China cash for S.Africa port shows continental priority

DURBAN, South Africa Wed Mar 27, 2013 11:09pm IST

South Africa's President Jacob Zuma (R) shakes hands with China's President Xi Jinping after a media briefing at the presidential guest house in Pretoria March 26, 2013. REUTERS/Siphiwe Sibeko

South Africa's President Jacob Zuma (R) shakes hands with China's President Xi Jinping after a media briefing at the presidential guest house in Pretoria March 26, 2013.

Credit: Reuters/Siphiwe Sibeko

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DURBAN, South Africa (Reuters) - China's decision to spend billions of dollars this week to revamp South Africa's rail lines and a major port show the importance Beijing places on making sure African minerals reach its fast-growing industries

China has long invested heavily in Africa to secure strategic commodities but has faced huge difficulties getting them to ports in some of the world's poorest countries, many still reeling from damage inflicted by decades of civil war.

It has also spent billions more on projects that build goodwill and give Beijing an edge with African governments over Western nations, whose aid often comes with more strings.

Even in South Africa, the continent's richest country that boasts world class ports and rail links, China has found opportunity - announcing deals this week to ease bottlenecks that hold up exports of coal and to provide much needed jobs.

The China Development Bank agreed to lend South African state rail freight group Transnet TRAN.UL up to $5 billion to revamp ageing track, used to carry commodities such as coal and iron ore, a source close to the deal said.

South Africa also reached a deal valued at several billion dollars to build and repair ships at its Richards Bay port with China's Chery Holdings, affiliated with the automaker, according to documents obtained by Reuters on Wednesday.

The final terms were being worked out at a summit of the BRICS emerging market powers in the South African coastal city of Durban, a senior South African government official said.

South Africa has been pushing to expand the port to attract industry and create jobs in an economy that has seen its unemployment rate stuck at around 25 percent for years.

The infrastructure aid is a help, but South Africa still desperately needs to boost the capacity of its electric grid to power its energy-intensive mining sector. China has emerged as a leading candidate to build nuclear reactors sought by Pretoria.

NEW PRESIDENT, OLD FRIENDS

China's new president, Xi Jinping, has spent much of his first foreign tour in Africa. He renewed an offer of $20 billion of loans to Africa to "help African countries turn resource endowment into development strength".

Visiting Tanzania, he spoke of a relationship of "equals" and said: "China will continue to offer, as always, necessary assistance to Africa with no political strings attached."

China's trade with Africa has boomed over the last decade from about $10 billion in 2000 to $166 billion in 2011, mostly an exchange of minerals for manufactures. Critics say Beijing, like Western powers in the post-colonial era before it, ignores human rights abuses by African leaders who do business with it.

Africans broadly welcome China as a counterbalance to Western influence but, as ties mature, there are growing calls from policymakers and economists for more diverse trade.

Early Sino-African relations were forged in the 1950s and 60s, when Beijing's Communists backed movements fighting Western colonial rule. Today, relationships are more likely to be led by energy companies, such as those eyeing the east African seaboard after huge gas discoveries in Tanzania and Mozambique.

Chinese oil firm CNPC this month acquired a 20-percent stake in an Eni Mozambique offshore project worth $4.21 billion, linking up one of the planet's biggest untapped gas resources with the fastest growing consuming country.

Oil discoveries in the region have also caught the eye of China, now the world's second largest oil consumer. However, across eastern Africa, poor infrastructure and inadequate regulation risk delaying large-scale production.

Industrial and Commercial Bank of China (601398.SS), the world's most valuable bank, has invested more than $7 billion in projects across Africa. The China Development Bank had provided various forms of financial support to more than 30 African countries as of February this year, with a credit balance of $16 billion, Chinese state news agency Xinhua said.

For many in Africa, the arrival of Chinese construction crews means that long-delayed projects will finally be built. Lilongwe, Maputo and other capital cities have had facelifts and new public buildings thanks to China; African bureaucrats pass monuments to Beijing's largesse each day they go to work.

But it is not all about selfless generosity from Beijing.

For Martyn Davies of the Frontier Advisory consultancy which specialises in China-Africa relations, "This is more about the long-term interests of China construction firms in the region, and geopolitics."

(Editing by Alastair Macdonald)

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