- City Fajr Shuruq Duhr Asr Magrib Isha
- Dubai 05:26 06:45 12:11 15:10 17:32 18:50
I was interviewing a Russian oligarch and as we parted I recognised some of the people wandering into his next meeting so I hung around to see who else turned up to this unofficial event. It was a who’s who of the global resources industry: Russian billionaires mingled with the chief executives and chairmen of all of the biggest oil and mining companies in the world. I did a bit of digging and discovered that the conversation at the meeting had been about Africa – and what to do about it.
Being hard-nosed businessmen, this was not an exercise in hand-wringing liberal concern about the plight of the poor but rather a pointed discussion about how to compete for raw materials. The reason for their interest is that Africa is awash with natural resources. Oil, gas, coal, gold, iron ore… the list goes on and on. But because of political instability and the appalling infrastructure in much of Africa, those resources are largely undeveloped while mines and wells in the developed world are rapidly being depleted. Africa is, therefore, seen as the future breadbasket of the world’s minerals and every single participant at the meeting in Davos wanted to put down his claim.
Unfortunately for the billionaires and mining moguls attending the meeting, China has got to Africa first. China’s vast economy will need a captive source of raw materials in the future if it is to maintain its growth and so the Chinese Government has cozied up to African leaders in a way that no Western country has. China has happily dealt with Libya, Sudan and Zimbabwe, while the West has attempted to find political and humanitarian solutions to their many problems. The result is that China now wields enormous, if somewhat ethically dubious, influence across most of the African continent.
China can offer African leaders football stadia, railways, roads, tanks and power stations in return for lucrative mining and oil rights. By comparison, Western exploration companies are not even allowed to offer bribes and are being shut out.
Over the next couple of decades the West’s mines will become unprofitable as the resources dwindle and if the miners and oil giants do not get into Africa soon, they may have to put away their shovels and get in line to buy from the Chinese. So, the plan concocted at Davos was to urge the World Bank and United Nations to encourage African governments to impose the same sort of environmental and worker protection rules on the Chinese as Western corporations must adhere to. This was a fine idea but it seemed to me as likely to succeed as any plan drawn up by Claudia Schiffer and Shimon Peres for dealing with climate change.
However, one of the attendees told me in a private conversation later that his real strategy for dealing with China’s rush for African resources was simpler: “if you can’t beat them, join them”.
That man was Paul Skinner, the Chairman of Rio Tinto – one of the world’s largest resources groups. Last week, Skinner got his wish as he announced a $19.5 billion (Dh71.5bn) investment in Rio by Chinalco, the Chinese state-owned metals group.
This is China’s largest investment in a foreign company and it will give Chinalco stakes in some of the best mining assets in the world such as Escondida, the world’s biggest copper mine, and Hammersley, the vast iron ore complex in Western Australia.
The prize for Rio is a partnership with Chinalco that will allow it co-develop massive resources in Africa. China’s financial muscle and willingness to invest billions of dollars in African infrastructure will be matched by Rio’s technical knowledge and experience developing mining projects. Win-win, you might think.
Unfortunately the deal stinks and Rio’s shareholders know it. The Chinalco investment may potentially open new doors to Rio but it also means selling many of the company’s current crown jewels. Looking to the future is all well and good but it cannot be done at the expense of today – as Skinner is about to discover.
- The writer is a business correspondent with The Times of London
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