A merger announcement for two mining-focused engineering groups, South Africa’s ProMet Engineers Africa and China’s Dadi Engineering Development Group, was a slightly awkward blend of two very different business traditions -- but also a sign of the times.
There was a “Chinese cultural performance” by a National Gold Medallist (medalist in what was unclear), a speech by a Chinese embassy bigwig, and bright red Chinese-style gift bags for guests on departure.
From the South African side: free-flowing wine and beer for a lunchtime function at a posh Johannesburg hotel, followed immediately by a cocktail event at the Jabulani Lounge, a hotel bar.
The merger itself -- creating ProMet Dadi Africa, focused on mining and mineral process projects in Africa and Asia, and able to undertake turnkey contracts of up to $300-million (U.S.) -- is indicative of a larger trend in mergers and acquisitions by Chinese companies in Africa.
A recent seminar by the Johannesburg-based Frontier Advisory group touched on the strategic benefits behind China’s M&A activity in Africa: for the Chinese companies, access to resources. For African companies, access to Chinese technologies and capability.
In other words, Africa is emulating China’s approach in the 1980s of opening its markets to foreign companies in exchange for technological know-how, said Chunlin Zhang, a lead private sector development specialist at the World Bank.
Rob Bennett, managing director of ProMet, said his company wanted to bring in Chinese expertise because of a shortage of top-level, experienced management in South Africa. Many managers have left for projects in Australia, he said at the announcement on Thursday.
“We are a family,” Mr. Bennett said of the new merged company, which has already undertaken a $25-million (U.S.) gold project in Kyrgyzstan, run from South Africa.
“We hope and we are confident this new company will give us a new, good opportunity to do business in the Africa market,” said Wang Dongping, a general manager of Dadi.
Jiang Wei, economic and commercial counsellor at the Chinese embassy in Pretoria, praised the strong political connections between South Africa and China, including the frequent inter-country visits by their top officials. (He didn’t mention it, but South Africa recently refused to grant a visa to the Dalai Lama, who is hated in Beijing.)
“It is our strong political ties that lay the foundation for our successful economic co-operation,” Mr. Jiang said.
“Our economic co-operation is still developing very fast despite the current European credit crunch,” he added.
Chinese investment in South Africa hit $7-billion by the end of 2010, and Chinese companies are starting to expand from mining, financial and manufacturing sectors, and towards telecom, transportation and renewable energy.
“You ain’t seen nothing yet,” said Martyn Davies, CEO of Frontier Advisory, on the subject of a buying spree by Chinese companies.
According to Davies, sub-Saharan Africa’s growth has been coupled with China’s -- in other words, as China has grown, so has Africa.
“This new coupling is an incredibly strategic force for this continent,” Mr. Davies said.