Page 26 - CEN 13 Apr.indd

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APRIL 2013
mining
This is according to Otsile Matlou, Head of Mining at
ENS (Edward Nathan Sonnenbergs), who says that
South Africa is increasingly becoming an attractive
destination for Chinese investment.
“South Africa has over 150 years of experience in mining
and is among the top five best banking systems in the
world. Furthermore, we arguably have more mineral
diversity than any other country in the world – mining
over 50 economic minerals within South African borders.
These factors are very important for Chinese investors,”
he says.
In addition, he says the recently amended Regional
HeadquarterCompanytaxlegislationprovidedafavourable
tax position for foreign companies to set up their regional
headquarters in South Africa. It has made it even easier for
Chinese firms to use the country as a launch pad for the
rest of their African projects. “We expect that there is going
to be an influx of Chinese investment into Africa, through
South Africa, as a result of this.” Ernie Lai King Head of ENS
China and executive in ENS’s Tax department, believes that
“the Headquarter Company concessions will assist a great
deal in competing with jurisdictions like Mauritius and I
am fortified by the announcement in the recent National
Budget speech that plans are in place to simplify the current
rules. The further announcement that plans to implement
Special Economic Zones is also very welcome.”
Otsile Matlou, whose firm has advised on mergers and
acquisitions throughout Africa, says ENS has already seen
An ideal launch pad
for Chinese investment
in Africa…
The diversity of the South African mining industry,
as well its world class banking and finance systems,
makes the country an ideal base from which Chinese
firms can expand their investment into Africa.
an increasing interest from China, specifically in African
mining ventures. “The indication is very much that the
Chinese are going to invest in a diverse mining sector.
They are not going to focus on one commodity and are
looking to diversify in iron ore, manganese and gold,
among others.”
According to him, the Chinese mineral strategy is largely
extractive. “While most companies are choosing to invest
in the countries where they are extracting minerals,
Chinese mining companies in the past were doing exactly
the opposite. They tended to mine the raw materials, ship
it to China, produce the products and ship those products
back into the international market.” Ernie Lai King reports
that, “the Chinese are now giving greater support to South
Africa’s beneficiation programme but a major obstacle
is South Africa’s sustainable electricity supply. A chrome
smelter, for example, consumes immense amounts of
electricity and until we have a sustainable reliable power
supply – it is a problem.”
Furthermore, according to Otsile Matlou, unlike other
active investors in South Africa, such as India, the
Chinese prefer not to enter into supply agreements if
they can take control of the operations themselves. “In
our experience, Chinese companies want to take control
of the operations themselves. Therefore, they will invest
in operations that are already up and running and seek
full control, so that they can determine the destination of
the ore or mined commodity.”
He attributes this approach to the fact that most of the
money available for investment is coming from Chinese
public funds. “There is no shortage of money. The Chinese
firms want to invest it into existing operating mines where
they are guaranteed returns.”
He says that the increased interest of the Chinese in
Africa has significant advantages for South Africa, if the
South African authorities balance labour regulation and
economic growth. “Foreign Direct Investment is always
good for an economy and is often a catalyst for growth.”
Ernie Lai King agrees and says, “Unless we achieve
good rates of economic growth, painful tax increases
are on the way. It is important that South Africa put up an
‘Open for Business sign’ to foreign investors and address
the factors that make us unattractive as an investment
destination,” he concludes.