Miners ask UN to stop China excluding them from Africa

Miners ask UN to stop China excluding them from Africa

David Robertson: The Times, Davos

29th January 2007

Companies query safety standards Chinese sweeten deals with dams

The world’s largest mining companies are turning to the UN and the World Bank in an attempt to prevent China freezing them out of Africa, The Times has learnt.

The heads of more than a dozen mining companies representing assets of more than $700 billion (£357 billion) met in secret at the World Economic Forum at Davos last week.

The group, dubbed the “governors”, met at the Hotel Fluela on Thursday in a six-hour session covering all major issues facing the mining industry.

Among those present were Paul Skinner, the chairman of Rio Tinto, Tony Trahar, chief executive of Anglo American, Jonathan Oppenheimer, chairman of De Beers, Alexei Mordashov, chairman of SeverStal, and Wayne Murdy, chairman and chief executive of Newmont Mining.

One of the most pressing issues facing the industry is competition from state-owned Chinese companies, which are signing deals in Africa and freezing out Western miners.

Africa has vast mineral resources that are largely untapped and, with metal prices at record highs, companies are rushing to grab the best assets.

China is particularly keen to sign deals with African nations because its booming economy needs access to raw materials such as copper, nickel and zinc.

Western mining companies are struggling to compete when negotiating deals because the Chinese can offer huge incentives to African nations. Chinese engineers are building dams, telecoms equipment, football stadiums, roads, railways and power stations across the continent. In return for these deeply discounted or gifted projects, they are winning rights to explore and exploit vast areas.

The World Bank estimates that China last year spent more than $10 billion on infrastructure projects in Africa, including motorways in Nigeria, a telephone network in Ghana and an aluminium smelter in Egypt.

China is also putting significant efforts into its diplomatic relations in Africa. Hu Jintao, China’s President, is to start a ten-country tour tomorrow. Last year, 48 African leaders, including Robert Mugabe, President of Zimbabwe, went to Beijing to discuss business partnerships and received $5 billion in development loans.

The most ambitious plan of the mining “governors”, and perhaps the most fanciful, is to ask the UN to mandate that countries must sign deals that require participants to meet high environmental and safety standards. Chinese miners have a poor reputation in these areas and one chief executive who was at the governors’ meeting said that Africa was being “raped and pillaged” by China.

This charge has been levelled at Western mining companies for years. However, environmental legislation and lawsuits have forced Western companies to raise their game and now they want China to play by the same rules.

Another strategy developed by the governors was to contact the World Bank’s International Finance Corporation (IFC), which invests in projects in developing nations. Partnering the IFC would let Western miners offer the same sort of incentive-laden deals as China.

The governors also want to work with environmental groups and organisations such as Oxfam to encourage African leaders to demand more guarantees from China.

Not all the governors agree about the effectiveness of these strategies. One big miner is seeking joint ventures with the Chinese, swapping its know-how for access to the Chinese market. It also wants to partner Chinese companies in Africa.