases.

A report last month bythe African DevelopmentBank and the Organisationfor Economic Co-operationand Development urgedresource-dependent statesto go further. “Increasedinterest in Africa’s mineralsfrom Chinese corporationsand other new partners isan opportunity for govern-ments to reap the fiscalrewards of competitive bid-ding. African states mustuse this opportunity togenerate higher publicresources,” it said.

On the other hand, exceptfor leading oil and mineralsexporters, African countriesface considerable tradeimbalances with China.

Cheap Asian imports

have brought a range ofpreviously unaffordablegoods within reach of con-sumers. Yet they haveundercut local producers, atthe cost of hundreds ofthousands of jobs.

A growing number ofAfrican policymakers arewary of becoming toodependent on or indebted toChina, and see virtue indiversity. Even Angola –where Beijing pioneered astrategy of swapping cheapfinance and infrastructurefor crude oil and otherresources – is now back inthe arms of the IMF.

Chris Alden, a BritishSino-Africa expert, arguesthat the Chinese have nev-ertheless been supple inadapting to changing Afri-can realities.

Moreover, in manyinstances, there is a conver-gence of interests betweenthe two. He cites agricul-ture as an example. Chineseefforts to raise productivitycould enhance rural Africanlivelihoods, at the same astime addressing the grow-ing problem of food securityin China itself.

In another example, Bei-jing has set up a $1bn funddesigned to help small andmedium-sized African enter-prises to grow.

The dilemma is that asChinese engagement inAfrica evolves, it is becom-ing more difficult for Bei-jing to control the outcome.

Some of the biggestrecent mineral deals havebeen made by autonomousprovincial companies andquasi-private Chinesefunds. Abuses by Chinesewheeler-dealers extractingminerals and timberabound, and the treatmentby Chinese companies ofAfrican workers is comingunder closer scrutiny.

The capacity of many

African states to regulate isalready weak, but is weak-ened further by lack ofoversight from civil societybecause of the opaquenature of many deals.

This needs to change, ifAfrica is to capitalise onChina’s interest and buildmore equal relations withthe outside world as tradingpatterns shift.

“It doesn’t matter wherethe money comes from,where the investmentscome from,” Paul Kagame,Rwanda’s president told theFT. “It’s how we ourselvesare prepared to maximisethe impact.”

African policymakers are wary ofbecoming too dependent on or indebtedto China, and see virtue in diversity,write William Wallis and Tom Burgis

Anxious to shed colonial imageand foster a new cycle of trade

Commodities are at the coreof China’s push into Africaand will remain so for yearsto come. It gets about athird of its oil from Africa,notably from Angola andSudan, and Africa alsoprovides a large slice of itscopper, cobalt and maybe inthe future, iron ore.

Urbanisation in Chinastill has years to run, whichmeans it will continue tospend the next decadescouring the continent forsuppliers of the metals andenergy that it needs tobuild its cities.

But China is beginning towant more from its relation-ship with Africa. Withinpolicy-making circles, aconversation has begunabout trying to find ways

that boost the relationshipbeyond Chinese purchasesof commodities in returnfor exports of light manu-factured goods.

Some of that discussion isa reflection of the growingpolitical challenges thatChina faces in Africa. Forthe past decade, it has beenable to present itself asanother developing country,rather than the next gener-ation of colonial powerscome to exploit the conti-nent’s natural resources.

Yet as it gets wealthierand more powerful and asits ties with African rulingelites become ever closer, itwill be harder to play thatrole.

The Zambian election of2008, when Michael Satalost by just 2 percentagepoints on a platform thataccused Chinese mininginterests of exploiting localworkers, was a warning of apotential future backlash.

Beijing is desperate thatthe tag of “new colonial-ists” does not stick.

This thinking also reflects

the fact that China is begin-ning to re-examine the wayit manages its massive for-eign currency reserves,which have now reached$2,400bn.

For several years, Chi-nese policymakers andeconomists have been talk-ing about the need to diver-sify the reserves in order toreduce the need to keep

buying US dollar assets thatmany believe will inevita-bly fall in value.

But more recently, thedebate has shifted to tryingto find ways to recyclereserves into parts of thedeveloping world, such asAfrica.

The financial crisis haspersuaded Chinese officialsthat the rapid growth in itsexports to the US and

Europe since the early 2000sis unlikely to be repeated.As a result, it needs to findnew sources of dynamism.

This means more thanjust buying more naturalresources assets – it isabout using the reserves tohelp foster a new cycle oftrade and developmentbetween China and Africa.

A by-product of these dis-cussions has been a seriesof interesting proposals.

Last summer, a formersenior official called XuShanda called for the crea-tion of a Chinese “MarshallFund” to lend money toAfrica and other parts ofthe developing world forprojects that would helpraise living standards.

This would also boostdemand for Chinese goods.His proposal called for$500bn to be handed over.

Although that type offunding for such a proposalis politically inconceivable,the idea has won backingfrom important sources. At

China’s policyGeoff Dyer onBeijing’s changingrelationship withthe continent

Xu Shanda(left), formerofficial, hascalled for aMarshallFund

Continued on Page 2

Source: Thomson Reuters Datastream; Chinese Ministry of Commerce; International Trade Centre, Market Analysis Tools

** plusprecious

stones andmetals

*** pluscermets

and otherbase metals

% total Africa export* (rolling 12-month sum)

2000 02 04 06 08 100

2

4

6

8

10

12

2003 04 05 06 07 080

1

2

3

4

5

6

2

4

6

8

10

$bn As % of total Chinese FDI

African exports to China Chinese FDI outflow to Africa

Chinese imports fromAfrica, 2009Top categories ($bn)

Mineral fuelsOresPearls**CopperIron and steel

WoodCottonOil seed & fruitCobalt***Electrical equipment

27.85

6.05

1.80

1.60

1.05

0.80

0.34

0.33

0.26

0.21

* Does not include North-Africa

Resource rail: Chinese involvement is helping address infrastructure shortcomings that hold up growth – with roads, dams and pipelines and railways Getty

Inside this issueInvestment strategyTom Burgis on the recentrush of state to privateinvestments Page 2

The middlemen China ismapping the businesslandscape – and learninghow fast it can chanPgePage 2

Business titans The influx

of Chinese has hastenedthe departure of an oldergeneration Page 2

South Africa China is nowSouth Africa’s biggesttrading partner, saysRichard Lapper Page 3

Restaurants The diaspora’sculinary contributionPage 3

2 ★ FINANCIAL TIMES MONDAY JUNE 14 2010

Africa­China Trade

Eager to shed colonial image and foster new cycle of trade

a meeting of G20 financeministers last year, HuXiaolian, deputy governorof the central bank, calledfor the creation of a “supra-sovereign-wealth invest-ment fund” that would allo-cate foreign currencyreserves to developingcountries, so that they can“serve as new engines inglobal recovery andgrowth”.

The idea of a ChineseMarshall Plan has a com-panion in the discussionsbetween the World Bankand the government in Bei-jing about establishingindustrial zones in low-costfactories in Africa.

According to Bob Zoel-lick, president of the WorldBank, there is “a stronginterest among some inChina” about the project.The discussions involvedevelopment zones in seven

African countries, includingNigeria, Egypt and Ethio-pia.

Officials in Beijing saythe idea is not so muchabout relocating Chinesefactories to parts of Africa,but more about using Chi-nese expertise in buildingindustries such as toys andfootwear, including attract-ing foreign investment andbuilding supply chains.

Justin Lin Yifu, the Chi-nese academic who is now

the World Bank’s chiefeconomist, says it is inChina’s interest to helpexpand low-end manufac-turing in Africa, becausethis would help expand con-sumer demand. “This wouldbe a source of global eco-nomic growth,” he says.

These debates indicate aninterest among some in Bei-jing to push the economicengagement with Africa innew directions, but the fateof these sorts of proposals

remains unclear. The Mar-shall Plan idea has come infor a lot of criticism inChina. Some officials worryabout the ability of Chinato invest large sums in Afri-can projects successfully,while others worry aboutpotential corruption.

A Chinese academic whohas participated in some ofthe discussions says offi-cials are concerned thatsuch a bold initiative willbe labelled internationally

as a new form of colonial-ism – exactly what its con-ceivers hoped to avoid.

Meanwhile, discussionsabout helping to promotelow-cost manufacturing inAfrica are politically sensi-tive at a time when China’sown manufacturers are fac-ing huge challenges – fromrising wages to tougherlabour laws and potentiallya stronger exchange rate.

But at least the debatehas begun.

ContributorsWilliam WallisAfrica Editor

Geoff DyerBeijing Bureau Chief

Tom BurgisWest Africa Correspondent

Richard LapperSouthern AfricaCorrespondent

Stephanie GrayCommissioning Editor

Steven BirdDesigner

Andy MearsPicture Editor

For advertising details,contact:Mark Carwardine on:+44 (0)20 7873 4880;e­mail:mark.carwardine@ft.comor your usual representative

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Continued from Page 1

Tough lessons innavigating thebusiness landscape

Inside a pair of unremarkable one-storey buildings on two leafy back-streets 500 miles apart, the middlemenare hard at work. The offices – one inLagos, Nigeria’s commercial capital,the other in Niamey, capital of neigh-bouring Niger – are entirely uncon-nected.

But both house companies workingto advance China’s thrust into Africa,linking Chinese groups hungry forresources to African governmentsdesirous of cash and infrastructure.

Just as Chinese geologists are chart-ing Africa’s oil reservoirs and mineralseams, so its emissaries haveattempted to navigate what is oftentreacherous political territory.

Following in the footsteps of someof their local guides offers a glimpseof the relationships through whichBeijing is building its African pres-ence – and the pitfalls it has encoun-tered. One such trail leads to theLagos address given for a little-knowncompany called Sunrise.

Sunrise acts as a representative forChinese groups seeking an entry intoAfrica’s biggest energy producer. Byfar its biggest gambit to date was lastyear’s proposals for CNOOC, China’sbiggest offshore oil and gas producer,to buy one-sixth of Nigeria’s oilreserves in a deal officials say couldbe worth $50bn.

When the FT visited the Lagosaddress, a secretary said James LapYen Young, Sunrise’s chairman, wasaway. Reached by phone, Mr Youngsaid: “I don’t know much about that,”and hung up. Mr Young is a business-man with roots in Hong Kong andShanghai and a family friend of JiangZemin, predecessor to Chinese Presi-dent Hu Jintao, according to an asso-ciate.

However, the prime mover behindSunrise is Leno Adesanya. A Nigerianschooled in New York, Mr Adesanyaworked for Citibank before gettinginto the oil trading business at theage of 25. He prospered under the mil-itary dictatorships of the 1980s and1990s, although a sizeable contract toprovide offshore petroleum storagewent sour.

Mr Adesanya’s first serious dealingswith China came when he enlisted theengineering group, now called Sino-hydro, for a successful bid to build ahydroelectric dam. The $6bn contractwas awarded in 2003, but was, likemany other deals in Nigeria’s perilousbusiness climate, engulfed in politicaldisputes. Politics may yet decide thefate of the CNOOC offer.

In November, Umaru Yar’Adua, thelate president, fell into the sicknessfrom which he died last month. His oilminister and deputy minister – bothfriends of Mr Adesanya – have sincedeparted, as Goodluck Jonathan, thenew president, brought in his ownteam.

However, Emmanuel Egbogah, spe-cial adviser to the president on petro-leum matters whose signature adorns

correspondence with Sunrise, remainsin post.

In a sign that Beijing’s ambitions inNigeria are undimmed, shortly afterMr Yar’Adua’s death, a consortium ofChinese construction groups signed amemorandum of understanding tobuild refineries and a petrochemicalplant for $23bn. The consortium’slocal partner is Sunrise.

Some industry insiders are scepticalas to how much influence is wieldedby figures such as Mr Adesanya, whodeclined to comment. One experi-enced insider questions whether therefineries will be built and suggestsMr Adesanya has yet to convince Die-zani Allison-Madueke, the new oilminister. He is certainly not the onlyintermediary.

“Finding the middlemen in Nigeriafor the commercial deals with Chinawould be worthy of a PhD,” says Lil-lian Wong, an expert on China’s rela-tionship with Nigeria. “Almost any-body who is anybody has visitedChina in recent years.”

North of the border, however, a sin-gle operation has emerged as themain link between China and Niger’sstocks of another critical energysource – uranium. Trendfield is regis-tered in the British Virgin Islands andbased in Hong Kong but the hub of itsbusiness to date has been Niger,where it maintains an office on aquiet, sandy road.

The consultancy was instrumentalin helping state-owned China NationalNuclear Corporation secure in 2006the permit for what is to be its biggesturanium mine in Africa – a dealsealed with a $300m signature bonus.It is run by Guy Duport, a Frenchmanwith an education from Liverpool anda mining background. The companyhas ties to Chinese and Canadianbusinessmen.

People close to the situation sayTrendfield has close links to OusmaneTandja, Niger’s commercial attaché inChina and the son of MamadouTandja, whose presidency came to anabrupt end when he was toppled inFebruary’s military coup.

The new junta is planning to auditall 150 mining permits issued duringthe Tandja era, which broke the 40-year monopoly of Areva, France’sstate-owned nuclear group.

El-Moctar Ichah, head of Trend-field’s Niger subsidiary, dismissesclaims of links to the Tandja family as“speculation”. The company has alsoassisted investors from other coun-tries, including Australia, he adds.

“A lot of companies came,” says MrIchah, a Tuareg from the northernmining region who used to work forAreva. “Some sought the aid of Trend-field, who already knew the terrain.”

Assisted by its phalanx of guides,China is mapping Africa’s businesslandscape fast. It is also learning howquickly it can change.

The middlemenTom Burgis reports on theshifting relationships thatcan make or break deals

Generation of industrialists makes way for a new wave

The Nigerian and Chinese flagsflutter above the mock pink cas-tle that rises above the shackson the outskirts of Lagos,Nigeria’s sprawling commercialcapital.

Behind China Town’s wallsare salesmen from the factory ofthe world. Piled high with bar-gain flip-flops and imitationdesigner wear, the 62 clothesshops are but a few of the con-duits channelling cheap Chinesemanufactures to African mar-kets.

China Town’s façade may lookmedieval but its occupants are

by no means the first wave ofarrivals from the east. Theinflux of recent years has has-tened the departure of an olderChinese generation whose longNigerian adventure appears tobe coming to an end.

The story of Nigeria’s once-prosperous population of HongKong Chinese industrialistsserves as a cautionary tale forAfrica, as it adapts to the floodof Chinese imports entering thecontinent as oil and mineralsflow the other way.

“It started very suddenly andit has been very rapid,” says oneHong Kong industrialist, whosetextile factory folded under theweight of competition fromcheap imports from the main-land.

“You see Chinese arrivingevery day – young guys, younggirls, families. They are traders,they want fast money,” adds the

industrialist, who, like many ofhis compatriots, asks not to benamed. “They import a lot andthe price is cheaper, so we couldnot survive [without them].”

A very different odysseybegan in 1949, when the People’sLiberation Army marched intoShanghai, then the hub of Chi-nese capitalism. Middle-classentrepreneurs and industrialfamilies fled to Hong Kong, thenunder British rule, in theirdroves. Once there, they joinedthe established Hong Kong mag-nates surveying the horizons.

A few pioneers set about re-creating the industries in whichthey had prospered back home –textiles, steel, enamel – on Afri-can soil.

Nigeria, with its vast market,was no exception. Factoriessprung up in Lagos and the bignorthern cities of Kano andKaduna. Those who weathered

the 1967-1970 civil war madefortunes in the oil boom thatfollowed.

Today, the Lee Group is bysome estimates Kano’s singlebiggest employer, churning outeverything from binbags to foot-wear.

Factories such as UniversalSteels are landmarks of theindustrial quarter of Lagos. Yetall but the strongest have beenswept away. From the mid-1990s, local producers began tonotice Chinese-made clothing,pots and pans on sale. A tricklebecame a flood.

Many of the Hong Kong indus-trialists have been able to shiftinvestments elsewhere. But forNigeria’s home-grown textileindustry, Chinese competition,compounding chronic powershortages, has been disastrous.Hundreds of thousands of jobshave been lost as factories close.

A ban on textile imports hasdone little, save to deprive thestate of customs revenues. Astudy of the textile sector lastyear for the Nigerian govern-ment by the United NationsIndustrial Development Organi-sation found that smuggledproducts had gained an 85 percent market share, worth $1.5bna year.

“China is the country wheremost of these textiles areimported from,” says YakubuDogara, chair of the house ofrepresentatives’ customs com-mittee.

With the imports have comethe traders. Arriving from main-land China, their expectationsfor income and prestige were farlower than the old Hong Kongindustrialists.

China Town’s residents speaka unique tongue that takesPidgin English, Nigeria’s dis-tinctive lingua franca, and addsa heavy Chinese accent. In onestifling store, a 35-year-old ven-dor – known jokingly to hislocal employees as “Kingmaker”– is sifting his stocks of girls’frocks. He says every threadcomes from his homeland.

Asked what brought him toNigeria, he says: “The Chinesepopulation is very, very big. Wecan’t all stay at home. We can’twait for opportunities. We haveto search all over the world.”

Nigerian customers wander-ing among the shops appeardelighted to be picking up

garments for a fraction of theprices at other markets.

Yet China Town relocated tothe periphery from a prime loca-tion on Lagos’ wealthy islandspartly because of outcry fromlocal rivals tired of being under-cut.

Such friction has provedexplosive elsewhere in Africa.The Chinese diaspora in Nigeriais estimated at 50,000 and grow-ing, as traders, constructionworkers and employees of theenergy groups carving out ashare of the continent’s biggestoil and gas reserves more thancompensate for the departures.

“Long live Nigeria-Chinafriendship,” reads the slogan bythe entrance to China Town.

The new guardians of thatrelationship will have to treat itwith care. After all, as one ofthe old generation remarks wist-fully, “nothing is permanent”.

Business titansTom Burgis dips intothe history of Chineseinfluence in Nigeria

Behind ChinaTown’s walls(left) aresalesmen fromthe factoryof the world

State­to­private contractsprovide second route to riches

If 1978 was the year that China’scommunist rulers began toembrace the market, perhaps2009 was the moment that Bei-

jing’s African strategists did some-thing similar.

For the past decade, China’s hugedeals on the continent broadly fol-lowed a pattern. Analysts christenedit “Angola mode” after the originalpact: a mammoth infrastructure pro-gramme in exchange for crude andother resources, agreed between twosecretive governments and underwrit-ten by billions of dollars of cheap Chi-nese finance.

Such state-to-state deals continue tobe replicated, most recently in Niger,where China is building an oil indus-try from scratch, for an initial $5bn,and a uranium mine.

But of late China has forged a sec-ond route to Africa’s mineral riches,one whose first ports of call is westernbourses rather than presidential pal-aces. The new approach might bedubbed “Addax mode”. Last June,Addax, an independent oil-producerlisted in Toronto and London withassets in Nigeria, Cameroon, Gabonand Kurdistan, announced it was sell-ing itself to Sinopec, one of China’sthree big energy groups.

The deal bought Sinopec sought-after production in west Africa. The

$7.2bn fee represented China’s biggestoutward oil investment.

The hefty premium rekindled accu-sations that Chinese groups, flushwith cash and driven by strategicnational goals rather than commercialcalculations, regularly overpay.

Chinese officials reject such claims,saying executives are given strictfinancial targets and note that Chinahas been able to pick up bargainsafter the commodity bust left miningassets cheap and western rivals shortof money.

But there is also a more fundamen-tal reason for a recent rush of state-to-private investments. “In Congo orAngola, you can say [to the govern-ment]: ‘Give me some blocks and I’llbuild you a railway,” says AmadouHott, chief executive of UBA Capital,the investment banking arm of one ofNigeria’s biggest lenders, which has apartnership with China DevelopmentBank. “But here, you have to talk toShell or Chevron.”

The three countries in which Bei-jing struck its grandest early infra-structure-for-resources bargains –Angola, the Democratic Republic ofCongo and Sudan – have much incommon. Each has only recentlyemerged from long, horrific civil war.Each has an authoritarian govern-ment that controls access to under-developed resources.

However, in Nigeria and SouthAfrica, the continent’s two biggesteconomies, some of the world’s mostpowerful mining and oil companieshave spent decades establishing domi-nant positions.

Some analysts see the Addax dealas evidence of Chinese frustration

that its efforts to court the establish-ment in Nigeria, Africa’s biggestrepository of oil and gas, have beenrockier than elsewhere.

“Before the Chinese arrival becomesnoticeable, they will have to throwlots and lots of things at us, becausewe have a preponderance of oldfriends,” says Ernest Nwapa, a seniorofficial at the national oil company,referring to Royal Dutch Shell, ExxonMobil, Chevron and the other majorsentrenched in Nigeria’s oil sector.

China has plenty to throw, however.State-owned CNOOC’s confidential bidto buy 6bn of Nigeria’s 36bn barrels ofreserves for $50bn, was followed by

last month’s undertaking by a Chi-nese construction group to spend$23bn building refineries.

The same approach is in evidence inSouth Africa, where mining empiressuch as Anglo-American control someof the planet’s richest stocks of every-thing from diamonds to coal.

Political ties are strengtheningahead of President Jacob Zuma’s visitto Beijing in August. Mineral alli-ances could follow, but, for now,China is shopping in the private sec-tor, most recently agreeing to plough$877m into mining platinum via SouthAfrican junior Wesizwe.

Martyn Davies, who has advised on

a number of Chinese deals inAfrica as chief executive of FrontierAdvisory, says it is “premature”to divine a wholesale change ofstrategy.

“The terms of engagement are stillshaped by the same forces: it’s a state-capitalist approach,” Mr Davies says.

In some quarters, a grey areabetween state and private is emerg-ing. The publicity-shy China Interna-tional Fund, based in Hong Kong, isostensibly private. In Angola it hasprovided at least $2.9bn of credit linesin parallel to lending from Chinesestate-owned banks for infrastructureprojects.

Some promised projects havestalled, but the CIF and its sister com-pany, China Sonangol, a joint-venturewith Angola’s state-owned oil com-pany, are expanding across the conti-nent rapidly.

In October, Guinea’s military-backed government unveiled mining,oil prospecting, and infrastructurejoint-ventures with the CIF and ChinaSonangol with plans for $7bn ofinvestments. There followed CIF’sdeal with Bellzone to spend $2.7bn onexport infrastructure from the Aim-listed junior miner’s planned iron oremine in central Guinea in exchangefor a share of the mineral permits.

Some Chinese officials have beenquoted as saying the CIF is a purelyprivate affair, occasionally seeking todistance Beijing from its activities.

However, a report for the US Con-gress found evidence that “key per-sonnel” among its owners “have tiesto Chinese state-owned enterprises …and possibly China’s intelligenceapparatus”.

Investment strategyTom Burgis on China’snew approach to thebig African economies

‘Before the Chinese arrivalbecomes noticeable, theywill have to throw lotsand lots of things at us’

State­to­state: Yang Yiechi, China’s foreign minister, with Ojoa Maduekwe, his Nigerian counterpart, in talks at the start of a six­nation tour of Africa Getty

Mamadou Tandja(left), whosepresidency ofNiger came to anabrupt end whenhe was toppled inFebruary’smilitary coup

FINANCIAL TIMES MONDAY JUNE 14 2010 ★ 3

Africa­China Trade

Coup alters the balance as nations jostle for position

Jocular and shielded by air con-ditioning from the fierce heatoutside, Olivier Muller does notlook like a man in the thick of abattle for resources between twoof the world’s great powers.

As recently as 2007, the ura-nium concessions highlightedon Mr Muller’s wall-mountedmaps of Niger, a destitute westAfrican country sitting abovecopious seams of the metal, hadonly one foreign proprietor:France.

These days, the 40-year defacto monopoly of Areva, thestate-owned atomic energygroup that fuels France’s nucle-ar-powered economy, is nomore.

Sino-U, Beijing’s answer toAreva, is working to bring intoproduction what will be China’sbiggest uranium mine in Africato fuel its own nuclear energyprogramme.

But if Mr Muller, a seasonedoperator now heading Areva’sNiger operations from Niamey,the capital, looks relaxed, that isbecause he believes – publicly atleast – that talk of a high-stakesstruggle for uranium betweeneast and west is nonsense.

“Honestly, there is no compe-tition,” he says. “There areenough blocks, [but] in the next10 years there will be smaller

discoveries. People will beforced to co-operate. All the so-called ‘competitors’ will shareinfrastructure.”

It is an assessment that runscounter to a popular view ofChina’s pursuit of Africa’sresources as a direct – andpotentially destabilising – threatto western interests.

From Zambia’s copperbelt toNigeria’s crude oil-rich swamps,China is seeking to plant its flagin areas where others havealready staked their claims.

Mr Muller’s thesis has meritnonetheless – and not just inNiger. In March, Chinalco, aChinese miner, agreed to spend$1.4bn helping to develop part ofthe world-class Simandou ironore concession in Guinea along-side its holder, Rio Tinto.

That Chinalco was prepared

to overlook the bribery chargesthat China has levelled againstexecutives from the Anglo-Australian miner underscoresBeijing’s readiness to sharecosts and political risks in vola-tile countries.

It is also possible that Chinesedemand will ease resource com-petition by opening up newsources of supply.

China’s appetite is the princi-pal driver of a shift to whatmany analysts believe is an ageof structurally higher prices forcommodities. That has radicallyaltered the economics of devel-oping African mineral depositsthat western miners long con-sidered unviable.

Yet Mr Muller’s good humouris not simply down to a benignreading of the global commodityoutlook. He has just come from

what he says was a very cordialmeeting with Salou Djibo, thearmy officer who heads thejunta that toppled MamadouTandja, Niger’s president, in aFebruary coup.

Under Mr Tandja, Niger’s rela-tions with Paris had deterio-rated sharply, as he invited Chi-nese and other newcomers toenter the uranium sector, delib-erately seeking to curb Frenchinfluence.

Two Areva officials wereexpelled for allegedly conspiringwith the anti-government rebelsin the northern mining region.

The French group agreed tomore generous terms to securethe go-ahead for its vast €1.3bnmine at Imouraren – althoughMr Muller attributes this tohigher prices rather than Chi-nese competition.

Mr Tandja used Chinesemoney to compensate for aidthat was frozen when he steam-rollered Niger’s institutions toextend his term unconstitution-ally last year.

It was the kind of manoeuvrethat has some in Africa warningthat renewed competitionbetween east and west risksallowing would-be autocrats toplay suitors off against eachother, much as they toyed withMoscow and Washington duringthe Cold War. The ploy failed.The putschists took advantageof worsening paralysis to strike.

The soldiers have declared areview of Tandja-era miningpermits. What lies ahead isuncertain, but French officialshave every reason to feel morecomfortable for the change ofguard.

Xia Huang, China’s newambassador to Niger, appearsjust as sanguine about develop-ments as Mr Muller. He says thecoup will do nothing to alter thecourse of uranium develop-ments or China’s infrastructureblitz and its $5bn venture topump Niger’s first oil to its firstrefinery.

“I don’t think that in Nigerthere is competition betweenChina and other partners,” hesays. But in the same breath, MrXia accuses the old Europeanpowers of neglecting Africandevelopment even as they carryoff mineral wealth, in contrastto the largesse that is helpingChina outflank rivals.

“China is here to proposeanother option,” he says, “amore profitable option for thepeople of Niger.”

UraniumTom Burgis reportson the growing east­west competition forNiger’s valuable metal

Fine company, fusion food,wanderers and raucous toasts

Dragon dOr,Niamey, Niger

When Wu Wen Yi told herfamily 17 years ago thatshe had fallen for a manfrom Niger, her father wasnot amused.

He commented: “Thereare more than 1bn peoplein China. Why does it haveto be an African,” recallsthe Cantonese designer,who met her futurehusband at ShanghaiUniversity.

If the menu at theDragon d’Or, therestaurant she now runs inNiamey, Niger’s sun-bakedcapital, is anything to goby, the fusion works verywell. The capitaine, or Nileperch, from the nearbyRiver Niger, is presented ina piquant Chuan sauce.The sizzling beef is sourcedfrom Niger’s wanderingpastoralists.

Ms Wu’s life withAboubacar Karda, abusinessman and formerdiplomat, has not been

immune from the strains ofa sometimes tempestuousrelationship between theirtwo countries.

When Niger ended a briefflirtation with Taiwan andreturned its allegiance toBeijing, Mr Karda wasassigned to ease therapprochement.

As the couple nurturedtextiles interests, Ms Wutook over the Dragon d’Or.A bar and a nightclubfollowed, as did twochildren. Then, in 2007,when one of the newlyarrived Chinese uraniumminers was kidnapped byrebels, Mr Karda, whoshares his Tuareg originswith the militants, wasasked to mediate.The minerwas freed. But Mr Kardawas jailed for nine monthsby Mamadou Tandja, thepresident with whom hehad previously been close,ostensibly for his part innegotiations with therebels. Mr Karda believeshe was seen as a threat toTandja family interests.

Mr Tandja has since beentoppled and Mr Karda isonce more a man abouttown.

Ms Wu has plans for ahostel next door.“There’sinstability here,” she says.“But you have to make asuccess of life.”

Saipan,Lagos, Nigeria

A fortnight before it wasdestroyed on September 112001, Clarence Yeung waslooking out from NewYork’s World Trade Centerwhen he had a thought.

“I realised that inManhattan there are somany modern Chineserestaurants,” he says, overa pre-prandial cocktail atSaipan, his restaurant onVictoria Island, a wealthyenclave of Lagos.

“Americans orEuropeans, even Nigerians,are used to very narrowChinese food – spring rolls,fried prawns, things likethat. I decided I wanted toproduce something moreauthentic. That was thegerm of this idea.”

To illustrate his point,Mr Yeung’s chef – whoseprevious job involvedcatering for top Chinesepoliticians – serves upHong Kong scallopswrapped in winter melon,pan-fried Shanghai meatbuns and an array of othereastern delicacies.

In the six years since itopened, Saipan’s upstairsrestaurant has become afavourite haunt of Chinesediplomats andbusinessmen. Moneyed

young Nigerians andthirsty oilmen throng tothe well-stocked bardownstairs, schmoozingamid the jazz and cigarettesmoke.

A mild-manneredsocialite, Mr Yeung’s storyis very different from thatof the labourers andtraders who have floodedinto Africa from mainlandChina in recent years.

He is descended from theShanghai industrialistswho fled to Hong Kongwhen the Communist partytook control of mainlandChina 60 years ago.

His father expanded intoNigeria, where he built amanufacturing business.

That perhaps explainsSaipan’s cosmopolitan feel.Mr Yeung has taken hislead from those Manhattanestablishments, adding aningredient for whichChinese restaurants are notrenowned.“You can blendgood wine and Chinesefood,” he says.

Many patrons do indeedtap Saipan’s impressivewine cellar, although someprefer moutai, the fierceChinese liquor consumedin rounds of increasinglyraucous toasts.

“It’s the west and theeast,” Mr Yeung concludes,“blending together.”

Chinese cuisineTom Burgis visitstwo excellentrestaurants

Way paved for broader links

South African diplo-mats frequently talkof the importance ofthe country’s rela-

tionships with the develop-ing world.

But over the past twoyears, this orientation hasbegun to acquire real eco-nomic substance: nowheremore so than with China,the biggest developing econ-omy of them all.

Chinese sales of manufac-tured goods, ranging fromtextiles to telecommunica-tions equipment, has led toa steady expansion inexports, while its hungerfor South Africa’s rawmaterials such as coal andiron ore has driven trade tonew heights.

In 2009, China leapfroggedGermany, the US, the UKand Japan to become South

Africa’s biggest tradingpartner.

China’s investment hasbeen slower. At times, theOctober 2007 decision bythe Industrial and Commer-cial Bank of China to invest$5.5bn in a 20 per cent stakein Standard Bank hasseemed like something ofan outlier. When the Chi-nese economy slowed in2008, state companies thatmight have expandedabroad took stock.

However, in recentmonths China has begun toexpand again. In March2009, the China AfricaDevelopment Fund – aquasi-sovereign vehicle setup by the China Develop-ment Bank to invest in Afri-can opportunities – set up aJohannesburg office.

This year the fund hasmade the first of its invest-ments. Last month, thefund teamed up with JidongDevelopment, China’s sec-ond largest cement maker,to acquire a majority stakein a new R1.65bn cementplant based in Limpopoprovince.

As part of the deal, which

represented Jidong’s firstventure outside China, thetwo Chinese partnersploughed R382.5m into thedevelopment, with aboutR450m coming in loansfrom Chinese banks.

Two South African part-ners – Continental Cementand Wiphold, a blackwomen’s empowermentgroup, also took equitystakes, with NedBank, asubsidiary of the OldMutual insurance concern,providing additionalfinance.

A few weeks later, thefund supported a $877mequity and debt deal inSouth Africa’s platinumsector, the second biggestChinese investment inAfrica outside the energyindustry.

Jinchuan, a state-ownedmining company from thefar west of China, acquiredfor $227m a 51 per centstake in Wesizwe, a SouthAfrican junior mining com-pany and announced itsintention to pump a further$650m in project finance inorder to develop the flag-ship Frischgewaagd-Ledig

project, near Rustenburg,west of Pretoria. The dealsneatly encapsulate tworelated aspects of the Chi-nese thrust into SouthAfrica.

On the one hand, China iskeen to secure supplies ofstrategic raw materials,such as platinum, a metalwhose main industrial useis as a coating for catalytic

converters. The investmentalso gives China its firstdirect access to metal thatis also heavily used by localjewellery manufacturers.

According to Martyn Dav-ies, chief executive of Fron-tier Advisory, a Johannes-burg company that advisedWesizwe, the structure ofthe world’s platinum mar-ket makes it particularly

valuable. Since the bulk ofinternational output isbought and sold as part oflong-term contracts, onlyabout 10 per cent of themetal is available on theopen market. “This is avery significant strategicplay,” says Mr Davies.

On the other hand, thecement deal highlights Chi-nese commercial interest inAfrica’s expanding domesticmarkets, particularly inregional infrastructure.

Chen Ying, vice-presidentof Jidong, says his companyis excited by South Africa’sgrowth potential andbelieves the market forcement will grow quicklyover the next few years.

Per capita consumption isbarely a quarter of that inChina and the developedworld and has beendepressed by the economicslowdown last year, but MrChen says a revival in thehousing market and contin-ued public investment ininfrastructure will sustainexpansion. “We are not wor-ried. Africa is like Chinawas 10 years ago. Butmaybe in 10 years this will

be growing faster thanChina is now,” he says.

Investment links are byno means all one way. Anumber of South Africancompanies made significantcommitments in the Chi-nese market, while othersare doing business with theChinese as they expand intothe rest of Africa.

SAB Miller is the secondbiggest brewer in mainlandChina, while Naspers, themedia and internet group,which generates the bulk ofits cash from pay TV busi-nesses in Africa, owns a 35per cent stake in China’sbiggest internet messagingcompany, the Hong Kong-listed Tencent.

Mr Davies says SouthAfrica’s interest in the restof the continent and otheremerging markets paves theway for broader co-opera-tion with Chinese business.

Banks such as Standardor First Rand, which lastyear signed a strategic co-operation deal with theConstruction Bank ofChina, are well placed tohelp finance Chinese invest-ment.

South AfricaRichard Lapperexplains theeconomic substancebehind the talk

The diplomat’s view Like Hong Kong, gateway to a continent

Businessmen, investors and mediapundits may agonise about every twistin South African politics, but forChina’s ambassador to Pretoria, theevents that shape short­term viewsabout the country are things ofrelatively minor consequence.

Zhong Jianhua, who has known threepresidents during his three years in thejob, brings a long­term view to hisassessment of China’s relationship withAfrica’s richest economy.

When businessmen worry about theunresponsiveness of local or provincialgovernment, Mr Zhong tells them notto worry. “We [tell them] the Africancontinent is the last to be developed,[but] it is only a matter of time.”

That optimism means he takes issuewith the pessimism that frequentlyinfects US or European perceptions ofSouth Africa, and Africa moregenerally. Sometimes, he says,

westerners tend to see it as “justanother African country, potentially, inthe long line of disappointments”,

It is a view the ambassador sees asrooted in the “civilising” mission ofEuropean colonialists. “To Christianisethe world to save the barbaric natives.”

Chinese sensitivity to this is acutebecause of its own history. “We werealso forced to change by countrieswith different methods, such asgunships.” Just as China found its

“own way”, he believes, so shouldAfrica.

“We see South Africa as a HongKong,” the territory that “played anessential role at least in the earlierstage of the open policy when Chinadeveloped itself. It supplied experience,investment, entrepreneurship. AndHong Kong enjoys benefits from thedevelopment of the Chinese economy.”

Mr Zhong sees South Africa as agateway into the rest of Africa. It has“the best communications, the besttransport and the best facilities forbusiness. It will also benefit from itsposition on the continent.”

If development is inevitable, then itfollows that those who want to bethere had better “exert” themselves.

“Come here early. Learn early. Thereis a long way to go.”

Richard Lapper

Deep working: drilling at the Impala platinum mine Bloomberg

‘The Africancontinent is thelast to bedeveloped butit is only a matterof time’

Zhong Jianhua

‘Africa is like Chinawas 10 years ago.But maybe in10 years this willbe growing fasterthan China is now’