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Friday, 08 November 2013 14:09

China to help South Sudan develop mining sector: How can South Africa get involved?

Written by Tobela Tapula
China to help South Sudan develop mining sector: How can South Africa get involved? Photo © SAIIA/ Riona Judge McCormack

The South Sudan Petroleum and Mining Minister, Stephen Dhieu Dau, has recently announced that China has decided to give South Sudan's mining sector a boost by lending the young state between US$1 billion and US$ 2 billion. The full amount will be spread between infrastructure projects, the mining industry and agricultural projects. Together, the two countries will conduct South Sudan's first geological survey, funded by a US$ 43 million Chinese loan.

The study will help to determine South Sudan's mining riches and will also assist South Sudan to provide mining licenses as it looks at extracting gold and other metals including copper and iron ore. How can South Africa, a country with a very developed mining sector and an “African Agenda”, get involved.

The geological surveys that were conducted in the 1970s and 1980s show that South Sudan may have rich deposits of gold, copper and uranium. However, since those surveys were conducted, South Sudan's mineral resources have remained unexploited, due to the on-going civil war. Some government officials in South Sudan believe that the new nation has unexplored deposits of gold, diamonds, copper, uranium, chromite, manganese and iron ore. Many of these minerals are to be found, and are exploited, in South Africa; in other words: there is expertise on the continent. If South Sudan has mineral wealth in these sectors, that could present South African investors and companies the opportunity to invest in the Republic of South Sudan, and share its technological expertise.

South Africa has the oldest mining jurisdiction in the world, it has over 100 years of mining experience, expertise and knowledge. The industry accounts for 6 per cent of gross domestic product (GDP), generates 60 per cent of South Africa’s export revenues and is a valuable contributor to corporate taxes. Mines employ 2.9 per cent of South Africa’s economically active population, which translates into more than half a million direct jobs. Moreover, South Africa has enacted prudent mining, labour and environmental legislation that emphasises the development of communities alongside economic benefits. South Africa’s involvement in the South Sudanese mining sector could certainly have positive spinoffs, for both countries.

With this expertise in mining on the continent, why has China succeeded to come in ahead? Financial muscles in the Middle Kingdom seem to help with deals on the continent, for example by pairing mining deals with infrastructure development or development co-operation projects. South Africa’s capacities in this regard are limited, but not entirely absent, either.

Assistance beyond investments While South Africa cannot compete with the Chinese financial muscle, the country can play a positive role in terms of sharing experience and assisting South Sudan in building capacities to manage its mineral wealth effectively. Some analyst have been making assertions that South Sudan will not have the institutional capacity to manage this sector and are uncertain that South Sudanese mining companies will benefit from these mining developments. Moreover, other mining experts are even asking how South Sudan will ensure that these mining projects contribute towards community and skills development initiatives. Expertise on corporate social responsibilities is clearly limited on the Chinese side and engagement with the public is certainly a weak point in many Chinese business endeavours. A crucial question for Juba thus is: how much can a government with limited capacity formulate standards – and then push foreign companies to adhere to these standards? Concerns are warranted considering Africa’s bad mineral resources management experience.

As a young nation with severe capacity shortages, South Sudan should focus on developing their ability to negotiate and formulate good mining agreements that will ensure that their mining sector contributes towards infrastructure development, economic growth, skills development and how to support small-scale miners. Some positive steps have been taken: South Sudan should be commended for passing its mining law early this year (in March 2013) that allows international firms to receive five-year exploration permits, renewable for two five-year terms, with a maximum area of 2 500 km2 and a 25-year large-scale mining. The South Sudanese mining law seeks to attract foreign investment but analysts argue that it will take time to develop the sector because of the lack of almost any infrastructure or geological surveys. This law will achieve its intended outcomes, if there is political will to implement it and when the capacity of implementing institutions is improved.

Another way of developing the South Sudan mining sector could be via Chinese mining companies that have joint ventures with South Africa companies. Via these joint ventures, both countries can invest and share best practices with their South Sudanese counterparts. This strategy would enable China to secure its long-term supply of raw material, additionally affording South African companies the opportunity to access the South Sudanese market. South Sudan would certainly benefit more from this economic co-operation, provided that there is proper co-ordination and co-operation. For any of these options, however, action, and co-ordinated action At that, would be necessary in South African business headquarters and in government in Pretoria.

 

Tobela Tapula is a Research Analyst at the Centre for Chinese Studies (CCS) at Stellenbosch University. This article was originally published on their website, and forms part of a commentary series from the Centre for Chinese Studies.

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