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China's Commitment to Africa
Cover Stories Series 2011> China's Commitment to Africa
UPDATED: September 19, 2011 NO. 38 SEPTEMBER 22, 2011
Creating Opportunities in Africa
Chinese enterprises generate jobs for Africans while exploring the vast potential of the continent

CHINESE FESTIVAL IN AFRICA: A Chinese worker with his Kenyan colleagues on a geothermal site in Nairobi on September 12, the date of China's traditional Mid-Autumn Festival (ZHAO YINGQUAN)

Zhang said Metorex has had long-term cooperation with JNMC. As early as in 2007, JNMC signed long-term exclusive sales contracts for Metorex's cobalt hydroxide and cobalt carbonate products. "We have cultivated mutual trust through our cooperation," Zhang said.

He believed another reason Metorex chose JNMC was its confidence in the Chinese market. China has unchallengeable advantages in financing and technology, and JNMC possesses leading technology in mineral exploration. "The most important thing is we can realize common development in this way," he said.

Once the purchase of Metorex succeeds, JNMC's total investment in Africa will reach $2.237 billion, making Africa its top overseas investment destination.

"Actually, we are a little late for entering this market. Many American and European mineral giants have occupied the best resources," he said.

JNMC and Wesizwe focus more on environmental protection and highly processed mineral products, he added. The Chinese Government has set strict regulations on overseas investment, banning all projects that might cause environmental problems.

Before the Wesizwe purchase, Zhang had only two Chinese staff members in the JNMC's South African branch. Now most of his employees are still locals. JNMC has kept all former Wesizwe employees except four leading positions for JNMC officials. And Zhang plans to recruit more local employees for the company.

He said once Wesizwe starts mining, it will create at least 3,200 jobs for local residents. Unemployment remains a pressing challenge for South Africa. Every South African president in recent decades has tried to boost employment. In 2010, the country's unemployment rate for black youths was as high as 39 percent. "Our investment benefits local people as we provide more job opportunities for them," he said.

Wesizwe has signed an employment commitment and social and labor plan with the South African Government to create more jobs. "We are trying our best to shoulder social responsibility here. And we hope to set a good example for all Chinese enterprises in Africa," Zhang said.

"Coopetition" in banking

Only with good financial support can Chinese enterprises like JNMC better develop their business in Africa. In response, Chinese bankers are rapidly expanding services in Africa.

The win-win strategy is reflected through cooperation between China's biggest commercial bank—the Industrial and Commercial Bank of China (ICBC)—and South Africa's Standard Bank Group (SBG). ICBC purchased 20 percent of SBG for $5.5 billion in early 2008. Now when an ICBC client in China expands its business in South Africa, the bank sends the client to SBG, and SBG directs South African companies doing business in China to ICBC.

As the biggest bank of South Africa and Africa as a whole, SBG has more than 1,500 branches throughout the continent. ICBC has over 4 million corporate customers, 490 of which are among China's top 500 companies.

Africa is a great potential market for banks, because about 50 percent of Africans don't yet have a bank accounts, said Liu Yagan, Chief Representative of ICBC Africa, in an interview with Beijing Review in Johannesburg. "We are not afraid of competition. Competition only makes us stronger," he said.

By cooperating with SBG, ICBC can successfully enter the mainstream market in Africa, and gain a competitive edge. "ICBC now faces a strategic opportunity to expand its business in Africa," Liu said.

To SBG, ICBC had adequate capital, which was of special importance for a bank, said Jacko Maree, the SBG's CEO. Maree also pointed out some of SBG's actual business profits were from Chinese enterprises investing in Africa.

Since the purchase, SBG shares have brought ICBC a profit of over 2 billion rand ($299.85 million) every year, and over half of the profits are reinvested in SBG for further development, Liu said.

"The rate of return from the investment is much higher than our normal loan rate, which stands at 3-4 percent," Liu said.

Through SBG, ICBC had granted loans totaling $8 billion by the end of June 2011. ICBC's successful investment in SBG has helped dispel misperceptions about Chinese enterprises in Africa. "We come here for investment, not for grabbing local resources," Liu said.

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