Johannesburg, 27 March (Argus) — China is stepping up its investment in a South African coal sector previously dominated by western firms such as Anglo American and UK-Australian miner BHP Billiton.
China's new president Xi Jinping started a state visit to South Africa on 25 March ahead of a meeting of the Brics group of nations — Brazil, Russia, India, China and South Africa — in Durban on 26-27 March. Jinping's visit to Africa was part of his first overseas trip since his confirmation as China's leader on 14 March.
Jinging's visit to South Africa aims to deepen the economic ties between Beijing and Pretoria. China is already South Africa's biggest trading partner with trade between the countries reaching 201bn rand ($21.7bn) last year. South African exports to China accounted for R89bn of this, mainly in the form of commodities, including coal.
Chinese firms take around 2mn t/month of South African thermal and coking coal or up to a third of South Africa's total coal exports from the Richards Bay Coal Terminal (RBCT). Coal is railed to RBCT by South African state-owned firm Transnet, which yesterday announced that it has secured around $5bn in loans from China Development Bank to partly fund its R300bn expansion of rail and ports to increase coal and other commodity exports.
Chinese shipping firm Chery is in negotiations to build a ship repair facility at Richards Bay port, while South Africa's Coal of Africa reached an agreement with Hong Kong-based Haohua Energy International (Hei) over commercial, technical, financial and operational issues. South African president Jacob Zuma earlier this month warned that Chinese firms were making significant advances in Africa.
But challenges remain. South African energy firm Sasol dropped plans to build coal-to-liquids (CTL) plants at a cost of $10bn in China in 2011 after Beijing failed to approve its plans. Sasol had insisted that it retain intellectual property rights over the use of its technology in the proposed plants. Sasol has since focused its investments in the North American gas market.
Chinese firms operating coal mines in southern Africa, including Zambia, have been hit by labour disputes sparked by wage demands and protests against Chinese managers. Chinese firms have also expanded their role in Zimbabwe's coal sector. South Africa and China are also major emitters of greenhouse gases because of their dependency on coal for power generation.
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