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Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

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China Makes Big Move On Battery Metals In Africa

Over the past few decades, China has been all over Africa, building railroads, airports, bridges, and power dams, doing what Africa's colonial masters should have done eons ago. Trade between China and Africa has surged dramatically from US$1 billion in 1980 to US$128 billion in 2016, while cumulative loans to African governments have hit US$143 billion, with half of them given over the last four years alone, making it Africa's largest bilateral creditor. China's lending to African countries has particularly skyrocketed under the massive Belt and Road Initiative.

On the surface, China is investing in the continent to help African countries develop a sound infrastructure and place the continent on the global map. African countries need these investments to sustain economic growth and join the global economy.

However, a peek below the surface reveals that China could be investing more aggressively in Africa for less altruistic reasons: To secure its interests there and also gain political and diplomatic influence, as has been the case in Southeast Asia.

China has, however, lately been changing tact, cozying up to mineral-rich countries such as the Democratic Republic of Congo to the chagrin of oil-rich ones like Angola and Nigeria.

The bulk of Chinese investments are concentrated in Angola and Nigeria, where they are closely linked to their respective oil industries. Related: Oil on Guard over Yemen as Saudi, Iran Meet in Secret

Source: BBC

Cheap oil

According to the China Africa Research Initiative (CARI) at Johns Hopkins University, between 2000 and 2019, China extended US$42.6 billion worth of loans to Angola, good for 30 percent of its total lending to African nations. The DRC received only US$2.7 billion worth of Chinese loans over the timeframe.

Beijing is, however, turning its attention to the Democratic Republic of Congo, with Chinese Foreign Minister Wang Yi in a recent trip to Kinshasa promising that it would write off loans worth about US$28 million and provide it with US$17 million in other financial support.

It's not like China is going green at a record pace and no longer needs to import oil; On the contrary, it remains the world's largest oil importer but is now benefitting from the availability of cheap crude from the likes of Iran, whose shipments would traditionally go to the United States.

Iran's crude and condensate exports were estimated at 825,000 b/d in Q1, a considerable improvement from 420,000 b/d in Q3 2020 though still a far cry from the 2.125M b/d the country exported in 2017. You can bet that China is more than happy to take the bulk of this crude, especially given the fact that Iran sells it to Chinese refineries at a steep discount to Brent crude. The relatively high level of exports amid those sanctions could mean that Iran is not desperate for a nuclear deal--and could, in fact, be hoping to prove that sanctions mean nothing.  Related: EU Admits It Can’t Go Net-Zero Without Natural Gas

But what Beijing still needs from Africa is its abundant mineral wealth, including copper, cobalt, and other rare minerals.

The DRC is the world's largest producer of cobalt, an essential component of Li-ion batteries for electric vehicles, as well as smartphones, laptops, and tablets.

Although Chinese firms have increasingly been investing in African mines, including in the DRC, they are still minor players compared with the mining giants of Western countries.

They could soon start giving their western peers a run for their money.

China Molybdenum, the owner of the world's second-largest cobalt mine in the DRC, recently purchased the undeveloped Kisanfu resource from Freeport McMoRan for US$550 million. Meanwhile, the likes of Chengtun Mining, Huayou Cobalt, Wanbao and CNMC are busy staking their claims in the Central African nation.

Locking in Africa

A cross-section of experts has taken a dim view of China's rapidly growing investments in Africa, with some accusing China of burdening the continent with debt in projects designed to lock in Africa.

"Even though they are financed with Chinese loans and built with Chinese contractors and labor, most of these projects are designed to lock African countries into a long-term political and diplomatic relationship with China rather than to make money," says Ted Bauman is a senior research analyst and economist at Banyan Hill Publishing.  

Bauman says China can use the diplomatic relationship, for instance, to gain Africa's votes on sensitive matters, like the Taiwan and the South China Sea issues. He says that evidence suggests that China is using state-funded energy infrastructure projects for Chinese corporate domination of African energy companies, something that could prove to be disadvantageous for their African partners, especially if Beijing starts leveraging lower prices for exports of African oil to China.

Former U.S. Secretary of State Rex Tillerson criticized China's lending policy to Africa, saying it "encouraged dependency, utilised corrupt deals and endangered its natural resources."

By Alex Kimani for Oilprice.com

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Leave a comment
  • R MOVASAT on April 28 2021 said:
    "It's not like China is going green at a record pace and no longer needs to import oil; On the contrary, it remains the worlds largest oil importer but is now benefitting from the availability of cheap crude from the likes of Iran, whose shipments would traditionally go to the United States"

    Iran hasn't sent shipments to U.S for over 40 years....

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