China poised to pour $10bn into Zimbabwe's ailing economy
Category: World of Business
David Smith and agencies, guardian.co.uk, Tuesday 1 February 2011 18.21 GMT
Zimbabwean government rejects concern that Beijing cash could prop up Mugabe, and says investment can turn economy around
Zimbabwe could be in line for a windfall of up to $10bn (£6.19bn) from China, a potentially huge boost to its ailing economy, its ministers have claimed.
But such an investment would be likely to heighten concerns about president Robert Mugabe's increasingly warm relationship with China, which has been accused of turning a blind eye to human rights violations across Africa.
Zimbabwe's coalition government is putting up a united front on the issue, however, insisting that Chinese investment in mining and agriculture could help turn the economy around.
Tapiwa Mashakada, a government minister and member of the Movement for Democratic Change (MDC), told Reuters on Monday: "We have met with officials from China Development Bank and they have said they are willing to invest up to $10bn in Zimbabwe."
The sum would dwarf Zimbabwe's gross domestic product, expected to be about $6bn (£3.72bn) this year.
Mashakada, the minister of economic planning and investment promotion, told a conference in Harare that he expected Zimbabwe to produce about 1.5m tonnes of maize in 2011, up from 1.3m last year. He saw gold production hitting 13 tonnes in 2011, up from 8.3 tonnes in 2010.
Zimbabwe also has the world's second biggest platinum reserves and hugely controversial deposits of alluvial diamonds.
China is "looking into mining development, that is exploration and exploitation, agriculture, infrastructure development and information communication technology", Mashakada said. "The Chinese are now moving towards strict due diligence, accountability and transparency. At the end of the day this really depends on us, how we position ourselves as a destination for investment. China is coming in a very big way." The announcement could be aimed at trying to prod western investors to sink more money into Zimbabwe out of fear they will lose ground to China.
Trevor Ncube, an entrepreneur who attended the conference, said he was sceptical about the headline figure. "That number looks a bit too big for me," he said. "It sounds a rather extravagant claim."
Ncube, publisher of the Zimbabwean newspaper NewsDay, said he understood the lines of credit were aimed at the private sector. "We shouldn't overplay the political dimension. The Chinese are streetwise. We expect them to conduct themselves in a businesslike manner. We know it's not humanitarian; they will earn a bit of interest."
China said recently its two-way trade with Africa had increased by nearly 45% in a year to hit a record $114.8bn (£75bn). Its investment in Zimbabwe has been growing steadily over the last decade but still lags behind that in neighbouring Mozambique, Zambia and Angola.
The unity government formed between Mugabe and prime minister Morgan Tsvangirai in 2009 brought stability to an economy crippled by hyperinflation. But it has failed to attract foreign investment, especially from western companies who want more political reforms and are anxious about a law that says 51% of firms worth over $500,000 should be owned by black Zimbabweans.
Last year the Chinese embassy in Harare threw an 86th birthday party for Mugabe. Such gestures have fuelled speculation that China is content to prop up Mugabe and could even bankroll his next election campaign. It has refused to join America, Britain and the EU in imposing sanctions against the president and his allies. But the MDC hesitates to criticise a potential cashcow. Tsvangirai told Fox News last week: "Whatever you can say about the Chinese, they are not missionaries. They have business interests, they have their own national interests, especially when it comes to resources."
Chinese investors have snapped up commercial and residential properties in Zimbabwe's capital, Harare, over the past few years. The influx of cheap Chinese goods, known locally as "zhing-zhong", has caused widespread annoyance.
William Bango, a veteran former journalist, said: "China is just taking advantage of a basket case. If you're a donor's burden, you have all kinds of thieves and crooks and people bringing you all kinds of trinkets.
"Once we restore this society to normalcy, with all standards maintained, China will fall away."