Of China and Zim options

by | Feb 10, 2022 | Business, Politics | 0 comments

Of China and Zim options.

Nevanji Munyaradzi Chiondegwa.


Many have wondered why Zimbabwe has been beating the trek to China for investment loans and other forms of concessionary funding.

Yet some have viewed both Chinese benevolence and investment overtures with suspicion alleging that Zimbabwe could be drifting into another debt trap.


Why is Zimbabwe going to China for every loan and financing of projects? Why is Zimbabwe accepting Chinese investors for all manner of projects in Zimbabwe? Is China the only option for Zimbabwe?


This writer will endeavour to answer all these questions and more, while explaining the rationale behind the trend, and the options available for Zimbabwe.


Strive Masiyiwa, the Group Chairman of Econet Global Limited wrote;

“As an entrepreneur, on many occasions, I have had initiatives for my country Zimbabwe, which could have created tens of thousands of new jobs. When I have discussed them with either investors or banks, they have turned me away, saying: “We don’t want to violate the sanctions on your country”


“I have documents and emails from bankers and investors. I tried so hard to persuade some of them, often suggesting that they are not interpreting the sanctions correctly.”


“In my case, I was forced to go to China to secure loans to support our Zimbabwean businesses. But this was not always ideal. I have spoken about it publicly on many occasions even in the US and China itself,” continued Masiyiwa.


He was not finished, he added, “It is not right that we as business should have to work under such conditions, when all we want is to create jobs and livelihoods for ordinary people.”


Let us park the quote from the billionaire Masiyiwa and look at the political and historical aspects of the situation that Zimbabwe finds itself in.


During the War of Liberation, China, Russia and to some extend Cuba, helped Zimbabwe with moral and material support. After the war, Zimbabwe should have ideally remained aligned to them both politically and economically but instead, for some reasons, the country went back to deal with those Westerners we had fought against at the cost of those who helped us.


The Look East policy was only adopted after we had fallen out with our former erstwhile colonisers and after a bruising second-round fight with the same enemy. The country tried to pull Russia but the Russians did not fully bite, and decided to stay away.


China, good as it has been, they have not been as generous as they have been to other African countries if available trade figures and investments in other African countries are anything to go by.

The country is truly grateful that and thank God they assisted us on key national projects.


On the global front, Russia and China have stood with Zimbabwe on many an international platform. Had the proposed United Nations resolution to slap Zimbabwe with UN sanctions for the land reform been passed, it would have crushed Zimbabwe. North Korea is a typical example. Namibia which had remained as one of the few countries which still had North Korean contractors working on major projects, was forced to dump North Korea three years ago as UN pushed enforcement of the sanctions by member states.


Now, onto key projects and investments. There is not a single African country that has managed to finance big power generation projects without seeking loans. It does not make sense as well to fund such big projects from the national budget. Projects such as airports, roads with toll capacity, borders, power generation, water that have their own cash inflow should not be funded from the national budget but through loans as proceeds from their use as people pay user fees will be enough to repay the loan.


Rather governments must focus the National budgets towards commercially unviable roads, health sector and provision of social safety nets.


A casual perusal of the Zimbabwe Power Company website will show that for 20 years they have had plans to fund new power stations. They failed because they could not borrow as no one was willing to lend to the Zimbabwean government and entities because of sanctions. India promised to assist or invest into power projects a couple of times but eventually walked away.


This did not only affect Government but the private sector as well. Reference to this is the Strive Masiyiwa case which was quoted earlier on.


What Masiyiwa narrated is the grim reality on the ground. Every other private company failed to borrow significant money destined for Zimbabwe.


As a country, Zimbabwe had failed to attract investment as there was no guarantee that there will be enough power generation in years to come to accommodate increased demand from expansion as more companies come in.


It does not end there, the country has investors who would have developed an interest in Zimbabwe. Every investor borrows, when the time to pull the full capital is required, no financial institutions will be prepared to lend money to an investor who wants to invest in Zimbabwe.


Recently people made noise about the Prospect Resources, which is an Australian company that sold its stake in Arcadia Lithium to a Chinese company, for US$400 million. The real reason is that Prospect Resources was not going to mobilize the capital required to operationalize the project due to sanctions.


Zimbabwean mining sector had stagnated as the country had few local investors in that industry. In the gold sector, big corporates produced only ten tonnes for several years until artisanal miners came through who produced the extra twenty tonnes during peak times. Things only improved when government came in with Kuvimba Mining Corporation that has spurred gold production to breach the ten tonnes cap by big corporates


Similarly in the coal industry, had it not been for the Chinese who recently came in, Zimbabwe would have failed to produce enough coal to fire the expanded coal power stations and no one would have wanted to invest US$1.2 billion currently being invested in Hwange Power Generation expansion.


Every day, Zimbabweans from all walks of life will be saying government should run those mines. Our national budget is below 5 billion USD and we can’t afford to do that, even if we can, government should never risk taxpayers money exploring for minerals in case we do not find that.


Last but not least government has more empowering places it can deploy the funds we have such as farming.


As for private Zimbabweans, reality is that we do not have the money to run mines. There are vast untapped mineral deposits including coal in Hwange untouched for 35 years until the Chinese came. We even have oil in Muzarabani but no Zimbabwean was willing to commit funds into that nor does the country have any with funds for that.


Zimbabwe’s President ED Mnangagwa is ambitious. He has dared to dream and has built dams, roads and contributed government portion of Hwange power expansion at the same time.


It has been argued before that the President should leave Harare roads and focus on Hwange Expansion. He was not wrong in focusing on those roads as it’s overdue. Today its surprising that he is still going beyond many people’s expectations though behind in terms of his own wishes.


The thing is, the President is pushing through this with the burden of Covid19 and without any international support. The real negative effects of Covid19 are now showing in Africa, Zimbabwe remains one of the less than five countries which did not get loans to cushion against the impact of Covid19.


Going forward, some may view China in a bad light. Yet she has stood with Zimbabwe during dark hours.

Zimbabwean may have to learn to live with the Chinese. When HE Michael Sata won Zambian elections, he promised to ‘deal’ with the Chinese. When he came in he made noise for few days then later embraced them.


The same happened with the current President Hakainde Hichilema. He promised the same but, he sure to borrow more from China, so far he has not done anything on what he promised.


Zimbabwean business people should start partnering with the Chinese or be left behind. The reality is that we will be with Chinese for a while as we still require funding and further direct investment.


It is only the Chinese who are brave enough to withstand the punitive measures and ravages of Western sanctions and so yes, China is the only option that Zimbabwe has!