China and Brazil vie at head of new 'scramble for Africa'

A CENTURY ago, it was the explorers and infantrymen of Europe's great powers slugging it out for slices of Africa. Now, it is the agents of Chinese and Brazilian capital, but the competition is just as fierce.

Underscoring the new world order of the 21st century, Brazil's Vale company, the world's biggest iron ore producer, is going head to head with Jinchuan Group, China's dominant nickel producer, in a fight for Metorex, a medium-sized mining firm listed in South Africa.

The saga still has at least a week to run, but Jinchuan swung a hefty blow this week, with an 814 million bid to trump a 689m offer from Vale.

Metorex operates copper and cobalt mines in Zambia and Democratic Republic of Congo. Jinchuan's juicy premium shows the lengths Chinese firms are prepared to go to secure natural resources for ravenous factories back home.

But it is also evidence of Chinese companies, particularly state-backed ones, posting top bids for foreign assets due to the cheap finance they can get from Beijing, rather than raise pricier commercial funding.

This aspect of Chinese growth in the new "Scramble for Africa", a century after colonial powers carved up the continent, may fuel the sense of a playing field tilted unfairly towards Beijing, creating tension with other rising powers.

"Chinese state-backed firms with access to cheap government export finance can easily trump the likes of Vale, who have to pay commercial, and thus more expensive rates, for finance," said Markus Weimer, of London's Chatham House think-tank.

"State subsidies for national companies will continue to be watched with scornful eyes by western governments, and increasingly by other emerging powers such as Brazil and India."

Separately this week, India's largest rubber producer announced it is to make its first overseas investment - in Africa. Harrisons Malayalam, which is also a major tea grower, is joining a surge in outbound investment by corporate India. It plans to spend up to 70m somewhere in Africa to buy about 10,000 acres.

The overseas investment push by Indian companies is spurred by difficulty finding attractive opportunities in Asia's third-largest economy. "Plantation land in India is very scarce," Harrisons Malayalam managing director Pankaj Kapoor said. "So all the plantation companies are looking at Africa, where it is still available and cheap."

That Brazil is a rising player in Africa is nothing new.During his time in office, former president Luis Inacio Lula da Silva made fostering commercial ties a priority, visiting at least 25 African countries and doubling the number of embassies there.

Brazil now has 31 formal African diplomatic posts, behind the United States and Russia at 46 and 45 respectively, but well ahead of 26 for Britain, which is closing embassies to cut costs in what used to be its backyard.

On the embassy count, China comes in at 42 - double the number India has - and Chinese firms looking abroad can tap a wealth of funding sources, from the likes of the China Exim Bank, the Bank of China and the China Development Bank. By contrast, besides commercial banks, Brazilian firms are largely limited to the BNDES, Brazil's national development bank - an important player but one that steers clear of more unstable markets.

When it comes to trade, China is also streets ahead, doing 67bn of business with the continent a year - more than the United States - against India's20bn, Brazil's 12bn, and a paltry 2.2bn for Russia, the final member of the BRIC group, which admitted South Africa this year.