Mugabe looks east at a questionable
cost By Gavin du
Venage
China's roots have sunk deep in
Africa, and nowhere has it found soil more
welcoming than in Zimbabwe. Seven years since
China declared its "Look East" policy, it's not
clear whether Chinese investment is delivering the
returns that Zimbabwe's leaders are claiming.
President Robert Mugabe's Maoist economics
have beggared a country that 10 years ago was
second only to South Africa in economic output in
the region. The 88-year-old president has clung to
power since the end of minority white rule in
1980, using a combination of force against
opponents and relying on the patronage of key
supporters.
It was his turning loose of
informal militia's against white minority farmers,
who underpinned the economy, in 2000 that signaled a
sea change in the
country's fortunes. By replacing skilled
agriculturalists with untrained black farmers,
Zimbabwe slid into a lost decade marked by bouts
of hunger, mass poverty and an exodus of its
professional middle class.
Mugabe's
increasingly acrimonious relationship with the
West, especially former colonial power Britain,
eventually led to targeted sanctions against
Mugabe and his inner circle in 2005. It was this
that prompted Mugabe to announce a new policy,
with his customary eloquence, at a public rally:
"We have turned east where the sun rises, and
given our backs to the West where the sun sets."
It's a relationship that has deepened ever
since although it's not always clear who benefits,
and at what cost. As a gesture of friendship
Beijing helped sponsor the building of a rambling
retirement home for Mugabe in the leafy suburb of
Borrowdale Brook in the capital, Harare.
He and his wife, Grace, who would drop up
to US$50,000 a time at Harrods in London, are now
banned from the European Union and the United
States. Instead, they regularly jet off to Hong
Kong, Singapore and Malaysia, where Grace can be
spotted loading up on designer brands at boutique
stores.
Their daughter, Bona, graduated
from City University in Hong Kong last year, and
the family reportedly have a $7 million house
here. A few years ago a British journalist was
beaten up by Mugabe bodyguards when he tried to
photograph the Mugabe's Hong Kong residence.
In Zimbabwe itself, signs of the blooming
relationship are everywhere. Arrivals at the
international airport - built by a Chinese firm -
will be greeted by large signs in English and
Putonghua - but nothing in the local Shona
languages.
Even the five-star Rainbow
Towers hotel, a stone's throw from the ruling
ZanuPF's headquarters, has signs in Putonghua
welcoming Chinese visitors. The state-owned
Zimbabwe Broadcasting Corporation runs a dedicated
Chinese-language channel that screens soaps and
news provided by China Central Television.
The Zimbabwean government itself is doing
everything possible to sell the benefits of
Chinese investment to its skeptical population. On
the face of it, Zimbabwe would be an excellent
investment destination. It has the world's
second-largest platinum reserves, abundant
deposits of gold, diamonds, chrome and other
strategic minerals. It also has fertile farmland
and a population that enjoys the best literacy
rate in Africa.
In the past month alone
announcements linking Chinese companies to
billion-dollar investments have been made. The
Guangdong Bureau of Coal Geology plans to invest
$3.5 billion to build a 1,200 megawatt thermal
power plant in Zimbabwe, according to reports in
the Herald newspaper, a government mouthpiece.
Another announcement claims China will spend $1.2
billion upgrading water supplies in the south east
of the country.
In the same week,
published reports by state media said China
Railway was to build a high speed train between
the capital and the industrial city of Bulawayo,
600 kilometers to the south east.
But,
apart from this steady stream of announcements
from Zimbabwean government sources, there appears
to be little else to give substance to these
deals. The high speed rail link, for instance, was
announced in the Herald newspaper; but a senior
China Railway official, who spoke to Asia Times
Online in Harare, said he was unaware of the
project until he saw it mentioned in the local
media.
Instead he said, speaking on
condition of anonymity, China Railway was, like
many potential investors in the resource-rich
country, waiting for political stability before
committing itself to projects.
"We come,
we look, we wait. We want to invest here but the
time is not now. It is not yet stable enough."
There are suggestions that the ruling
party is punting deals where none exist as it
gears up to go once more to the polls in March
next year. ZanuPF has been locked in an
uncomfortable unity government with opposition
movements since 2008, following a deal brokered by
regional leaders desperate to end the economic
fallout of Zimbabwe's implosion on their
countries.
Real power has remained with
Mugabe and his inner circle however. With polls
looming, it is quite likely that China is once
again being trotted out as Zimbabwe's rescuer.
The United Nations Conference on Trade and
Investment World Investment Report 2011 shows that
Zimbabwe recorded foreign direct investment (FDI)
of $105 million, compared to another southern
African country, Angola's $9 billion for the same
period. According to information from China's
ministry of commerce, annual FDI from China to
Zimbabwe was between $35 million and $45 million
annually between 2008 and 2010.
Chinese
companies that have already made active
investments are beginning to find that ventures
come with a hefty price tag. They are being pushed
into financing projects that make little economic
sense, in addition they are encouraged to top up
ZanuPF's election war chest.
Among the
companies operating in the country are Anjin -
involved in a diamond venture with entities linked
to Zimbabwe's military - as well as a company
affiliated with Anjin, the Anhui Foreign Economic
Construction Company.
Anjin operates in
the controversial but fabulously productive
Marange diamond field. The quantity of stones and
value of their sale is not disclosed, but British
watchdog NGO Global Witness released a report
recently that says the Marange diamonds are
laundered through a network of tax havens, front
companies and nominee shareholder, with very
little proceeds finding their way to official tax
receipts.
Zimbabwe's finance minister
Tendai Biti - a member of the official opposition
who has little actual authority - said recently
that the Marange operations were producing an
estimated $600 million a year in earnings, but
that only $30 million had been received in tax
contributions.
Instead, proceeds end up in
the pockets of a handful of connected officials,
mostly military officers, and of course with
Anjin, say Global Witness. But as election season
approaches, the ruling ZanuPF needs to demonstrate
to voters that it is indeed delivering benefits
from its joint-venture with Anjin. This is where
Anhui, the construction company affiliated with
Anjin comes in.
Anhui recently completed a
multi-million dollar Zimbabwe Defense College,
which opened last month, and is building a hotel
and shopping mall worth over $200 million in
Harare.
"It is a massive project indeed, I
had no idea what size it would be, even what shape
it would take but I was aware that our Chinese
friends were building this mall and will build a
hotel later," Mugabe told reporters at the site
during a tour of the complex recently.
Given the parlous state of Zimbabwe's
economy, hotels and malls are likely to stand
empty for years to come. They do however provide
Mugabe with much-needed photo opportunities and
flagship projects to show off to a battered
electorate.
Anhui was also mentioned in a
bizarre project to turn Harare's prisons into
shopping malls, and build new jails for its 4,000
or so inmates, which it will then run on behalf of
the Zimbabwean government.
The funding for
Anhui's projects is unclear, but it is widely
believed to come from the Chinese cut of Anjin's
diamond venture, and that Mugabe's party is
pressuring its partners to produce investment
projects - like malls and dams - to bolster its
support ahead of the upcoming elections.
In the run-up to the previous elections in
2008, Anjin was a major donor to ZanuPF's election
campaign, giving $100 million according to some
reports.
Ultimately projects being
announced on a weekly basis will be entirely
dependent on Chinese companies footing the bill.
Zimbabwe's "Look East" policy will therefore
continue to feature in the headlines of the
country's media.
Gavin du Venage
is a business writer in South Africa,
specializing in commodity and investment
analysis.
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