The United States embassy said the government was hyping supposed dividends from its relationship with China, but even Beijing was getting disenchanted with Zimbabwe’s abysmal business environment and economic mismanagement.
It claimed that most of the promised Chinese investments had failed to materialise.
The only major industry in which the Chinese held sway was in tobacco where Chinese buyers consumed a third of national output.
Ed: The West is today complaining about Chinese investments in Zimbabwe, claiming that China had become another coloniser. The West seems to have been irked most by Chinese investment in diamond mining where the Chinese investor is already saying it is now the world’s largest diamond producer. The diamond mining sector especially in Marange has been under siege allegedly because of lack of transparency. It has even been claimed that companies operating in Marange are run by the military and are siphoning money to finance ZANU-PF in the next elections.
Full cable:
Viewing cable 06HARARE964, GOZ HYPING CHINA’S ROLE IN ZIMBABWE,S ECONOMY
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Reference ID |
Created |
Released |
Classification |
Origin |
VZCZCXRO6513
RR RUEHMR RUEHRN
DE RUEHSB #0964/01 2130744
ZNY CCCCC ZZH
R 010744Z AUG 06
FM AMEMBASSY HARARE
TO RUEHC/SECSTATE WASHDC 0442
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RUEHUJA/AMEMBASSY ABUJA 1289
RUEHAR/AMEMBASSY ACCRA 1137
RUEHDS/AMEMBASSY ADDIS ABABA 1293
RUEHBJ/AMEMBASSY BEIJING 0069
RUEHRL/AMEMBASSY BERLIN 0054
RUEHBY/AMEMBASSY CANBERRA 0554
RUEHDK/AMEMBASSY DAKAR 0919
RUEHKM/AMEMBASSY KAMPALA 1347
RUEHNR/AMEMBASSY NAIROBI 3721
RUEHFR/AMEMBASSY PARIS 1116
RUEHRO/AMEMBASSY ROME 1758
RUEKJCS/JOINT STAFF WASHDC
RUFGNOA/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK
RUEKDIA/DIA WASHDC
RHEHNSC/NSC WASHDC
RUEHBS/USEU BRUSSELS
RUCNDT/USMISSION USUN NEW YORK 1504
C O N F I D E N T I A L SECTION 01 OF 03 HARARE 000964
SIPDIS
SIPDIS
AF/S FOR H.SERVIN-BAEZ
SENIOR AFRICA DIRECTOR C. COURVILLE
E.O. 12958: DECL: 07/25/2015
SUBJECT: GOZ HYPING CHINA’S ROLE IN ZIMBABWE,S ECONOMY
Classified By: Charge d’affaires Michael Raynor under Section 1.4 b/d
——-
Summary
——-
¶1. (C) Despite GOZ attempts to hype supposed dividends from
its relationship with China including the June visit of Vice
President Joyce Mujuru to Beijing, business sector contacts
tell us that promised Chinese investments have largely failed
to materialize. The only major industry in which Chinese
investors appear to hold sway is in tobacco, where Chinese
buyers consume a third of national output, according to
industry contacts. Instead, Chinese investors, like many
others, appear to have become disenchanted with Zimbabwe’s
abysmal business environment and economic mismanagement. In
addition, a popular backlash against the perceived influx of
substandard Chinese products has emerged. End Summary.
————————–
Desperately Seeking(Anyone
————————–
¶2. (C) Following up on President Robert Mugabe’s pilgrimage
to Beijing a year ago, Mujuru visited Beijing in early June
in an attempt to encourage investment and drum up support for
the GOZ’s latest economic turnaround plan. (N.B. Perhaps
showing the lopsided nature of this courtship, Chinese
Premier Wen sidestepped Zimbabwe on his seven African nation
tour also in June.) According to state-controlled media,
Mujuru signed two investment contracts with Chinese firms in
exchange for chrome sales from Zimbabwe’s parastatal Mining
Development Corporation (ZMDC). In a deal ostensibly valued
at US$1.3 billion, China National Machinery and Equipment
Import and Export Corporation reportedly agreed to develop
three thermal power stations in blackout-prone Zimbabwe.
Additionally, Star Communications of China reportedly inked a
US$60 million contract to provide radio and television
equipment to Zimbabwe’s state broadcaster.
¶3. (C) Mujuru’s state-media-grabbing visit coincided with
the visit of several relatively unremarkable Chinese
delegations that have received front-page coverage in the
GOZ’s papers. Portrayed as evidence of the success of the
GOZ’s “Look East” policy, the local media have hyped the
recent visits of a delegation seeking to establish more
“sister city” relationships, a team exploring potential
methane gas reserves in Matabeleland, and representatives of
the China Aero Technology Import and Export Company who
followed up on the sale of three MA60 passenger planes to Air
Zimbabwe last year.
¶4. (C) Opposition MP and pro-Senate faction of the MDC
foreign affairs secretary Moses Mzila Ndlovu told poloff on
June 22 that the GOZ’s emphasis on relatively small gestures
from China is an indication of how desperate for
international support ZANU-PF has become. Ndlovu said that
Mugabe had resorted to “political prostitution.” In the
absence of personal ties between GOZ and Chinese leaders, a
common liberation war history and anti-colonialist ideology
were the only binding ties. According to Ndlovu, the
Chinese, however, were increasingly looking for profitable
business deals, often putting them at loggerheads with the
hand-out seeking GOZ.
————————
Coming Back Empty Handed
————————
¶5. (C) Business sector contacts caution us that the deals
HARARE 00000964 002 OF 003
that Mujuru signed were merely MOUs and not actual business
contracts. As such, they were only the first of many steps
necessary before actual investment flowed into Zimbabwe.
Local economic commentator Eric Bloch told poloff on June 23
the GOZ was hyping the agreements in an effort to demonstrate
foreign confidence in the Zimbabwean economy and to show
dividends from the government’s latest economic revival
scheme. Bloch added that the Chinese were well aware of what
has happened to other foreign investors in Zimbabwe and are
seeking iron-clad, internationally arbitrated agreements to
prevent the GOZ from seizing assets.
¶6. (C) Tongai Muzenda, the commercial director of
ferrochrome-maker Zimbabwe Alloys, told poloff on June 22
that the recent chrome-backed MOUs signed by Mujuru were
largely smoke and mirrors. ZMDC owned only 10 percent of the
chrome fields in Zimbabwe and was not currently producing any
of the mineral. Investors from China, the world’s fastest
growing market for chrome, already operated one small chrome
mine and basic processing plant in Mashonaland West.
Muzenda, however, assessed that there was little new acreage
for the GOZ to offer the Chinese, since the two largest
chrome producers are indigenous firms and as such not subject
to proposed legislation that would nationalize foreign mining
companies.
¶7. (C) Alluding to the generalities of the ZMDC deal,
economic analyst John Robertson told poloff on June 21 that
this was the case for most of Zimbabwe’s “contracts” with
China. Recounting nine deals supposedly agreed to a year
ago, such as refurbishment of the railway, steel, and coal
parastatals, Robertson noted that none of the projects had
yet commenced. In fact, deals with the national steel
company and in the platinum industry that the Chinese had
been eying have gone to investors from Russia and India.
(N.B. Based on limited conversations with government
officials and coverage in the state media, the GOZ appears to
have shifted its hopes for support to these two countries.)
Perhaps the only major deal to materialize is Sino-Cement,
but Bloch noted that builders were essentially boycotting the
company’s overpriced and poor quality cement.
————————–
Tobacco Provides Only Vice
————————–
¶8. (C) In contrast to other sectors, Zimbabwe Tobacco
Association President Andrew Ferreira told poloff on June 21
that China has become the dominant foreign actor in the
tobacco industry, purchasing roughly one-third of Zimbabwe’s
national output. (N.B. Official Chinese trade data for 2005
show that tobacco accounted for 81 percent of its imports
from Zimbabwe.) According to Ferreira, Chinese smokers have
a preference for Zimbabwe tobacco despite declining quality
in recent years.
¶9. (C) Ferreira told poloff that Chinese buyers were eager
to guarantee their future access to Zimbabwean tobacco.
Accordingly, two Chinese companies have entered into
contracts with tobacco farmers in an effort to circumvent the
more volatile auction floors. Ferreira also said that the
GOZ had allocated Chinese investors two tobacco farms in
Mashonaland West, but could not provide additional details.
Ultimately, he said, Chinese buyers hoped that Zimbabwe would
revive output to about 180 million kilograms, as compared to
the current output of circa 50 million kilograms.
Recognizing that the lack of reliable power supplies is one
of the chief obstacles to that goal, Ferreira said the
Chinese had put pressure on the parastatal power company to
guarantee a supply to their contract farmers.
HARARE 00000964 003 OF 003
————————–
Honeymoon Coming to an End
————————–
¶10. (C) Robertson said that the Chinese had become
disenchanted with the GOZ’s failure to repay loans and to
make payment on capital equipment, and with the ham-handed
manner in which the bilateral relationship had been handled.
This was especially true in light of the large-scale payments
made to the IMF over the past year. (N.B. Exemplifying this,
an independent newspaper reported in May that six Chinese
firms had abandoned projects in Zimbabwe due to non-payment.)
Chinese visitors were often embarrassed by the intense
state-controlled media coverage and the GOZ’s penchant for
announcing deals before they were formally agreed upon.
Robertson noted that this put Chinese investors in the
awkward position of either accepting an ill-conceived
proposal or backing away from high-profile “contracts.”
¶11. (C) Smaller-scale Chinese merchants have also begun to
lose interest in Zimbabwe, according to several of our retail
industry contacts. Robertson explained that many Chinese
merchants flocked to Zimbabwe under the easy immigration
procedures of the GOZ’s “Look East” policy and brought with
them the one allowed shipping container of duty-free
merchandize, which they then sold at a substantial profit.
The initial attraction, however, quickly wore off, according
to Robertson, as sales dropped in line with the country’s
dwindling purchasing power. Like their local competitors,
many Chinese merchants have since closed shop due to the
economic hardships.
¶12. (C) Moreover, the flood of sub-standard Chinese consumer
products, or “zhing-zhong” as it is derisively called, has
sparked popular resentment against the Chinese, according to
several of our contacts. Japanese diplomats tell us that
they are often on the receiving end of criminal attacks and
derogatory comments from Zimbabweans who mistake them for
Chinese. The resentment has even spread to Bulawayo, where
civic leader Gordon Moyo told poloff on June 23 that despite
the city’s relatively small Chinese population the locals
were was increasingly xenophobic. Bulawayo Mayor Japhet
Ndabeni Ncube on June 23 added that locals often blamed the
business-savvy Chinese for creating and taking advantage of
Zimbabwe’s economic woes.
——-
Comment
——-
¶13. (C) Chinese investors )like those from other countries
– are eying Zimbabwe’s natural abundance and economic
potential with desire. However, in contradiction to the
state-controlled media, Chinese investors are not flocking to
Zimbabwe as they are to other parts of Africa. Despite the
talk of shared ideology and comradeship, the Chinese appear
to have made the business assessment that venturing into
Zimbabwe is simply very risky and not likely to be
profitable. To this end, China joins the likes of Libya,
Malaysia, and Iran in the growing list of the GOZ’s
disillusioned suitors.
RAYNOR
(26 VIEWS)
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