Southern African Minerals article in Contemporary Security Policy 2013

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This Means War? China'sScramble for Minerals andResource Nationalism inSouthern AfricaStephen Burgess & Janet BeilsteinVersion of record first published: 15 Mar 2013.

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This Means War? China’s Scramble for Mineralsand Resource Nationalism in Southern Africa

STEPHEN BURGESS AND JANET BEILSTEIN

The tendency for rising powers to seek control of resource markets is being repeated inSouthern Africa, where rising powers led by China are competing for strategic minerals.This could lead to market failure, shutting out Western companies. However, competitiondoes not mean that armed conflict will occur. The global reach of the United States is suchthat it can take measures short of war to guarantee the flow of minerals. China will be at a stra-tegic disadvantage for some time in relation to the United States and cannot assert control overthe flow of minerals. The Southern Africa case shows that even in the era of globalization, mon-opolization and nationalization of resources will still be attempted, but those efforts are likelyto be countered by global forces in favour of free markets. Rising powers like China may tem-porarily monopolize resources found on their own territory, but strong global forces will ensurethat the flow of most resources continues. Monopolization is unlikely to work outside the ter-ritory of rising powers, because they still must rely on sea lanes to transport those minerals. TheUnited States still has the ultimate trump in its navy, which can stop the flow of resources to anywould-be monopolist.

The growing competition for resources in Africa has led to predictions of conflict

between China and the United States.1 Responding to rising demand, the Chinese

state and Chinese companies have greatly increased their presence in Africa in the

last decade.2 Aggressive Chinese activities have caused concerns about the long-

term supply of strategic minerals through the free market. The Chinese state and

companies have engaged in ‘off-take agreements’, often involving infrastructure

development in exchange for minerals, as well as other practices that have the poten-

tial to eventually disrupt the free market and prevent Western companies from main-

taining access to strategic resources. Given the rising levels of Chinese demand for

resources, recent Chinese attempts to monopolize rare earth minerals, and reports

of a Chinese company’s five-year off-take agreement for practically all of South

Africa’s manganese, the probability exists of friction and eventual conflict between

China and the United States.3 China’s withholding of rare earth minerals from

Japan in 2010 sparked actions by Western governments and industries to maintain

supply. In Africa, relatively weak states make the manipulation of governing elites

and distortion of the market by Chinese actors easier than in more developed regions.4

Contemporary Security Policy, 2013, pp.1–24http://dx.doi.org/10.1080/13523260.2013.771095 # 2013 Taylor & Francis

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The surge in African resource nationalism in Southern Africa over the past decade

is a sign of growing populism, in response to chronic inequality in the sub-region.

Ruling parties, many of which were formerly socialist-oriented liberation move-

ments, have long made promises of socio-economic development and full employ-

ment. However, most leaders and ruling parties have been unable to deliver on

many of their promises, and some have been turning to populism and resource nation-

alism in striving to stay in power. In addition, resource nationalism is a sign of the

longstanding divide between ruling parties and Western and South African mining

companies, which have long been perceived as exploitative. In such cases, ‘indigen-

ization’ programmes have been launched, which promise to ‘trickle down’ benefits to

the masses from local black businessmen and companies with stakes in mining oper-

ations. Thus far, results of indigenization have generally been disappointing, with

very little trickling down to the people. As for the nationalization of the mines,

this demand has been raised by resource nationalists, even though nationalization

failed to deliver significant benefits in several African countries in the 1970s. The

spectre of indigenization and nationalization measures has shaken the confidence

of private investors and slowed their investments and could affect the subsequent

supply of strategic minerals to global markets.

This article is the first since the Cold War to focus on the problem of competition

for Southern African minerals and prospects for market failure and conflict.5 As such,

it is part of the growing body of research on struggles for resources and the onset of

conflict. For three decades, scholars have ignored this issue. Soviet defeat in the Cold

War ended efforts to shut off the flow of mineral resources, such as chromium, from

Africa to the West. The establishment of regimes in Africa in the 1990s that were

committed to the free market seemed to further lessen threats to supply. However,

rapidly rising demand by China and India for minerals in the 2000s, as well as the

rise of African resource nationalism, has led to a revival of concerns and to research

for this article.

The combination of China’s demand for resources and African resource national-

ism could eventually have serious consequences for the free market supply of stra-

tegic minerals and perhaps bring conflict. However, this article does not assume

that competition over scarce resources will inevitably lead to conflict. Instead, we

explore the state of affairs in Southern Africa, especially since 2000, lay out three

different scenarios over the coming decades, and make predictions concerning the

most likely outcomes. Thus, our emphasis is on conditions for intensified competition

and friction as well as armed conflict and market failure.6

If present trends continue, Chinese monopolistic activities, African resource

nationalism, and poor infrastructure could eventually lead to shortages of four stra-

tegic minerals, then to China trying to corner the market, and eventually to market

failure. In turn, the United States would most likely react to supply shortages and

looming market failure with coercive diplomacy against China. After a period of con-

frontation, China would be forced to back down due to the lack of a blue water navy

to challenge the US navy. Therefore, there could be market failure but probably not

armed conflict.

2 CONTEMPORARY SECURITY POLICY

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There are a number of alternative scenarios that could work against market

failure. China’s industrial development and demand for minerals could slow in the

coming years. The Chinese state and companies may not rely so heavily on off-

take agreements, which would lessen pressures on the free market. African resource

nationalism and populism will probably bring disappointing results, and there could

be a return to free market principles. Alternative metals or materials could be found to

substitute for the strategic minerals, and some minerals can be recycled to an extent.

On the negative side, there are scenarios that could lead to conflict. China could

develop naval capabilities to defend its sea lanes against the US navy, and the

latter could be weakened by budget cuts.

The conclusion reached in this article is that the rise of China and Asia as the

workshop of the world has created a new global dynamic that has arisen only in

the last decade or two. Given the recent upsurge in the Chinese scramble for minerals

and the re-emergence of resource nationalism in Africa, it is difficult to accurately

predict market failure and conflict scenarios. Market failure for Southern African

strategic minerals may not materialize for a decade or two, and the severity is difficult

to ascertain. However, given the high concentration of four strategic minerals, pro-

blems with supply and markets seem inevitable.

Chinese attempts to monopolize rare earth minerals have captured the attention of

policy-makers in the United States, Europe, and Japan, and the Southern African

issue has received some attention in their bureaucracies. In the United States, Con-

gress and the Department of Defense have taken action to ensure the availability

of rare earth minerals outside of Chinese control. While rare earth minerals can be

mined in a number of locations around the world, the high concentration of platinum

group minerals, cobalt, chromium, and high-quality manganese in Southern Africa

makes continued access more problematic. Even if the United States encourages

Western companies to invest more in Southern Africa, China and its companies

have far greater salience in operating there.

The Scramble for Resources, Market Failure, and Conflict

The probability of market failure grows when there is rapidly rising demand and stag-

nant supply of resources and when countries and companies seek to ‘corner the

market’ for those resources. The probability of inter-state conflict increases when

major powers that can project power are involved in the scramble for resources. In

the age of mercantilism, rapidly growing demand for gold, silver, and spices by

rising powers – the Netherlands, England, and France – was frustrated by two

major powers, Portugal and Spain, who maintained control of the resources. Spain

and Portugal were challenged on a global level by the rising powers and their

trading companies who waged wars to gain entry to closed markets and resources.

In the age of imperialism, European powers and companies competed for oil and min-

erals to fuel rapid industrialization. The result was a new wave of colonization, the

establishment of monopolies over resources, and inter-state friction that contributed

to the outbreak of conflicts.7

CHINA’S SCRAMBLE FOR RESOURCE MARKETS IN SOUTHERN AFRICA 3

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During the age of imperialism, two significant resource wars were fought in

Southern Africa by Great Britain to gain dominance over the gold mining region

in the Transvaal Republic. British mining entrepreneurs, led by Cecil Rhodes,

created pressures to seize control of the region that led Britain to attack the Boer

Republics. In contrast, Britain and Belgium scrambled for control of the copperbelt

that straddles present-day Zambia and the Democratic Republic of the Congo, but

boundaries agreed at the 1885 Berlin Conference helped to forestall conflict.

One of the most significant resource wars was initiated when Japan attacked the

United States and invaded British-controlled Malaya and the Dutch East Indies in

1941. From 1937 to 1941, the United States constricted supply of resources to a

rapidly industrializing Japan by embargoing oil and scrap metal shipments in

response to the Japanese invasion of China. Japan believed that its survival as a

major power was at stake and developed and followed up on plans to gain access

to oil and minerals and defeat American presence in the western Pacific. Japan was

desperate enough to risk taking on the United States in what seemed to some Japanese

strategists to be a losing proposition.8

During the Cold War, the Soviet Union developed a strategy to deprive the United

States and the West of the supply of oil and strategic minerals. In 1973, Soviet leader

Leonid Brezhnev said: ‘Our aim is to gain control of the two great treasure houses on

which the West depends, the energy treasure house of the Persian Gulf and the

mineral treasure house of Central and Southern Africa’.9

By gaining control of chromium, cobalt, platinum group minerals, and manganese

in Southern Africa, the Soviet Union was aiming to exploit the vulnerability of the

United States and the West in not having ready access to such minerals.10 In response,

the United States felt compelled to counteract the Soviet strategy by taking the side of

white minority regimes in Rhodesia and South Africa in the face of a rising tide of

African nationalism. From 1971 to 1976, the Byrd Amendment was enacted,

which waived American sanctions against Rhodesia in order to maintain access to

chromium.11 The Reagan administration’s policy of ‘constructive engagement’

towards the apartheid regime in South Africa, from 1981 to 1986, was initiated

partly out of the desire to maintain access to strategic minerals.12 In addition, the

United States helped to organize resistance on behalf of the Mobutu dictatorship to

the 1977 invasion of Zaire’s Shaba (Katanga) Province in order to safeguard

copper and cobalt mines from a takeover by insurgents who were backed by pro-

Soviet Angola and Cuba.

Resource nationalism, in the form of state ownership and indigenization, has been

initiated with great expectations in the past but has tended to bring declining output

and revenues. Zambia, Zaire, Chile, and Peru have launched nationalization and indi-

genization programmes in past decades, and all have experienced declining pro-

duction and export of minerals or oil. State-owned mining companies have proven

to be less productive than privately owned firms. In the past, Western companies

have been able to find alternative sources in other parts of the world, which under-

mined resource nationalism. However, such a strategy may not be available in

regard to some of the highly concentrated minerals, such as platinum group minerals,

that are found in Southern Africa.13


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This article’s uniqueness is the focus on a long-neglected strategic issue that is re-

emerging and promises to grow as a problem in the coming decades. In addition, the

article adds to the growing scholarly debate over resources and conflict. The literature

on resource conflict features a debate over the degree of correlation between resource

competition and conflict. Some authors see a strong correlation.14 Others see

resources as part of a multifaceted correlation in which the most explanatory variable

is either dyadic rivalry in the case of interstate wars or state weakness in the case of

civil wars.15 This article demonstrates that the likelihood of rising resource compe-

tition leading to interstate conflict is low, given the length of the Chinese supply

chain and the greater military strength of the United States for the foreseeable future.

The ‘new scramble for Africa’, led by China, is adding new dynamics and forces

to minerals markets. Those who defend China’s contribution to economic growth in

Africa may be generally correct, even though there are negative aspects to Chinese

mining and business activities.16 The arguments of those who see both the West

and the Chinese as rapacious or ‘neo-imperialistic’ tend to be overstated.17 Even

so, the Chinese do engage in practices that sometimes are harmful to both African

and Western interests.18 This article does not take sides in the debate over whether

Chinese or Western activities are helpful or harmful to Africa. Instead, without

making value judgements, we examine the Chinese tendency to seek to control

markets through monopolistic practices and extrapolate those tendencies to determine

trends in minerals supply and demand.

This article engages the issue of future conflict with China. Robert Kaplan leads

those who see conflict between China and the United States as inevitable.19 Propo-

nents point to the ‘string of pearls’ in the Indian Ocean that China is developing in

order to gain a permanent presence in the Indian Ocean and that will enable China

to challenge American dominance. In contrast, Henry Kissinger and other scholars

see the possibility that China and the United States can manage their differences

and that resource conflict will not occur.20 Other observers predict that Chinese

growth will slow and that China will not be strong enough to challenge the United

States.21 This article sees China as consistently growing over the past three

decades and continuing to do so over the next three decades. China will continue

to do whatever it takes to secure the minerals that it needs, which could lead to

market failure. However, China will not be positioned to gain military dominance

in the Indian Ocean and Africa for decades to come.

Critical Resource Dependencies and Supply and Demand Constraints

Mapping the sources of strategic minerals from Southern Africa indicates future chal-

lenges for the United States and the West in maintaining free market access. More

than 90 per cent of the world’s platinum group minerals are found in Southern

Africa, with 88 per cent found in a 200km radius around the South African capital,

Pretoria. Many of the mines are already several kilometres deep and very hot and

dangerous, which raises questions about sustainability. Most of the world’s cobalt

(greater than 50 per cent) and a high concentration of chromium (greater than

50 per cent) and a majority of the highest quality manganese are situated in the


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region. Also, the region contains high concentrations of vanadium, fluorspar, and tita-

nium. Alternative sources are not abundant in other parts of the world. The high con-

centration of mineral resources in the region and the fact that alternative sources of

supply are not as robust as for other minerals pose the probability that access

could be denied or that China could corner the market. Therefore, the United

States and its allies may not maintain a secure and steady supply of strategic minerals

from Southern Africa in the decades to come.22

The United States and other Western countries are heavily dependent on Southern

African minerals. The industries of the United States and its allies depend on the

free market for Southern African minerals, and American defence industries

depend on these minerals for the manufacture of aircraft, aerospace systems, ships,

and high-technology components. By the 2020s, the free market and US national

security interests could be adversely affected by the following supply and demand

constraints:

Demand constraints

. Rapid industrialization in China and other Asian states and rising mineral

requirements.. Technological change and increased uses for metals, e.g., high-tech components

and batteries.23

Supply constraints

. Resource nationalism in Southern African countries.

. Physical and human infrastructure: electricity, railways, water, and poor edu-

cation and skills.. Labour and governance challenges: labour costs and strikes, over-regulation, and

corruption.

The poor infrastructure of the region (electricity, railroads and roads, as well as short-

falls in skills) has resulted in sub-optimal production of minerals, with limited pro-

spects for expanded supply. Poor labour relations were underlined by the 2012

strikes at the Marikana platinum mine in South Africa, which led to dozens of

deaths. Less predictable is the impact that Chinese demand-driven intervention and

African resource nationalism (mine nationalization, state-owned mining companies,

and indigenization) will have on the free market and future flows. In a worst case

scenario, resource nationalism will further drive down production and supply,

while Chinese monopolization of minerals will dry up free market supply for the

United States and its allies in the 2020s and beyond.24 Thus, our emphasis is on

the two most variable factors: resource nationalism and Chinese activities.

Methodology

In determining future supply and demand of strategic minerals from Southern Africa

and the possibility of market failure, analysis of past and current trends is used to


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determine the possible effects of Chinese demand-driven activities, resource nation-

alism, and other factors over the medium term (5–15 years) and long term (15–30

years). The focus is on the four countries with the highest concentrations of minerals

– South Africa (platinum group minerals, chromium, and manganese), Zimbabwe

(platinum group minerals and chromium), and the Democratic Republic of the

Congo and Zambia (cobalt). It is assumed that platinum group minerals, chromium,

manganese, and cobalt will continue to be in demand for industries and vital for

defence industries, given that there are few substitutes. Chinese industrialization

trends, resource procurement strategy, and demand-driven activities are outlined,

stressing Chinese activities in the four Southern African countries. In addition,

trends in resource nationalism in each of these countries and the impact on supply

are assessed. The effects of sub-optimal infrastructure and other factors are taken

into account. Analysis of the major trends and their convergence provides varying

pictures of future supply and demand. The focus is on generating and examining

scenarios that are likely to occur in the medium and long term.

The possibility of market failure resulting in conflict is based upon the assumption

that there are resources that are so important for a state’s industrial well-being and

security that being deprived of them would constitute a threat to that state’s vital

national interests and that those interests cannot be recouped by using other

options besides military force. If states cannot negotiate the sharing of resources,

then they could initiate conflict against each other. The necessary conditions for con-

flict are states no longer being able to meet their demand for resources and having

sufficient power to reach out and try to wrest control of those resources, having

exhausted peaceful means of attempting to resume supply. Strong militaries that

can contest sea lanes and mining regions would be important in confrontation and

conflict.25

The possibility of conflict is determined by examining the extent to which the

United States and its allies on the one hand and China on the other will be vulnerable

to being cut off from Southern African minerals. Trends in the development of expe-

ditionary militaries and naval power on the part of the United States and China are

examined. The possibility is examined of China forming alliances with Southern

African states in efforts to fight the United States for control of strategic minerals.

Also, Southern African governments might be willing and able to fight for control

of their own resources.

Chinese Demand-Driven Activities and Strategy for Resource Access

China has developed a strategy to secure guaranteed supplies of strategic minerals,

including the widespread use of ‘off-take agreements’ with governments and compa-

nies worldwide and the imposition of export controls on rare earth and other minerals

that are critical for Chinese industries.26 In response to export controls on several stra-

tegic minerals, including those that come from Southern Africa, the World Trade

Organization has brought cases against China. In 2007, China identified five strategic

reserve minerals (including cobalt, copper, and manganese with heavy concentrations

in Southern Africa). China launched a plan to stockpile 500,000 metric tonnes of


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manganese, 200,000 tonnes of copper, and 300 tonnes of cobalt, equal to 90–180

days’ imports. The estimated cost of the stockpile was USD 2.7 billion. The stockpile

plan is operational today and includes rare earth minerals.27

China has been aggressively implementing its strategy for resource access in

seeking mineral resources in Southern Africa.28 Chinese state-owned and private

companies operate in almost every African state, and in Southern Africa some

have formed joint ventures with state-owned firms and ‘black empowerment’ compa-

nies. China has used soft power in building infrastructure in Southern Africa in

exchange for gaining access to guaranteed supplies of strategic minerals.29 China

also takes a long-term view in regard to the expansion of mining activities into

Southern Africa.30

One problem that Chinese companies face is that they are more hierarchical than

South African and Western companies. This basic cultural difference means that

every Chinese decision goes up many ranks to the top and then down many ranks,

no matter how minor the issue. This slows down Chinese takeover bids, especially

in a competitive economy like South Africa’s.31 However, China’s Jinchuan Group

competed with and eventually prevailed over Brazil’s Vale in a more than USD 1

billion takeover bid for South Africa’s Metorex, which had been heavily involved

in mining copper and cobalt in Zambia and the Democratic Republic of the Congo

for more than three decades.32

Chinese demand-driven activities have meant that the flow of strategic minerals

has been heading increasingly to China and will continue for the long run. Together

with resource nationalism and poor infrastructure, it appears that American and

Western access to strategic minerals from Southern Africa may diminish and even

be threatened in the coming decades.

Chinese Activities in Democratic Republic of the Congo (DRC)

Ninety per cent of China’s cobalt comes from the DRC’s Katanga Province and

Zambia’s Copperbelt Province. In the meantime, Chinese access to cobalt and

copper has dried up in the rest of the world.33 In 2008, China and the DRC (and Geca-

mines, the state mining company) made a USD 6 billion concession deal – ‘Sico-

mines’34 – for more than 10 million metric tons of copper and more than 600,000

metric tons of cobalt. Three major Chinese companies were involved: China

Railway Group, Sinohydro Corporation, and Metallurgical Group Corporation.

These companies have a controlling interest of 68 per cent. The Congolese parastatal,

Gecamines, has a 32 per cent interest. Almost USD 1 billion has been committed by

China’s Export-Import Bank for infrastructure development in exchange for copper

and cobalt.

Cobalt is the most high-profile strategic mineral that the DRC and Zambia

produce, and cobalt experienced rising demand and aggressive intervention by

Chinese companies, especially in the mid 2000s. Demand skyrocketed from 2002

to 2008 with a resulting rise in prices.35 The DRC’s Katanga Province is the

world’s largest cobalt producer at 34 per cent of global output, and next-door

Zambia’s Copperbelt Province is second at 20 per cent.


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In terms of the effect on the supply of cobalt, the Chinese could eventually buy

large amounts of copper, which could mean large amounts of cobalt flooding the

market, which could depress the price and make it non-economic to process.

However, at the moment, demand for cobalt has tended to drive prices higher, with

a short plateau in 2009 and 2010. An alternative scenario would be instability in

Katanga disrupting production and threatening supply.

As part of the Sicomines deal, China is building a road network stretching for

4,000km (2,400 miles) and a railway system spanning 3,200km (1,920 miles). This

is a much needed development in a country the size of Western Europe and the

second largest in Africa, but with only 200km (120 miles) of tarred road. The building

of a transport network is of strategic importance for China and Chinese companies.

For one, it will make it easier to transport copper and cobalt from mines in land-

locked Katanga to the coast.36

The USD 6 billion Chinese investment in the DRC has raised concerns,

especially around environmental consequences and transparency issues.37 Environ-

mental damage has already been done in the DRC by Chinese mining activities.

Artisanal mining and small operators have already damaged the environment by

excavating sites without care for plant or animal life. Thus far, the DRC government

has not been clear on environmental policies and has not enforced them, with

the expectation that investors would assume the responsibility to protect the

environment.38

A most notable part of the deal was China’s demand that the DRC guarantee

repayment of infrastructure investments should profits from mining projects be insuf-

ficient.39 Chinese investors complain about the lack of security in the DRC and about

their own government not providing enough support. China has been slow to

implement the infrastructure projects in the agreement. Initially the International

Monetary Fund (IMF) indicated that it was not willing to continue a three-year

poverty reduction and growth programme if the DRC government was potentially

beholden to China in terms of debt. There has also been criticism from those who

fear that the DRC government has found a way to line the pockets of top officials.

There were concerns that Congolese negotiators did not have the necessary capacity

to take on the Chinese negotiators, a perennial problem besetting African countries in

trade and economic talks. Civil society and other stakeholders in the DRC have

expressed concern about the transparency of the deal and have complained that

they were not consulted.40 In conclusion, China is guaranteeing its supply of

copper and cobalt from the DRC and is undeterred by security and transparency con-

ditions. Continued Chinese activities could threaten the flow of cobalt in the years to

come.41

Chinese Activities in Zambia

Zambia has featured a combination of Chinese demand-driven activities, a backlash

against questionable Chinese business practices, and the shooting and abuse of

mineworkers. Michael Sata’s Patriotic Front populist campaigns in 2006 and 2011

against alleged Chinese abuses finally paid off when Sata was elected president


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in September 2011. Zambian voters reacted against President Rupiah Banda and

the Movement for Multi-party Democracy (MMD), which favoured Chinese

involvement.

In 2007, Zambian cobalt production was set back by the Chinese management’s

abuses at the Chambishi mine, including the shooting of mineworkers, and a backlash

by mineworkers and politicians.42 Two years later, output restarted at Chambishi

Metals, which is now Zambia’s largest cobalt producer. Chinese companies,

especially the Non-Ferrous Metals Mining Corporation, remain heavily involved in

cobalt mining. In 2010, China provided a USD 5 billion loan to private companies

in Zambia, including Vedanta Resources, Canada’s First Quantum Minerals,

Equinox Minerals, Glencore International, and Metorex South Africa, so that they

could mine and export copper and cobalt to China.

In spite of Chinese largesse, Zambian attitudes towards China and Chinese com-

panies are more guarded than in the Democratic Republic of the Congo (DRC).43 In

September 2011, Michael Sata was inaugurated as president and some observers

expected him to intensify the regulation of Chinese behaviour. However, once in

office, he reversed course and sought a rapprochement with China and Chinese com-

panies. His about-face demonstrates the dominant position that China has established

in Zambia, its influence over political elites, and its control of the flow of cobalt from

Zambia.

Chinese Activities in Zimbabwe

In regard to strategic minerals, China and Chinese companies are heavily involved in

ferrochrome production in and export from Zimbabwe.44 A Chinese company owns a

majority share of the ferrochrome firm ZIMASCO, which exports large quantities of

the metal to China. As for platinum group minerals, some mining experts doubt the

Chinese technological capacity to mine them. Also, Chinese companies are involved

in the diamond trade from the Marange fields, which have been restricted until

recently by the Kimberley ‘blood diamond’ process due to the brutal conditions

imposed by the regime’s security forces on mineworkers.

China has long had an affinity with ‘liberation movement’ regimes and has had a

close relationship with Zimbabwe President Robert Mugabe and the ruling Zimbabwe

African National Union-Patriotic Front (ZANU-PF). In 2002, Mugabe initiated his

‘look east’ policy, especially after the European Union and the United States

imposed targeted sanctions on Mugabe and his inner circle. The policy means that

Chinese companies are not subject to Zimbabwe’s ‘Indigenization Law’ in the

same way that South African and Western companies are.

If the opposition Movement for Democratic Change (MDC) wins the 2013 elec-

tions and manages to take power, it would continue to welcome Chinese investment.

However, it will not be as favourable to Chinese interests as the Mugabe regime has

been. An MDC government would also reach out to Western and South African com-

panies for investment. However, there could be a military coup, and pro-ZANU-PF

generals will want to forge an even closer relationship with China, which could be

to the detriment of Western interests.


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In spite of the long Chinese relationship with ZANU-PF, China is active in Zim-

babwe more for the minerals and less to support Mugabe and his party. In the coming

years, Chinese interest in Zimbabwe and its minerals will continue to grow and will

attract the favour of both ZANU-PF and the MDC. In contrast, the United States and

the West will steadily lose influence. The flow of chromium and platinum group min-

erals to China will continue to rise.

Chinese Activities in South Africa

Chinese involvement in South Africa is growing but is not as pervasive and dominant

as in other Southern African countries, because the South African state and economy

are stronger, and many South African mining companies are more technologically

advanced than their Chinese counterparts. For example, Chinese companies do not

have the technical capability to compete in platinum group minerals mining and,

therefore, are years away from playing a primary role in the platinum group minerals

industry in South Africa.45

Chinese activities in South Africa have been centred on off-take agreements for

strategic minerals and establishing joint ventures with South African mining compa-

nies. In 2010, ASA Metals’ Jiuquan Iron & Steel (Jisco) purchased 26 per cent of

South Africa’s International Ferro Metals (IFM) which owns the Buffelsfontein chro-

mite mine and smelter. A Chinese company is partnering with a black empowerment

(BEE) company, Wesizwe, to mine platinum group minerals.

Chinese off-take agreements for ferrochrome and ferromanganese and chromite

and manganese ore have brought complaints from the South African stainless steel

industry about a shortage of supply for local production. Stainless steel industry

experts assert that Chinese companies are moving to corner the market on chromium,

manganese, and vanadium.46

In contrast to the DRC, Zambia, and Zimbabwe, the South African government

has made Chinese entry into mining in South Africa difficult. For example, the

South African Department of Mining Resources (DMR) put obstacles in the path

of the Chinese attempt to take over Wesizwe, and the Chinese company ended up

only gaining a 45 per cent interest. In addition, Chinese companies are wary of invest-

ing in South Africa because of the uncertainty caused by black economic empower-

ment.47 However, Chinese companies are well capitalized and backed by the Chinese

state and cushioned from risk.48 Also, Chinese officials regularly visit ministers and

deputy ministers in the DMR.

Some leaders of the African National Congress (ANC) Youth League, the Con-

gress of South African Trade Unions (COSATU), and the South African Communist

Party (SACP) are urging a shift towards China, which has become South Africa’s

largest trading partner and a potential source of greater investment and aid.49

China will continue to seek off-take agreements for South African minerals and

will continue to penetrate into mining operations. However, in attempting to take

over or initiate mining operations, Chinese companies will continue to encounter

resistance from the South African government and competition from South African

companies.


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Resource Nationalism in Southern Africa

Resource nationalism has taken the form of ‘indigenization’ programmes, which have

promised to ‘trickle down’ benefits from local black businessmen and their compa-

nies to the masses. However, results of indigenization have generally been disap-

pointing, with very little trickle down occurring. In several countries, state mining

companies have been created or revived and provided with competitive advantages.

At times, they have been used to mine non-profitable but strategic minerals and create

jobs. Nationalization of mines has been mooted in several countries, with the promise

of job creation and social benefits. However, Zambia and the DRC suffered through

failed mine nationalization experiments in the 1970s and 1980s, with Zambia return-

ing its mines to private control in 1998.

Resource nationalism in Southern Africa continues to grow in intensity. For

example, major changes have taken place in Namibia’s previously tranquil mining

industry. In May 2011, the Namibian government acted, contrary to the expectations

of some experts. Namibia’s Mines and Energy Minister Isak Katali announced that

uranium, copper, gold, zinc, and coal had been declared strategic minerals which

were to be mined with the participation of the state-owned mining company Epangelo.

The company would have at least a 26 per cent stake in companies that were mining

strategic minerals.50 Epangelo was recently formed and has been under-capitalized,

which has raised questions about how it would pay for its stakes in mining operations.

South African Resource Nationalism

South African resource nationalism is set against the backdrop of a government that

has not been able to deliver on many of its promises of employment and greater pros-

perity for the impoverished masses. South Africa’s macroeconomic performance

remains satisfactory but is undergoing stresses.51 Job creation remains the highest pri-

ority for the government, and the government’s New Growth Path for South African

development has been designed to deal with unemployment. It calls for modest econ-

omic liberalization combined with considerable state intervention and a mixed

economy.52

South African resource nationalism has become an immediate problem for the

mining industry and a disincentive for investors, and a source of continued decline

for South Africa’s mining industry. The 2010/2011 Fraser Institute survey of

mining investors ranked South Africa 67th out of 79 mining jurisdictions.53 South

Africa has declined as an investment destination in ten years from a middle-range

country to the bottom quartile.

Since majority rule in 1994, mining has been a declining industry, in spite of the

high concentration of strategic minerals. The South African National Planning Com-

mission, headed by former Finance Minister Trevor Manuel, pointed out in its ‘Vision

for 2030’ that the country’s mining industry needs investment above all. During the

global commodity boom of 2001–2008, it shrank by an average of 1 per cent a year,

whereas the world’s other top 20 mining-export countries grew by an average of 5 per

cent a year.54


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The principal problem is that South Africa has suffered from the increasingly

arbitrary role of the government and rising levels of political uncertainty, caused

by a number of resource nationalist actions by the government and ruling party.

Mining industry expert Peter Leon points to five factors that have contributed to

decline. These include ‘the upheaval of the previous minerals regulatory regime’, a

‘lack of regulatory certainty and maladministration’, and a ‘flawed Black Economic

Empowerment policy’, as well as the ‘spectre of mine nationalization’ and the ‘state-

owned mining company’.55

The 2002 Mining Law in effect nationalized minerals and enabled the govern-

ment to play a role in granting mining rights and created ownership and regulatory

uncertainty.56 The law included a ‘Mining Charter’ that mandated a ‘black economic

empowerment’ (BEE) requirement of 26 per cent ownership by black-owned compa-

nies. This requirement has created regulatory uncertainty and has been abused in

several high-profile cases.57 In 2007, the state-owned mining company African

Exploration was revived and given exemptions from regulation in order to make it

competitive with private companies.58 Many mining industry experts and investors

saw African Exploration as a Trojan horse, which would be a vehicle for mine

nationalization.59

In 2008, Julius Malema became the head of the African National Congress (ANC)

Youth League and in 2009 began calling for mine nationalization. Before Jacob Zuma

became President in 2009, the ruling ANC would have exercised party discipline and

most likely would have stopped Malema from continuing his campaign. However,

Zuma’s ANC failed to rein in Malema for two years, until he made the blunder of

calling for ‘regime change’ in Botswana in 2011. The repeated calls of Malema

and other Youth Leaguers for nationalization have done much to cause investors to

shy away from South Africa. Instead of squelching nationalization talk, the ANC

has commissioned a feasibility study to investigate the viability of mine nationaliza-

tion; the commission report has suggested that increased taxation would be more

effective in redistributing the revenues from mining than mine nationalization.60

The issue was considered at the December 2012 ANC conference, and President

Zuma has promised greater state intervention and the possible strategic nationaliza-

tion of certain minerals. If legislation for strategic minerals nationalization goes

forward, the government will be forced to choose between nationalization with or

without compensation. If the government decides to pay compensation, it will have

a hard time raising the revenue. If it decides to nationalize without compensation,

the results could be devastating, including a drop in the production and export of

strategic minerals, including platinum group minerals, chromium, and manganese.

American industries that rely on strategic minerals could be adversely affected.

With mine nationalization, investors would depart South Africa, and the country’s

mining industry would decline further.

Questions have arisen about the mechanisms for mine nationalization, especially

whether the state mining company African Exploration or a new state-owned

company would play a role in nationalization, or BEE companies or a combination

of the two. Even if nationalization occurred without compensation, it is assumed

that the South African state would contract Western companies to run the mines.


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This would be especially necessary in the case of platinum group minerals (PGM)

mining, which needs high levels of technical expertise. Nationalization would

mean no new investments in PGM mining and stagnation and decline and possible

market failure. In regard to chromium and manganese mining and ferroalloy pro-

duction, one would expect China to play a greater role in export of raw ore and fer-

roalloys as well as efforts to establish joint ventures with BEE companies to mine and

process ore.

The basis of the ANC government’s resource nationalism lies in the history of the

mining industry in which whites dominated and blacks were exploited as unskilled

labourers. Thus, the ANC and Congress of South African Trade Union (COSATU)

harbour an animosity against mining companies that goes back decades. A sign of

the ANC’s antipathy towards the mining industry came from Mineral Resources

Minister Susan Shabangu, who said the gold and platinum sectors were the ‘enemy

of workers’ when it comes to mine accidents.61 Mining industry experts point

out that mine nationalization without compensation would mean that mineworkers

would lose their pensions; therefore, the National Union of Mineworkers

(NUM) has opposed mine nationalization, whereas other COSATU leaders tend to

support it.

One possible route to mine nationalization would arise if the price of gold dra-

matically declines and the gold mines are forced to close. The gold mines are

often 4km deep and need a high gold price in order to afford the technology to

keep the mines open. If gold mines started closing, the South African government

would intervene and nationalize the gold mines, which would open the door to the

nationalization of other mining industries.62

Another resource nationalist proposal is to establish strategic mineral ‘exchanges’

in which minerals would be stockpiled to ensure price stability and encourage greater

‘beneficiation’ inside South Africa.63 Mining industry experts have criticized propo-

sals for mineral exchanges and compulsory beneficiation as uneconomic and

unworkable.64

In regard to South Africa, views of mining industry experts range from mildly

optimistic to very pessimistic. The mild optimists have counted on the moderate

wing of the ANC to forestall resource nationalism and perhaps even revive the

mining industry. Several experts cling to this hope, based on the history of generally

sound macroeconomic policies since 1994.65 It is significant that the Minister of

Mining Resources, Susan Shabangu, and the Minister for Public Enterprises,

Malusi Gigaba, have come out against nationalization.66 Also, the expulsion of

Julius Malema from the ANC and Youth League has diminished the voice of the

most prominent proponent of nationalization.

Pessimists point out that the 2002 Mining Law, the de facto nationalization of

minerals, and the Mining Charter opened the door to political interference in the

mining economy, which was followed by BEE abuses and calls for mine nationaliza-

tion.67 In spite of the abuses, the government continues to push ahead with transform-

ation of the mining industry. In addition, pessimists stress that Malema and others

have been scaring away investors with talk of nationalization. One mining investment

expert referred to the nationalization push, the state mining company, and other


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government actions as ‘death by a thousand cuts’.68 Since there is little or no capital

for nationalization, wholesale takeovers can only be achieved largely without com-

pensation. Otherwise, nationalization will be piecemeal.69

The likely outcome is somewhere in between the status quo and nationalization.

President Zuma is likely to be re-elected in April 2014, therefore some suspect that

the mining sector might be a sacrificial lamb to help him achieve re-election. It is

possible that nationalization will not be wholesale; some mines may be nationalized,

and some not. The South African government is looking at Brazil as a model for

increasing tax rates on the mining industry, since by Latin American standards, the

South African mining sector is under-taxed.70 Whatever is done, it is likely that

resource nationalism will continue to concern foreign investors, who will remain

reluctant to invest in South Africa. Also, local investor confidence will continue to

stagnate, and the supply of strategic minerals will not increase. The Fraser Institute’s

ranking of South Africa as a place to invest in mining exploration is likely to stagnate

in the bottom half.71 In the medium and long term, resource nationalism will continue

to place downward pressure on the South African mining industry. It will suppress the

supply of strategic minerals and make the scramble for them more intense in the years

to come.

Resource Nationalism in Zimbabwe

From 2000 to 2008, President Robert Mugabe and the ruling party, the Zimbabwe

African National Union-Patriotic Front (ZANU-PF), severely damaged the

economy of Zimbabwe and posed serious risks for mining investors and for the

flow of strategic minerals, including platinum group minerals and chromium. In

2000, Mugabe ordered the takeover of white-owned commercial farms without

compensation, resulting in the collapse of agricultural production and exports

and the halving of Zimbabwe’s GDP, causing a dramatic rise in investors’ risk

perceptions.

In 2007, an indigenization law was passed in anticipation of the 2008 elections,

which mandated the transfer of 51 per cent of mine ownership to local entities. As

the 2013 elections loom, Mugabe and his Indigenization Minister led in striving to

enforce the indigenization law, with deadlines for mining companies to implement

plans for the transfer of majority ownership to Zimbabwean entities. As a result of

Mugabe’s resource nationalism, the 2010/2011 Fraser Institute survey of mining

investors ranked Zimbabwe 71st out of 79 mining countries.

In spite of the high level of risk and threats from government officials, one of the

largest South African PGM mining companies (i.e. Zimplats in Zimbabwe) has

invested USD 500 million in a platinum refinery in Zimbabwe, and both Impala

and Anglo Platinum have invested billions of dollars in platinum mining in Zim-

babwe.72 The reason is that the platinum ore is relatively close to the surface and

less costly to mine than in South Africa. In response to the Indigenization Law, Aqua-

rius and other mining companies have offered 26 per cent local ownership and an

amount equivalent to 25 per cent ownership in social benefits.73 However, Mugabe

and his Indigenization Minister have threatened to cancel the mining permits of


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Zimplats and other companies if they do not fully comply.74 Zimplats has finally

agreed to give Zimbabweans a 51 per cent stake in the company.75 Chinese compa-

nies have been exempted from the law, which can be seen as part of Mugabe’s ‘look

east’ policy. Also, the Zimbabwe government has announced that it is considering a

ban on raw platinum exports, which would dramatically reduce the flow of platinum

group minerals from Zimbabwe.76

The Movement for Democratic Change (MDC), which won the 2008 parliamen-

tary elections and expects to win the 2013 elections, is a moderating force. President

Mugabe is approaching 90 years of age and has been in failing health. However,

several top military officers have rejected the possibility of the MDC taking power

and threatened a coup.

The range of views on the Zimbabwe mining industry extends from optimistic to

very pessimistic. There are mining industry insiders who consider Mugabe’s resource

nationalism to be largely rhetoric.77 Other optimists think that Mugabe’s days are

numbered.78 Pessimists include the Fraser Institute and investors from outside the

region who are unlikely to take risks in Zimbabwe. There are those pessimists who

are fearful of the possibility of a military coup, which creates additional uncertainty.

The beneficiaries of uncertainty are likely to be some of the ZANU-PF inner circle as

well as Chinese companies.

The likely outcome is hard to determine. Foreign investors who are not familiar

with Zimbabwe will continue to stay away. If ZANU-PF stays in power or the mili-

tary seizes power, the air of turbulence and uncertainty is likely to remain. However,

if the MDC wins the forthcoming elections and is able to take power, and the military

refrains from staging a coup, the situation could improve. Because of political uncer-

tainty, PGM mining could either decline or dramatically increase in the next four

years, and the flow of platinum group minerals and chromium from Zimbabwe

could either diminish or increase.

Resource Nationalism in the DRC

In the Democratic Republic of the Congo (DRC), President Joseph Kabila leads a

neo-patrimonial regime in a recovering failed state. The state-owned mining

company Gecamines plays a role in mining deals and patronage, including the

2008 ‘Sicomines’ deal with China. In 2010, the DRC government expropriated,

without explanation, First Quantum’s (of Canada) rights to exploit two Kolwezi

copper/cobalt mines and mine tailings. Dan Gertler (President Kabila’s Israeli

advisor) bought the mining rights and sold them to a Kazakh mining company.

This arbitrary act highlights the high levels of risk facing mining companies in the

DRC as well as the negative role played by Dan Gertler.79

In regard to resource nationalism, a struggle emerged between President Kabila

and Katanga Governor Moı̈se Katumbi Chapwe, who constructed a power base

and is well regarded in some Western quarters. This has spawned fears of instability

in Katanga and a rising risk to cobalt production and supply. Katanga Province has

always been the more industrial and developed region of the country and experienced

secessionist rebellions in the 1960s and 1970s. In the past, whenever there was


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friction between the central government in Kinshasa and the Katanga provincial gov-

ernment, the dictator Mobutu would order power cut from Inga Dam to the copper

mines. Today, the issue revolves around revenues from mining in Katanga that

flow to the capital, Kinshasa, and do not flow back to Katanga.80 One mining execu-

tive with strong involvement in the DRC is concerned that these differences will boil

over into conflict, which could seriously disrupt the supply of cobalt and copper to the

world.81 President Kabila has been re-elected and is due to serve until 2016 and is

likely to keep the pressure on Katanga. Tensions between Katanga and Kinshasa

will continue, and a major escalation could threaten the supply of copper and cobalt.

The views of the DRC range from pessimistic to guardedly optimistic. Oddly, one

very experienced mining industry entrepreneur is quite bearish on the DRC, while

being bullish on Zimbabwe.82 The DRC will continue to witness government inter-

ference in the mining industry, which will continue to concern investors. The

Chinese may be able to operate under conditions of uncertainty, but Western compa-

nies and investors find it daunting. As a result, more cobalt and copper will flow to

China.83

Synthesis and Scenarios

In the short and medium term, the most important factors in regard to the flow of stra-

tegic minerals are and will be infrastructure and resource nationalism. Many Southern

African mining experts think that infrastructure is the greatest short-term obstacle,84

while a growing number of experts think that resource nationalism is becoming the

greatest problem and will be so in the medium term.85 In the short term, infrastructure

remains the major impediment to sustaining and developing mining in South Africa,

and it is a problem in the Democratic Republic of the Congo (DRC), Zambia, Zim-

babwe, and Namibia. Resource nationalism is inhibiting further investment and

development in South Africa, Zimbabwe, and the DRC. In South Africa, infrastruc-

ture and resource nationalism will be the greatest problems in the short term and the

medium term. They will lead to sub-optimal production and supply of minerals but

probably not to market failure.

Chinese involvement is already having an impact in the DRC, as well as in Zim-

babwe and Zambia, which is affecting the flow of cobalt and ferrochrome. Some

experts think Chinese off-take agreements are a growing threat that could become

as serious as electricity shortages and infrastructure deficiencies, especially in the

medium to long term.86 In the long term, Chinese demand-driven activities and mon-

opolization of strategic minerals appear to be the most significant factors that will

affect the flow of platinum group minerals, manganese, chromium, and cobalt from

Southern Africa. India’s rising demand for resources may lead it to bandwagon

with China in sharing in off-take agreements. Chinese monopolization of minerals

could lead to market failure for cobalt, chromium and manganese in the medium

term and for platinum group minerals in the long term.

The preceding analysis and synthesis inform a range of possible scenarios in

regard to demand and supply trends and their interaction (see Table 1), as outlined

below.


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Scenario A (Market Failure, No Conflict)

For Southern Africa, resource nationalism and demand-driven activities on the part of

China and other Asian states will become increasingly important in affecting and

even threatening the free market for strategic minerals. Chinese attempts to monop-

olize minerals markets could lead to market failure. It is likely that rising Chinese

off-take agreements will lead to interruptions in supply of cobalt, manganese, and

chromium in the medium term and platinum group minerals in the long term, as

has been the case with rare earth minerals in recent years. Interruptions would be

followed by American multilateral action through the World Trade Organization to

punish China, and the United States would engage in bilateral negotiations with

China in order to restore supply. Also, the United States and its allies would

attempt to use carrots and sticks with supply countries, including South Africa and

the DRC, in order to guarantee the continued flow of strategic minerals.

In the long run, increasing demand and off-take agreements could lead to the shut-

ting of American and Western defence and high-tech industries, American industries

losing out in competition with Chinese industries, and the United States military

unable to fulfil certain core functions. If faced with the cut-off of strategic and

defence critical minerals, the US navy could move to stop Chinese shipping on the

high seas from Southern African ports and even seize strategic minerals. China

will not have the naval capabilities to offset such action. Overland routes from

Southern Africa to China are long, underdeveloped, and not cost effective. Therefore,

it is possible for the United States to respond to market failure with military power but

without precipitating conflict.

Scenario B (Market Failure, Conflict)

The likelihood of market failure leading to conflict is dependent on the ability of

China to defend the shipping of minerals from Southern Africa to Asia. This

ability is dependent on the pace and scope of China’s build-up of naval and other

military forces, as well as its formation of alliances with Southern African regimes

and Asian states against the United States. It will take decades for China to build

up the naval forces to have the capability to take on and defeat the US navy, even

with American force reductions. China may be able to use alliances in Southern

Africa and elsewhere to stand up to the United States, as well as the asymmetric capa-

bilities needed to defeat American forces; however, it will still be faced with the task

of sustaining the shipment of strategic minerals over a period of several decades.

Scenario C (Status Quo)

It is possible for the status quo to continue and for market failure and conflict to be

avoided. In order for this to happen, the monopolistic tendencies of Chinese compa-

nies would have to moderate to enable the free market to be sustained. Much would

be contingent on slowing the rate of growth of China, India, and other Asian countries

and cooling demand for strategic minerals. Predictions of Chinese and Asian growth

patterns over the next 30 years vary, but all assume that growth will continue to range

between 6 and 10 per cent per annum. If so, demand for strategic minerals will


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continue, although it may not continue to rise at the same pace as the last 20 years.

Many analysts assume that China still needs to triple its industrialization in order

to attain the GDP per capita to become a middle-income country.87

Overcoming stagnation and decline in Southern African mining industries would

require a move away from resource nationalism and towards adopting and imple-

menting policies that would attract foreign direct investment and lead to a major

upgrade in infrastructure. There is no sign that the pragmatic wing of the African

National Congress (ANC) will regain influence in government or that the opposition

will ever defeat the ANC in elections or that the tripartite alliance between the ANC,

the Congress of South African Trade Unions (COSATU), and the South African

Communist Party (SACP) will fall apart. In Zimbabwe, Zambia, and the DRC, the

process of developing strong states and economies that can support development

of mining is proving to be a long and arduous one.

Conclusion

The new scramble for strategic minerals in Southern Africa, led by China, may lead to

market failure and the shutting out of Western interests. However, this possibility

does not mean that conflict is inevitable. The tendency of rising powers to challenge

status quo powers for the control of resource markets is being repeated in Southern

Africa and could eventually lead to market failure in regard to certain minerals

that are heavily concentrated in the region. Conflict over the minerals is possible,

although the global reach of the United States is such that it can take measures

short of war in order to restore the free market and guarantee resumption of the

flow of minerals. China does not have global reach and will be at a strategic disad-

vantage for some time to come in relation to the United States and the West, and

cannot guarantee total control over the minerals. The Southern African states are

too poor and too dependent on the export of minerals to divert or stop their flow,

although resource nationalism and deteriorating infrastructure have been causing

sub-optimal flow. Therefore, it is possible that American and Western coercion

would arrest market failure and restore a free market, albeit one in which all actors

would be forced to accept sub-optimal supply of strategic minerals.

TABLE 1

SCENARIOS

Outcomes Variations in Chinese behaviour, resource nationalism, and American coercion

Market failure, noconflict

Resource nationalism and poor infrastructure bring minerals shortage. Chinacorners minerals market to meet rising demand. US coercive diplomacycompels China to relent.

Market failure,conflict

Minerals shortage. China corners minerals market. American coercion bringsconflict. US navy superiority brings Chinese defeat.

Status quo Resource nationalism moderates. Minerals shortage is not severe due tocontinuing investment. China does not corner the market due to plateau indemand and adequate supply of minerals.


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The larger meaning of the Southern Africa case for the study of resource conflict

is that, even in the era of globalization, efforts to monopolize and nationalize

resources will still be attempted. Rising powers, like China, may temporarily monop-

olize resources, such as rare earth minerals, found in their own soil for their own

industrial uses. However, such efforts are likely to be counteracted by global

forces in favour of free markets and the unimpeded flow of resources. Furthermore,

monopolization is unlikely to work outside of the home areas of rising powers,

because they must still rely on sea lanes to transport those minerals. In regard to con-

flict over resources, this article has demonstrated that interstate conflict is unlikely,

given that the United States still has the ultimate trump card in the US navy,

which can stop the flow of resources to China or other states.

Trend analysis of China’s scramble for minerals and resource nationalism, as they

apply to the four mining countries and the supply of four strategic minerals, has pro-

vided the basis for synthesis and the assessment of three different scenarios. It is poss-

ible that more systematic and quantitative analysis will eventually provide a more

precise picture of future scenarios. Whatever mode of analysis, the high concentration

of strategic minerals in Southern Africa as well as Chinese demand-driven activities

and resource nationalism provide a dynamic that requires the sustained attention of

academic and policy circles.

This article has contributed to the literature on resource conflict by exploring the

dynamic of the likeliest region for minerals market failure and increased contention

and conflict among mineral-hungry states. In spite of the high concentration of the

four strategic minerals in Southern Africa due to its peculiar geology, the prospects

for interstate conflict are not high because of American global reach and the weakness

and dependency of sub-regional states. The remoteness of Southern Africa means that

control of the sea lanes is key to dominance, and the United States has been pre-

eminent for the past six decades and will remain so for at least one or two decades

to come. In contrast, in the Persian Gulf there are stronger states, such as Iran,

which might eventually be able to ally with China to redirect the flow of oil and

gas to East Asia. Even so, prospects for interstate resource conflict remain low.

The struggle of Southern African states for industrial development means that

they have placed export controls on mineral resources. However, they must also

export some of their minerals for foreign exchange earnings. This dynamic entails

that they cannot engage in conflict to prevent those resources from leaving their

territories.

Policy-makers in the United States, the European Union, and Japan have taken

action to counteract China’s attempts to monopolize rare earth minerals, especially

through support to develop new mining facilities outside of China. The rare earths

experience has made minerals experts in Western governments willing to pay atten-

tion to the long-term possibility of China cornering the market on key Southern

African minerals. If supply problems are foreseen, those governments can stockpile

the minerals that may be affected and engage in recycling. However, developing

alternative mining facilities will be difficult, given the high concentration of the

key minerals in Southern Africa. Ultimately, the trump card of coercive diplomacy

is available to guarantee supply of platinum group minerals, cobalt, chromium, and


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manganese. As years pass by, the challenges will grow, and policy solutions will

prove more difficult to find.

D I S C L A I M E R

The research and conclusions in this article are those of the authors and do not necess-

arily reflect the views and policy of the US Air War College, Air University, the US

Air Force, the Department of Defense, or any other agency of the United States

government.

N O T E S

1. Martin Rupiya and Roger Southall, ‘The Militarisation of the New Scramble in Africa’, in RogerSouthall and Henning Melber (eds), A New Scramble for Africa? Imperialism, Investment and Devel-opment (Scottsville, South Africa: University of KwaZulu Natal Press, 2009), pp. 165–89.

2. See Africa-Asia Confidential, available at http://www.africa-asia-confidential.com/news. Companiesfrom India, Brazil, Malaysia, South Korea, and other countries are also very active in Southern Africa.

3. Interview with officials at the US Defense Logistics Agency Strategic Materials, 17 June 2010.4. Damien Ma, ‘China Digs It: How Beijing Cornered the Rare Earths Market’, Foreign Affairs, 25 April

2012.5. The earlier generation of scholarship on the topic includes R.A. Hagerman, U.S. Reliance on Africa for

Strategic Minerals (Quantico, VA: The Marine Corps Command and Staff College, Quantico, 6 April1984); Hanns W. Maull, ‘South Africa’s Minerals: The Achilles Heel of Western Economic Security’,International Affairs, Vol. 62, No. 4 (Autumn 1986), pp. 619–26; and C.J. Van Rensburg and D.A.Pretorius, South Africa’s Strategic Minerals: Pieces on a Continental Chessboard (Johannesburg,South Africa: Valiant Publishers, 1977).

6. Market failure is a situation in which the quantity of supply of a good does not equate to the quantity ofdemand; therefore, market equilibrium is not attained. In the China and Southern Africa case, one par-ticipant in a marketplace accumulates disproportionate power, preventing normal supply and demandmechanisms from determining fair prices. Where there is a dominant buyer (a ‘monopsony’), othermarket participants will not be given a fair chance to influence outcomes.

7. Michael Klare, Resource Wars: The New Landscape of Global Conflict (New York: Holt, 2002).8. Jonathan Marshall, To Have and Have Not: Southeast Asian Raw Materials and the Origins of the

Pacific War (Berkeley, CA: University of California Press, 1995); Edward S. Miller, Bankruptingthe Enemy: The U.S. Financial Siege of Japan before Pearl Harbor (Annapolis, MD: Naval InstitutePress, 2007).

9. Richard Nixon, The Real War (New York: Warner Books, 1980), p. 23.10. Robert Keohane and Joseph Nye, Power and Interdependence (Boston, MA: Addison Wesley, 2001),

pp. 3–7. Vulnerability and sensitivity were exemplified by the Arab oil embargo of 1973 and sub-sequent ‘oil shocks’ of the 1970s.

11. R. Sean Randolph, ‘The Byrd Amendment: A Post-Mortem’, World Affairs, Vol. 141, No. 1 (Summer1978), p. 57.

12. J.E. Davies, Constructive Engagement? Chester Crocker and American Policy in South Africa,Namibia and Angola 1981-8 (Athens: Ohio University Press, 2007), pp. 57–8.

13. Ernest J. Wilson III, ‘Strategies of State Control: Nationalization and Indigenization in Africa’, Com-parative Politics, Vol. 22, No. 4 (July 1990), pp. 401–19.

14. Klare, Resource Wars (note 7).15. Thomas Homer-Dixon, Environment, Scarcity, and Violence (Princeton, NJ: Princeton University

Press, 1999).16. Deborah Brautigam, The Dragon’s Gift (Oxford: Oxford University Press, 2009).17. Rupiya and Southall, ‘The Militarisation of the New Scramble in Africa’ (note 1), pp. 165–89.18. Ibid.19. Robert D. Kaplan, ‘How We Would Fight China’, The Atlantic, June 2005.20. Henry A. Kissinger, On China (New York: Penguin Books, 2012).


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21. Minxin Pei, ‘Superpower Denied? Why China’s “Rise” May Have Already Peaked’, The Diplomat, 9August 2012.

22. ‘Reconfiguration of the National Defense Stockpile Report to Congress’, April 2009, available athttp://www.acq.osd.mil/mibp/docs/nds_reconfiguration_report_to_congress.pdf (accessed 17 June2010). The Defense National Stockpile Center (part of the Defense Logistics Agency, Ft. Belvoir,VA), whose name was changed to Defense Logistics Agency Strategic Minerals division, wascharged with maintaining stockpiles of defence critical minerals for the US. military. The Departmentof Defense’s Approximate Annual Usage of Standard Materials that are concentrated in SouthernAfrica: #7 in rank of DoD usage is manganese ore chem/metal grade – 25,041.8 short tons peryear; #9 is chromium ferro (ferrochromium) – 9,667.8 short tons per year; #10 is chromite ore (allgrades) – 9,630.5 short tons per year. Others include chromium metal – 913.8 short tons per year;manganese ferro (C and Si) – 7,897.0 short tons per year; vanadium – 134.8 short tons per year; plati-num (platinum group) – .8 short tons per year; palladium (platinum group) – 2.3 short tons per year;iridium (platinum group) – .3 short tons per year; no data for titanium mineral concentrates andfluorspar.

23. One demand constraint is the increased uses of platinum group metals, especially the minor platinumgroup metals, in high-tech components, batteries, and fuel cells. One possible remedy for future supplybottlenecks would be recycling. Also, demand trends for chromium, manganese, and cobalt could leadto bottlenecks.

24. India, South Korea, Malaysia, Brazil, Russia, Kazakhstan, and other countries are also seeking min-erals. For relevant news stories, see Africa-Asia Confidential (note 2).

25. Klare, Resource Wars (note 7).26. Jennifer C. Li, China’s Rising Demand for Minerals and Emerging Global Norms and Practices in the

Mining Industry, FESS Working Paper 2 (Washington, DC: US Agency for International Develop-ment, 2006).

27. James Areddy, ‘China Moves to Strengthen Grip over Supply of Rare-Earth Metals’, Wall StreetJournal, 7 February 2011.

28. Lara Smith, Core Consultants, Johannesburg, interviewed 7 June 2011. A review of Sino-Africanmining relations was being issued by Core Consultants at the end of 2011.

29. Padraig Carmody, The New Scramble for Africa (Cambridge: Polity, 2011). See also Brautigam, TheDragon’s Gift (note 16).

30. Hume Scoles, Senior Partner, Malan Scoles Attorneys, Johannesburg, interviewed 9 June 2011.31. Lara Smith, interviewed 7 June 2011 and Metorex executive, Johannesburg, interviewed 31 May 2011.32. ‘Metorex Listing to be Suspended in Jan’, Business Live, 28 December 2011.33. Metorex executive, interviewed 31 May 2011.34. Sicomines was originally a USD 9 billion deal that was reduced to USD 6 billion after an intervention

by the International Monetary Fund.35. Dan Haglund, ‘Regulating FDI in Weak African States’, Journal of Modern African Studies, Vol. 46,

No. 4 (2008), pp. 547–75. In Zambia, cobalt production doubled to 4,057 tons (2009) from 1,967 tons(2001).

36. Stephanie Nieuwoudt, ‘Pros and Cons to Huge Chinese Investment in DRC’, Inter Press Service NewsAgency, 28 October 2008, available at http://ipsnews.net/africa/nota.asp?idnews=49031.

37. Jean Didier Losango, ‘South African Mining Companies Corporate Governance Practice in the DRC:Rushi Mine’, in Claude Kabemba and Roger Southall (eds), South African Mining Companies inSouthern Africa (Johannesburg: Southern African Resource Watch, 2010), pp. 152–89.

38. Nieuwoudt, ‘Pros and Cons’ (note 36).39. Johanna Johansson, ‘Patterns of Chinese Investment, Aid and Trade in Central Africa (Cameroon, the

DRC and Gabon)’, briefing paper for the World Wildlife Fund, Stellenbosch, Centre for ChineseStudies, August 2009, pp. 11–17.

40. Claude Kabemba, Southern African Resource Watch, Johannesburg, interviewed 27 August 2010 and8 June 2011.

41. Metorex executive, interviewed 31 May 2011.42. Haglund, ‘Regulating FDI in Weak African States’ (note 35), pp. 547–75.43. John Lungu and Sumbye Kapena, ‘South African Mining Companies Corporate Governance Practice

in Zambia: The Case of Chibuluma Mine Plc.’, in Kabemba and Southall, South African Mining Com-panies in Southern Africa (note 37), pp. 47–88.

44. ‘ZIMASCO Imports Coal’, Zimbabwe Independent, 18 August 2011.45. Rob Still, Chair and Chief Executive, Pangea Exploration Group, Johannesburg, interviewed 9 June

2011.


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http://ipsnews.net/africa/nota.asp?idnews=49031

46. Theresa Meyer, Spokesperson, Columbus Stainless Steel, Witbank, telephone interview, 2 June 2011.47. Peter Leon, Partner and Co-Head of Mining, Energy and Natural Resources, Webber Wentzel, Johan-

nesburg, interviewed 7 June 2011.48. Michael Spicer, Vice President, Business Leadership South Africa, Johannesburg, interviewed 3 June

2011.49. Greg Mills, Director, Brenthurst Foundation, Johannesburg, interviewed 1 June 2011. Rob Still, inter-

viewed 9 June 2011.50. ‘Namibia: Existing Licences not Affected by New Mining Law’, SteelGuru, 18 May 2011.51. Assis Malaquias, ‘Stress-Testing South Africa: The Tenuous Foundations of One of Africa’s Stable

States’, Africa Center for Strategic Studies Research Paper, August 2011.52. African National Congress, ‘New Growth Plan’, ANC NEC Bulletin, January 2011.53. Fraser Institute Survey of Mining Companies, 2010–2011, available at http://www.fraserinstitute.org/

uploadedFiles/fraser-ca/Content/research-news/research/publications/mining-survey-2010-2011.pdf(accessed 12 September 2011). The breakdown of the ratings was as follows: uncertainty relating toadministration, interpretation, and regulation enforcement ¼ 69th; legal processes that are timely, effi-cient, and not corrupt ¼ 66th; uncertainty over land claims ¼ 80th; socioeconomic deals ¼ 78th; pol-itical stability ¼ 77th; labour problems ¼ 89th; security (from criminals) ¼ 80th; corruption ¼ 68th;and uncertainty in mining policy ¼ 79th. In overall ranking South Africa moved up 23 places, from77th place in 2010–2011 to 54th place in the 2011–2012 survey.

54. ‘Nationalisation in South Africa: A Debate that Will Persist’, The Economist, 3 December 2011.‘Vision 2030’ was submitted to the government in November 2011.

55. Peter Leon, The South African Mining Industry - Where to Now? Address to International PlatinumGroup Metals Association Annual Dinner, London, 17 May 2011.

56. Ibid. The Pretoria High Court’s ruling of 28 April 2011 in the case of AgriSA’s coal mining rightsstated that ‘its coal rights had been legislated out of existence’.

57. Leon, The South African Mining Industry (note 55).58. In May 2011, the African Exploration exemption was withdrawn by the Mining Resources Minister,

Susan Shabangu. See https://www.moneyweb.co.za/mw/view/mw/en/page295025?oid=533229&sn=2009+Detail&pid=289766.

59. Michael Spicer, interviewed 3 June 2011.60. ‘Nationalisation in South Africa’ (note 54). Thus far, it seems that the study commission will not rec-

ommend nationalization.61. ‘Shabangu Warns on Mining Safety’, Business Day, 4 October 2011. Both platinum and gold mining

are inherently dangerous, given the depth and heat in the mines. Mining industry experts point out thatit is impossible to maintain perfect safety and profitability at the same time.

62. Tim Cohen, Editor of Business Day, telephone interview, 20 May 2011.63. Iraj Abedian, economist, CE Pan-African, Johannesburg and government advisor, interviewed 8 June

2011.64. Roger Baxter, Chief Economist, Chamber of Mines, Johannesburg, interviewed 9 June 2011. Godfrey

Gomwe, Executive Director of Anglo American South Africa, Johannesburg, interviewed 10 June2011.

65. Godfrey Gomwe, interviewed 10 June 2011; Tim Clark, Deutsche Bank, Johannesburg, interviewed 22August 2010.

66. ‘Nationalisation in South Africa’ (note 54).67. Catherine Keene, mining lawyer, Taback and Associates Law Firm, Johannesburg, interviewed 2 June

2011. Severe pessimists believe that nationalization of the mines in South Africa is inevitable. Theirposition is reflective of a broader unease with the direction in which South Africa has been heading,especially over the last three years of the Zuma administration.

68. Steve Shepherd, mining analyst, JP Morgan, Johannesburg, telephone interview, 31 May 2011.69. Greg Mills, interviewed 1 June 2011; Rob Still, interviewed 9 June 2011; Michael Spicer, interviewed

3 June 2011; Godfrey Gomwe, interviewed 10 June 2011; Bloomberg News correspondent(anonymous), Johannesburg, interviewed 30 May 2011.

70. Peter Leon, interviewed 7 June 2011.71. Fred McMahon, Fraser Institute, Toronto, Canada, email message and telephone interview, 8 August

2011.72. Tim Aiken, Marketing Director, Anglo Platinum, Johannesburg, interviewed 2 June 2011. Anglo Plati-

num, which is part of the Anglo-American Corporation, is by far the largest player in South Africanplatinum mining and is much less exposed to risk in Zimbabwe than is Impala Platinum.

73. Patience Nyangove, ‘Zimplats Windfall Divides ZANU-PF’, Zimbabwe Standard, 16 October 2011.


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http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/mining-survey-2010-2011.pdf

http://www.fraserinstitute.org/uploadedFiles/fraser-ca/Content/research-news/research/publications/mining-survey-2010-2011.pdf

https://www.moneyweb.co.za/mw/view/mw/en/page295025?oid=533229&sn=2009+Detail&pid=289766

https://www.moneyweb.co.za/mw/view/mw/en/page295025?oid=533229&sn=2009+Detail&pid=289766

74. Derek Engelbrecht, marketing executive, Impala Platinum Holdings, Ltd., Johannesburg, telephoneinterview, 30 May 2011.

75. ‘Zimplats Takeover Far from a Done Deal’, Zimbabwe Independent, 22 March 2011.76. ‘Zimbabwe: Mulling Ban on Raw Platinum Exports’, Radio Netherlands Worldwide, 28 December

2011.77. Rob Still, interviewed 9 June 2011.78. Brian Latham, Bloomberg News, Johannesburg, interviewed 30 May 2011.79. ‘UK Legislator Calls for Probe in Sodimico Sale’, Africa Intelligence, 7 December 2011.80. ‘Congo’s Outback: Mr. Copper’, The Economist, 20 August 2011.81. Elizabeth Jaffee, US Embassy, Kinshasa, briefing on 15 March 2011.82. Rob Still, interviewed 9 June 2011.83. Metorex executive, interviewed 31 May 2011.84. Roger Baxter, interviewed 9 June 2011.85. Peter Leon, interviewed 7 June 2011.86. Theresa Meyer, telephone interview, 2 June 2011.87. John Hawksworth and Anmol Tiwari, The World in 2050 (New York: Price Waterhouse Coopers,

January 2011).


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Southern African Minerals article in Contemporary Security Policy 2013

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Transcript of Southern African Minerals article in Contemporary Security Policy 2013