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Mugabe averts collapse with Chinese help

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WATERLOO, Canada — Disillusioned Zimbabweans are facing a new wave of price increases that will put the most basic of food essentials even further out of their reach.

On the streets of Harare, a loaf of bread costs the equivalent of what a dozen new cars would have cost a decade ago, when factoring current consumer price indicators and inflation figures.

With public wages largely remaining unchanged, up to 3 million Zimbabweans have been forced to take up menial jobs in neighboring South Africa in recent years to support their families back home.

New figures, released by independent economists last month, show that annual inflation has reached 9 million percent. With the worthless Zimbabwean dollar trading at more than 1 billion to £1, the country’s Central Bank announced the introduction of a Z$1 billion banknote.

With a sinking economy and hyperinflation that has produced millionaires and billionaires who struggle to feed their families and have to rely on remittances from South Africa for survival, questions are surfacing as to how President Robert Mugabe has managed to avert a state collapse thus far.

Some answers can be found in the much publicized and often controversial Zimbabwean-China relations.

By many accounts, China has become one of Zimbabwe’s most important foreign investors, following the exodus of Western multinationals in the mid-1990s, due to the worsening political and security situation in the country, after the seizure of white-owned farms.

Last month Chinese Ambassador to Zimbabwe Nansheng Yuan said a Chinese company was exploring the possibility of investing $500 million for electricity generation in Zimbabwe. This follows discussions between the two states on expanding bilateral trade and investments.

Over the past two years, China had thrown Zimbabwe’s disintegrating economy a lifeline with energy and mining deals, reportedly worth more than $1.6 billion. It was reported that these deals gave China access to Zimbabwe’s precious mineral resources, including the world’s second-largest deposits of platinum, as well as gold, chrome, coal, nickel and diamonds.

These major investment projects included the construction of three coal-fired thermal power stations to assist the state power company, which was cutting customers’ electricity for seven hours a day. It also included a deal with the China Machine-Building International Corp. to mine coal and build thermal-powered generators in Zimbabwe, aimed at reducing the country’s electricity shortage.

Indeed, Beijing’s economic support for Harare remains strong and, through its efforts, Beijing has secured the contracts to develop Zimbabwe’s agricultural, mineral and hydro-electric resources. Tobacco counts among Zimbabwe’s top exports and China is Zimbabwe’s largest importer. China has made large investments in the country’s tobacco production and processing industry.

China also injected a capital injection of more than $200 million into Zimbabwe’s farming, manufacturing and mining sectors. China supplies Zimbabwe with expertise, technical assistance and agricultural equipment, including tractors and agro-processing.

Chinese investors help Zimbabwe process tobacco into cigarettes and export these as finished value-added products. Chinese investors and a local company also undertook a joint venture in the form of a large cement factory in Gweru, to meet the national demand for cement.

It seems likely that Harare will become increasingly reliant on Beijing for economic support, as Zimbabwe’s economic and political situation continues to deteriorate. Western analysts and Zimbabwean critics contend that Beijing will continue to support Harare unconditionally, while piling up various claims on Zimbabwe’s natural resources and other commodities. With a lack of direct competition by Western firms in the local market, Zimbabwe will remain one of China’s important resource bases, for as long as the incumbent government remains in place.

Yet, the current fragile state of the country is putting Beijing in an increasingly vulnerable situation, as Western condemnation of China’s long-standing ties with the autocratic regime of President Mugabe is becoming increasingly more vocal. China’s continued involvement in Zimbabwe, in the agricultural and mining sectors in particular, furthermore carries significant sovereign risk. Beijing is gambling that it can manage relations to guarantee its claims in what will almost certainly continue to be a chaotic transition period.

The growing importance of China in the country’s economy is evidenced by economic assistance and foreign investment deals in the extraction sector, state-owned enterprises and the agricultural sector. The key to this is China’s willingness to barter-trade. China’s motives appear economic — namely to satisfy its growing economic needs.

A constructive engagement with China will have to focus on improving transparency in contracts, investment deals and loan agreements, if ordinary Zimbabweans are to reap the full benefits of increased Chinese investments.

Hany Besada is senior researcher and program leader at the Center for International Governance Innovation, Waterloo, Canada. Web site: www.cigionline.org