Understanding China’s activities in Zimbabwe: A review of literature

1. Understanding China’s activities in Zimbabwe: A review of literature By Zindiye Stanislous

2. Background • The relations between Zimbabwe and China can be traced back to January 1979 during the war of liberation. • It started on the war front with ZANU led by Robert Mugabe quoting Beijing for arms after failing to get support from Soviet which was backing ZAPU led by Joshua Nkomo. • Formal diplomatic relations were established on the 18th of April 1980. • The disagreement between Zimbabwe and the EU in 2003 led to capital flight and economic depression and this resulted in Zimbabwe being isolated from EU in form of targeted sanctions. • The relations between Zimbabwe & China deepened & culminated into Zimbabwe adopting a Look East Policy.

3. Background • To expand bilateral & trade relations & offer priority to investors from the Asian continent. However China dominates the block. Zimbabwe and China have strong economic ties. • In 2008 The late Vice President of Zimbabwe Joseph Msika praised the Chinese government for its continued support in the face of economic sanctions imposed by Western nations . • From 2000 to 2012, approximately 128 Chinese official development finance projects were identified in Zimbabwe.

4. Infrastructure development • Water infrastructure and sewerage rehabilitation to the value of US$144m to Harare City Council.  • The money to rehabilitate aged water infrastructure and sewer systems. • The rehabilitation programme is expected to improve water availability and sewer treatment plants. • “The China Exim Bank programme is expected to increase the integrity of the water production facilities.”

5. Infrastructure development • The new $98 million Zimbabwe National Defence College, constructed by Anhui Foreign and Economic Construction Company (AFECC) after a loan from the China Export and Import Bank, was officially opened. • The loan for the defence college will attract 2% while its repayment period is 20 years. • This is considered a huge discount, particularly for Zimbabwe, at a time its perceived credit rating has been downgraded to “junk” status by multilateral lending institutions because of the external debt that is estimated to be over $8 billion (more than 100% of GDP).

6. The National Defence College, a 3 year project that was completed way ahead of schedule, has become a symbol & physical manifestation of the Look East policy. The state-of-the-art villas, including a majestic stadium, all show the quality &value of the Chinese investments.

7. Infrastructure development • Many local construction projects have begun to be implemented & are of high quality & are being completed on time. • Calculations by The Sunday Mail Business indicate that other mega pipeline projects that are on course are valued at more than US$10 billion. • Market watchers are excited with the mulled high-speed train service between Harare and Bulawayo that was announced by China Railway Corporation. • Zimbabwe will ultimately become the second country in the region and beyond after South Africa to have such a project after the R20 billion Gautrain project.

8. Infrastructure development • The Matabeleland Zambezi Water Pipeline project, first mooted by the colonial settlers in 1912, is now taking shape. • The mega project is expected to deliver water to 2 million people & provide water for all domestic & industrial activity in the southern parts of the country. • The major contractor of the project, China Dalian Technical Group, indicated that it will take 3 years to complete the pipeline that has eluded policymakers for the past 100 years. • China has already budgeted US$864 million that will be extended through China’s Eximbank.

9. Infrastructure development • Another US$3,5 billion thermal power project that is expected to produce 1 000 MW will be undertaken by China Railway International. • In Harare, AFECC is close to completing the construction of a US$300 million 300-bed hotel adjacent to the National Sports Stadium, while an extra US$580 million will be pumped into a giant shopping mall to be completed in November 2013. • A similar impact has been made in the mining sector where Anjin Diamond Mine — a joint venture between AFECC and the ZMDC — has become the biggest diamond miner in the world as confirmed by the Kimberley Process. .

10. Infrastructure development • A US$300 million injection has been made to the mining venture that now produces more than seven million carats per year. • There also other countless projects. All these undertakings have helped locals find employment at a time when industry’s capacity is severely constrained. • A MOU was signed with Avik International, for the construction of Kunzvi Dam in November 2012.

11. Infrastructure development • Plans to build Kunzvi Dam, with a capacity of 158,4 million cubic meters of water, were mooted 30 years ago but have been repeatedly hampered by lack of funding. • The Chinese firm would partner other private contractors engaged in 2011. • The project is estimated to cost at least US$370 million.

12. Employment creation • On the overall, China has created more than 16 000 jobs through its ventures. • Many Chinese companies are willing to employ local people &most of which have a low proportion of Chinese employees. • Zimbabwean employees have made important contribution in the development of Chinese enterprises and, in many of those enterprises, the locals have become the backbone of the companies’ senior management.

13. Foreign Direct Investment (FDI) • China has sunk in more than half a billion dollars in FDI into Zimbabwe in the past 4 years. • Lined up projects valued at more than $10 billion. • Annual FDI from China between 2008 and 2010 was measured between $35 million and $45 million. • In 2011 more than $460 million was pumped into the economy. • This development takes place at a time when the country has been unable to attract any meaningful investments relative to other countries in the region. • Zimbabwe recorded FDI of $105 million compared to Angola’s $9 billion for the same period. • On the overall, FDI declined from a high of $444 million in 1998 to $60 million in 2009.

14. Investments • Much of the Chinese investments have mainly been concentrated in agriculture, mining, construction, trade and tourism. • As the world’s largest producer & consumer of tobacco, huge investments have been made to the local tobacco sector, with Tianze established in 2005 by China Tobacco Import & Export Corporation. • Tianze has extended a cumulative $100m in interest-free loans, & the company has helped stabilise the market price. • Programmes under way include a project by Anhui Agricultural Reclamation to increase yields per hectare, especially in wheat production. • Since Zimbabwean tobacco growers lack capital & technologies, Tianze actively develops the contract-farming business in Zimbabwe.

15. Partnerships • Anhui Agricultural Reclamation carried out the projects of agriculture growing development co-operation, & produced 5 tonnes of wheat p/ha, compared to the local average yield of 2 tonnes p/ha. • Chinese companies like Hubei Agricultural Reclamation Company, Shandong Dezhou Shuangfeng Cotton Industry Company, Shandong Jinfang Cotton Industry Company, Sinotex and China CAMC Engineering Company, are actively developing agricultural co-operation in Zimbabwe. • Though local Chinese investments have shown an inclination to partner with the Government, some companies have been forging alliances with private sector companies as well.

16. ICT developments • Huawei, in co-operation with TelOne has constructed the Zimbabwean nationwide optic fibre backbone network, which is connected to the African sub­marine network and has increased the international access bandwidth. • Huawei has also built the IMS network and deployed the last-mile access to national broadband network that prepares the infrastructure for ADSL broadband services. • ZTE Corporation is working with both Econet and Telecel to build wireless 2G and 3G base stations and tower sites. • Such infrastructural projects and interventions have significantly helped to increase local cell phone coverage from 10% in 2008 to the current 100%. • Prices of telecommunications products have inevitably dropped.

17. Bilateral trade • All the investments are designed to benefit China in the medium to long term, but, in essence, they are win-win projects. • Alternative source of capital- China provide cheap funding with grace period & a longer repayment period. • The Bilateral trade volume between Zimbabwe and China was expected to reach US$1 billion by the end of 2012. • The bilateral trade volume was US$533m in the first months of 2012, an increase of 20% from the same period last year.

18. Humanitarian • In November 2012 the Zim Government received grain worth more than US$15 million from the Chinese government as part of efforts to help disadvantaged communities. • The donation which is the largest amount the Chinese government has ever given to a single country comprised 9 000 tonnes of wheat & 5 000 tonnes of rice. • The grains were to be distributed to needy persons from Zimbabwe’s 10 provinces. 

19. POSITIVES

20. Non-compliance • Nan Jiang Africa Resources diamond mining firm was fined US$40 000 for building permanent structures at its site without approval from council. • It has since 2012 been constructing permanent structures such as administration offices and a plant in the Devuli Ranch where the company discovered kimberlite. • The fine was to regularise the structures, although they only paid $35 000. • The council was contemplating taking legal action against the company for delaying to pay the balance of the fine. • BRDC expressed dissatisfaction with Nan Jiang Africa Resources due to their action of building permanent structures like offices and plant equipment in the area without first seeking approval. • The firm started operations at Devuli Ranch without seeking a licence from the council as the company had not yet applied for a licence to date.

21. Competition • Murray & Roberts (M&R) a top construction firm in Zimbabwe complained the Chinese are now dominating Zimbabwe's construction industry, grabbing the few projects on offer. • M&R is facing serious & "stiff competition" from China &, sometimes, SA. • "South African and Chinese contractors are moving into our industry and taking most of the few projects," a worried Mangoma said. • "The Chinese have also taken over the telecommunications industry and we face stiff competition because they have cheaper& more skilled labour. • M&R is contemplating joining hands with Chinese construction firms, who have been given major projects in the region. • The Chinese were given "Favoured Nation Status" by the Zanu (PF) government for helping it during the liberation struggle.

22. Exploitation • A crackdown on Chinese businesses took place. • Labour Minister Paurina Mupariwa branded Chinese business operations in Zimbabwe “the darkest side of capitalism”. • She said her party would urge Zimbabweans to boycott Chinese products in protest. • “Over the last few years, there has been an influx of Chinese businesses of all forms in Zimbabwe. Instead of aiding development & growth of the economy, the Chinese have brought nothing new except exploiting the locals & overshadowing them”. • She claimed abuse of Zimbabwean workers by their Chinese employers. • “The Government should bring the matter to the attention of the Chinese government to encourage its nationals to abide by the laws of this country. Should they continue, the MDC-T calls upon every law-abiding citizen to boycott Chinese products until they learn to treat workers with respect and dignity,” Minister Mupariwa said.

23. Perceptions • The Southern Africa Resource Watch (SARW) produced a book “Win win partnership? China, Southern Africa & the Extractive Industries”. • It adds to the growing criticism on China’s investments in Zim. • It suggests that China is a new coloniser of Zimbabwe & is only expropriating Zimbabwe’s resources. • The Sino-Zimbabwe relation is only beneficial to a small political elite & is accused of pursuing elitist infrastructural development projects. • MDC has been critical of Chinese businesses in the country. • Minister Chimanikire claimed operations by Anjin Investments’ at Chiadzwa diamond fields have not benefited the country in anyway.

24. Africa to blame? • Part of the fault may lie with African policymakers, for not demanding enough from their Chinese counterparts at the bargaining table. • "If you allow the Chinese to come & rape you & take whatever they do because you're just looking at the money they bring, & if you're looking on a short-term basis, the country will suffer, there's no 2 ways about it," said Sipho Nkosi, CEO of South African mining company Exxaro Resources. • Africa must demand that China transfer skills & technology to the continent instead of allowing it to simply export raw materials, he said. • For some African politicians, part of China's attraction lies in its unwillingness to criticize local governments over human rights or corruption, unlike the West.

25. Africa to blame? • For more than a decade African govts have rolled out the red carpet for Chinese investors, trading oil, coal, iron ore & other resources for badly needed ports, roads & railways. • But policymakers & executives, worried the flood of cheap Chinese imports is sapping Africa's own manufacturing potential, & the continent must drive harder bargains with China. • "The sad reality is that they are not comrades. Their companies are there to make profits like everyone else," • Zim Finance Minister Biti told the Reuters Africa Investment Summit. "The African textile industry has basically collapsed because of cheap Chinese imports ... Africa needs China but let's create an equitable relationship."

26. Are we becoming a Zhing-zhong nation? • The Look-East Policy have been criticized as an alternative to the West. • Zimbabweans are being deliberately removed from one form of colonialism and chained to another form of bondage.  • People have been exposed to a cunning, ruthless & amoral slave master-the Chinese. The notion is that the conduct of most of the Chinese in Zimbabwe is unacceptable. • "All I see is that what the West did in Berlin in 1884-5 when they partitioned Africa & their conduct in most of their African colonies since then is exactly the same thing the Chinese are after, Africa’s natural resources, to feed the Chinese industry & huge population, to largely exploit the continent, & in some cases develop infrastructure & industries which benefit the Chinese themselves more than the locals.”

27. Are we becoming a Zhing-zhong nation? • Commenting on a service booth with directions written in English & Chinese at the Harare International Airport in Zimbabwe, she said "This to me is a crime we are committing against ourselves. It is a betrayal of the liberation war gains. It appears like a move towards us becoming stooges of the East. If we are shunning the English language as an imperialistic tongue, why then are we embracing Chinese.  Why did we not put these signs in Shona, Ndebele and all the other dialects that are spoken by Zimbabweans? Who reads Chinese anyway besides the Chinese themselves in Zimbabwe? Now of this I am sure- if Lobengula’s alleged actions of selling over rights of land ownership to John Moffat did not cause Nehanda to spin 360 degrees in her grave, I am sure this Chinasation of Zimbabwe will!"

28. Employee welfare • Zimbabwean workers abused in Chinese factories and mines. • Cases of summary dismissal without notice & without any compensation. • Female employees impregnated by their Chinese bosses & giving birth to Chinese babies after being coerced to have unprotected sex. • Long working hours, very little pay, unsanitary working conditions in clear violation of Zimbabwe’s labor laws & clear disregard for workers’ rights. • Denial of compassionate leave to go and bury relatives due to language barriers. • Workers are not even allowed to recognise any of the Zimbabwean holidays. They are only allowed to recognise the Chinese Lunar New Year on 22nd January.

29. Employee welfare • 3 Chinese managers have been sodomising workers. • The managers apologised & management promised that the culprits would be deported back to China but nothing happened. • The workers went on strike demanding at least $650 for the lowest paid worker, compared to the $235 they are getting. • Management responded by suspending 1,500 workers for 4 days. • The head of the workers committee, was also fired. • “The workers are demanding to have a good working environment. There are people who have been sodomised by the Chinese people. There are people who have been beaten, physically assaulted by the Chinese people”.

30. Human rights • In June 2012 Global Witness, a human rights group focused on the exploitation of natural resources, recommended an investigation into the activities of mysterious Chinese business tycoon Sam Pa, diamond firm Anjin and Sino Zimbabwe to see if they “risk funding future human rights abuses.” • The report titled, “Financing a Parallel government”, exposed how the CIO, army & police chiefs were involved in the diamond, cotton & property sectors. • The ownership structures of companies like Anjin were exposed as being dominated by senior members of the state security. • Half of Anjin’s shares are said to be held by a Zimbabwean military lawyer.

31. Look East policy bears no fruit for Zim 11.04.2012 • In 2010, Zimbabwe’s exports to China were valued at $237m, while imports were $557m- a trade deficit of $320m. • During 2006-10, exports to China grew in value by an average 31% p.a, & imports by some 32%. • Of total exports, 7.4% goes to China; whilst 6.2% of our total imports come from China. • The top exports are unmanufactured tobacco, ferro-chromium, chromium ores & concentrates, cotton (not carded or combed), edible nuts, nickel sulphates & granite – all unprocessed commodities. • However our top imports from China are all finished goods -cheap clothing, electrical apparatus, exercise books, bicycles & other cycles, generators & engines.

32. Summary Is such an arrangement a benefit for both parties? • We seem to do well- we get to consume products without producing them, and money for capital investment without having to save. • The Chinese get to process those raw materials into products they don’t consume, but sell them for a fortune to the world. • China’s capital investments, technology, skills & money to Zim are not earmarked for processing commodities, but to expedite the extraction of commodities at low cost. So where is the real benefit? • Commodity exports cannot lead to sustained economic growth as they are vulnerable to international prices which we don’t have control over. • The challenge is to generate productive jobs & livelihoods for many people. • Value addition has a higher potential for employment creation.

33. Summary • The existence of diminishing returns to scale in agriculture, due to fixed factors such as land, implies that the opportunities for employment in the sector are limited. • As the population is growing & urbanization is taking place, there is also need for growth in manufacturing employment to absorb those displaced from agriculture. • China is not doing anything to promote value addition in Zimbabwe. • The influx of low quality & cheap products from China is destroying the manufacturing sector. • Most of Chinese businesses are not compatible with the Indigenization and Economic Empowerment Act. • They are occupying areas preserved for locals - like retailing. If you throw a stone in Harare, it hits a Chinese shop. These are the same guys who have been accused of not banking their money, but sending it back home, contributing to our current liquidity crisis.

34. Thank you