Chinese deals a double-edged sword

via Chinese deals a double-edged sword – The Zimbabwe Independent February 20, 2015 by Elias Mambo

RECENT revelations that Chinese companies are fleecing Zimbabwean parastatals by among other malpractices, charging exorbitant fees in the implementation of agreed projects only serves to highlight the sustained contradictions and ambiguities of Zimbabwe’s Look East policy aimed at bringing in much-needed foreign direct investment.

China has invested billions into Africa but that has come with serious problems.

While government has for close to a decade been claiming success in attracting foreign direct investment from China in the face of Western-sanctions imposed in 2002 over poor governance issues, there seems to be very little, if any, benefits the country is deriving from the so-called “mega deals”.

According to state media reports, Zimbabwe was overcharged for the construction of the Kariba South Power station when compared to what China demanded from Zambia for the construction of an even bigger power station.

Zambia reportedly paid US$278 million for the expansion of Kariba North Power Station that added 360 megawatts to that country’s state-owned power utility, while Zimbabwe will fork out US$533 million for Sino-Hydro to expand Kariba South Power Station expected to add 300MW to the national grid. Zimbabwe is going to pay US$255 million more than Zambia, despite Lusaka is benefitting from 60MW more.

The deal sparked controversy when former Finance minister Tendai Biti smelt a rat and raised objections with the price adjustments from US$355 million to US$533 million last year.

Chinese investment into Zimbabwe and many other African countries has increased in recent years, even out-stripping that of Africa’s former western colonisers.

In spite of the increased Chinese investment, there is thus far precious little in terms of tangible benefits accruing to the economies of the host countries and ordinary citizens.

The deals, which are normally shrouded in secrecy and carry stringent conditions including the hiring of Chinese professionals and equipment, seem to mostly benefit the Chinese and top government officials in the countries concerned.

While Zimbabwe’s Look East Policy could have helped the country during its protracted economic meltdown, questions have always hovered around whether government is getting the best of out of these deals or it is being ripped off with its consent.

An example that readily springs to mind is that of Anjin, a joint venture between Zimbabwe’s army and the Chinese mining in Chiadzwa where alluvial diamonds are fast running out.

Global Witness, an international non-governmental organisation, in 2013 revealed that about US$2 billion in diamond revenues had been unaccounted for since 2008, joining a long list of individuals and organisations who have alleged that proceeds of Zimbabwe’s diamonds were not finding their way to Treasury. In fact, Zimbabwe’s government has confirmed as much, and is in the process of consolidating diamond mines so that only one or two firms are left to mine.

During the inclusive government era, Biti constantly complained over low remittances to Treasury by diamond mining companies and the opacity of their operations.

In 2012, Biti was forced to slash the country’s national budget to US$3,4 billion from US$4 billion after receiving US$41 million instead of a targeted US$600 million expected from diamond sales.

His successor Patrick Chinamasa has also complained about disappointing revenues from the diamond sector. Anjin is among diamond firms accused of not giving back to the surrounding communities in Marange.

President Robert Mugabe last year signed several “mega-deals” with China, touted as an “all-weather friend” for Zimbabwe, whose aim, among others, was to promote long-term cooperation in energy, road development, national railway network, telecommunications, agriculture and tourism.

What is also a thorn in the flesh of the Zimbabwean government is the shoddy workmanship of Chinese firms.

A case in point is the controversial construction of the Chinese mall in Harare (Longchen) near the National Sport Stadium, which despite warnings from environmentalists to stop the construction on wetland went ahead. The building has structural problems and has been developing cracks during the rainy season.

Human rights abuses and labour exploitation were rampant during the construction of the mall, as indeed at other projects and ventures, with Zimbabweans alleging they were treated like slaves and at times beaten up in the presence of other employees.

Economic commentator Maxwell Saungweme said of major concern with Chinese investments in developing countries is that they benefit the Chinese more and a few corrupt government officials.

“Evidence is awash in South Sudan, Uganda, Sudan, and many Asian countries. Zimbabwe is not an exception. The Chinese are preferred investors mainly by corrupt government officials as their investments come with very little conditionality on issues related to ethics, environmental protection, corruption, rule of law and other good practises which Western investors insist on,” Saungweme said.

“The Chinese investments come cheap to corrupt regimes and a few government officials at the investment destination get rich fast as they receive bribes and so forth but the ordinary people of the country and environment suffer,” he said adding: “The Chinese investors bring their own people and technology, and their contracts are not tied to proper skills and technology transfers.

They also do not give back to communities where natural resources are exploited.”

Another analyst, Alexander Rusero said the Chinese are casting a new ideology in which they are economically capitalistic and politically communist, hence they invest where they will realise profits.

“China has a new ideology in which it remains capitalist economically because they invest in desperate governments with severe conditions attached to their investments,” Rusero said.

“Their investment conditions dictate that if they invest, then a Chinese company will supply raw materials, labour and even the management of the investment. They disregard labour laws because host countries will be desperate for such an investment.”

During the unity government (2009-2013), Biti told parliament that the deal involving a US$98 million loan from China to build a military college was “criminal” because the agreement stated that “the goods, technologies and services purchased by using the proceeds of the facility shall be purchased from China preferentially and also from Zimbabwe where this will benefit the project and end user.”

While the deals signed by Zimbabwe and other African countries with China have helped them to attract capital and investment, they also have downsides which are undesirable.