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What future for China-Zimbabwe ties?

Dec 03, 2015, 4:44 PM EST
Source: David Brossard/flickr
Source: David Brossard/flickr
Zimbabwe's best friend recently paid a visit, with deep pockets. Chinese President Xi Jinping arrived in Harare on Tuesday for a rare two-day state visit, and top Zimbabwean officials took the opportunity to announce major upcoming deals. The infrastructure-starved country needs all the investment it can get, and China has proven itself a reliable patron.
 
One critical gap in Zimbabwe's economic development is a chronic lack of electricity. Average daily demand is roughly 2,200MW, but even if all of its installed generating capacity was operational, the country would only produce around 1,800MW. But factoring in low water levels at its Kariba hydropower plant and ageing equipment at its Hwange coal power plant, actual production has dropped to about half of that in recent years, necesitating electricity rationing. To make matters worse, Zimbabwe already owes over $1.8 billion to international creditors, which has blocked access to fresh loans from most potential lenders.
 
However, China is coming to the rescue. Finance Minister Patrick Chinamasa announced on Tuesday that China will provide a $1.2 billion loan to rehabilitate and expand the Hwange power plant. The planned work on two generators will add 600MW of power to Zimbabwe's grid. "There are other power projects which are going to be funded by China,” Chinamasa added, citing licenses that have been granted to Makomo Resources Ltd., China Africa Sunlight Energy Ltd., and Per Lusulu Power. “Each will add 600 megawatts when complete,” he said, although he didn't specify how these three projects would be financed. Collectively, however, they should ease and ideally eliminate all electricity rationing.
 
And the planned deals also extend far beyond electricity generation. Chinamasa also noted that deals on road construction and infrastructure development will be signed during Xi's two-day visit. Likewise, Zimbabwe's Secretary for Foreign Affairs Joey Bimha said on Tuesday it was "all systems go and the agreements to be signed will be in the areas of communication, civil aviation, transport [and] infrastructure," among others.
 
China is Zimbabwe's largest source of foreign investment, a fact confirmed at the Zimbabwe-China Business Forum held on Monday. (The Forum released data showing that Zimbabwe is now Chinese investors' 6th most preferred destination in Africa.) China has also become a major trading partner of Zimbabwe -- their bilateral trade reached $1.24 billion in 2014, a 12.7% increase from the previous year. The balance of trade currently favors China because Zimbabwe (like many of its African peers) does not have a strong manufacturing base. Zimbabwe mostly exports raw materials and imports Chinese manufactured goods, an arrangement that suits Beijing just fine. However, President Robert Mugabe has advocated adding value by processing minerals at the source rather than exporting them raw. It remains to be seen whether China would agree to such deals.
 
But issues of trade asymmetry aside, Chinese investment in Zimbabwe's infrastructure is a clear win-win. Structural bottlenecks have continued to hamstring the economy's recovery from a recession between 1999-2008, which saw GDP shrink by 45%.
 
One measure of the government's viability is its budget. In 2009, the budget stood at $934 million, in 2010 it reached $2.1 billion, and in 2011 it rose to $2.7 billion. But since 2012 it has plateaued at or around $4 billion. Last week, in announcing 2016's $4 billion budget, Chinamasa said he was ashamed of the measly amount. Furthermore, the bulk of the budget — $3.685 billion — is earmarked for salaries and recurrent expenditures, leaving less than 8% for capital projects. So it's no wonder that Zimbabwe is embracing Chinese financing with open arms. And there is plenty available -- Beijing's investments in Africa amounted to $32.4 billion at the end of 2014, according to BMI Research.
 
In August, Mugabe said his country's economy was poised for a major take-off with China's help. This is easier said than done. As the finance minister stressed last week, "Our growth rate is too low. At 1.5% this year and 2.7% next year. We should never be content with a gross domestic product of $14 billion. It's so little."
 
He continued: "We need to catch up on our time considering that we have lost a good 20 years over issues of resolving the land question. So we need to catch up and for that to happen we need to grow consistently at around 7 to 8% for the next 10 years. If we fail then we are not getting there. We have the potential."
 
There is a long way to go, but China's help will make a big impact -- perhaps not leading to such ambitious growth rates, but an improvement over today's performance. And Mugabe, who has ruled for 35 years, has developed a solid rapport with China that preceded Xi's ascension to the Presidency and has only gotten stronger.
 
During Mugabe's state visit to China in August 2014, according to Xinhua News, the two countries agreed to be good friends, good partners and good brothers that treat each other as equals, support each other, and pursue win-win cooperation and common development. And the two leaders met again in April in Jakarta, and pledged to lift bilateral relations to higher levels.
 
But Mugabe turns 92 in this coming February, and he won't last forever. Adding to the uncertainty is that he has kept the succession plan a secret, leading to factional tensions and maneuvering within his ruling ZANU-PF party. China detests political instability when doing business, meaning the two countries' future relationship has a big question mark hanging over it.
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