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Thursday, July 16, 2009

China steps up African investment

Chinese factory
China denies its investment in Africa is purely for its own economic gain

China has continued its pursuit of mineral resources in Africa by agreeing to bankroll a copper and cobalt project in the Democratic Republic of Congo.

Two firms, China Railway and Sinohydro, will invest about $1.8bn in the scheme in a joint venture with local partners.

In return, they will gain access to a regular supply of the key minerals at a time when global prices are soaring.

DR Congo holds 10% of the world's copper reserves, as well as a third of its cobalt supplies.

Trading relationships

China has attracted criticism for its rapid commercial expansion in Africa, using its wealth and manpower to help fund major infrastructure and industrial projects in many countries.

Its strong trading relationships with Sudan and Zimbabwe remain particularly contentious.

Beijing has always denied that it is turning a blind eye to humanitarian problems on the continent in the pursuit of its own economic gain, arguing that its investment is creating jobs and raising living standards.

In a concession to DR Congo's government, the Chinese firms involved in the new $2.9bn project have agreed to supply just 20% of the workforce.

China will provide start-up costs for the project and fund the first phase of construction.

Engineering group China Railway, which raised $5.4bn by floating its shares in November, will take a 43% stake in the venture, while hydropower firm Sinohydro will hold 25%.

The remaining equity will be owned by state-owned DR Congo mining firm Gecamines and a Congolese businessman, Gilbert Kalamba Banika.

DR Congo has agreed to provide China with no less than 10 million tonnes of copper once the mines have been built and production started.

Experts view China's growing role in Africa over the last few years as much in terms of its need to find new sources of natural resources and energy to power its economic expansion as a desire to extend its political influence.

Michael Komesaroff, an analyst at commodity experts Urandaline Investments, said the DR Congo project may provide a "useful model for future African resource development".

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