China support not enough to rescue Zimbabwe economy

SNUBBED by a U.S.-hosted gathering of African leaders this month, veteran President Robert Mugabe has turned again to "old friend" China, but even Beijing's support may not be enough to rescue his country's sinking economy.

Mugabe, at 90 Africa's oldest leader and one of its longest ruling, received a warm welcome on a visit to China this week, something he hasn't received for many a year in the West, where he is reviled as a despot.

China says its focus is on growing trade and aid with Africa, not meddling in internal affairs like the West, but this leaves it open to charges of turning a blind eye to conflicts and rights abuses.

Mugabe, still under U.S. sanctions for abuses of power and election rigging he denies, was pointedly not invited to an August 4-6 Washington summit of African presidents hosted by President Barack Obama that aimed to open a "new chapter" in U.S.-Africa ties.

But in Beijing he got the VIP treatment: red carpet, 21-gun salute, toasts to "traditional friendship ... forged in the glorious years when we stood shoulder to shoulder against imperialism, colonialism and hegemony".

However, there was much less detail in Zimbabwean and Chinese official accounts of what size loans or investment Mugabe secured for his country's floundering economy, where inward foreign investment has dropped 59 percent this year, exports are falling and unemployment is at 80 percent.

Zimbabwe state media quoted officials with Mugabe in Beijing as saying funding was needed for some $4 billion in projects, including energy, road and dam construction, rehabilitation of a dilapidated rail system, upgrading the state telecoms system and developing an industrial factory park.

But Finance Minister Patrick Chinamasa declined to give more details, saying only that the new memorandums signed "set out the framework under which we can be able to access funding".

Few believe southern Africa's most prominent surviving liberation hero - after Nelson Mandela died in December - left Beijing empty-handed.

China's support for Mugabe stretches back to the days when it backed his guerrilla war against white-ruled Rhodesia in the 1970s, and continued after he was elected president following independence from Britain in 1980.

"I'm sure the Chinese authorities will be able to offer some help to an old friend," said Joseph Cheng, professor of political science at the City University of Hong Kong.

But he said "business-like" Beijing would seek real economic returns. China has stakes in Zimbabwe's diamonds and ferrochrome industries and is also interested in minerals like platinum - the African nation has the world's second-largest reserves.

But however, generous the package that Mugabe takes back from his Eastern ally, there are questions over how much this can really help Zimbabwe's struggling economy, with its shuttered factories, massive unemployment and social destitution.

"I don't think it's a game changer in any significant way, unless there are details that they are hiding from us," said John Robertson, a private economic consultant in Harare.
Fiscal crisis looming?

"If they take off, some infrastractural projects will create some jobs here and there, but what the economy is looking for is massive investment in industry, in mining and in agriculture to help create real strong structures," he said.
That looks unlikely.

Stephen Chan, a southern Africa expert at the University of London's School of Oriental and African Studies, said Mugabe's proclamation of economic "indigenisation" in his successful re-election campaign last year was an "own-goal" disincentive to further foreign investment.

That strategy requires 51 percent of foreign investment ventures to be in black Zimbabwean hands, and has already been applied against foreign mining companies and banks.

"Without diversified investment and greater Chinese support, all the current Zimbabwean efforts to widen the tax base will lead, even if fully successful, to no more than a fraction of the amount required to balance the books," said Chan.
He predicted a "fiscal crisis" emerging by early 2015.

Chinamasa and other officials dismissed suggestions Mugabe had gone begging to Beijing with promises that loans would be backed by diamonds, gold and other minerals.
"Nothing has been mortgaged," Chinamasa told Zimbabwean state broadcaster ZBC.

Zimbabwe online media in May quoted the economic counsellor at China's embassy in Harare saying talks were under way on a mechanism for proceeds from Zimbabwean minerals sales to be used as collateral for fresh Chinese loans.
Mugabe has increasingly embraced a "Look East" policy since facing growing opposition at home and abroad after 2000.

His nationalist counter-attack at home involving seizure of white-owned farms tipped an already weak economy into meltdown, with inflation reaching 500 billion percent and economic refugees streaming into South Africa. It also led to sanctions from the West and demonization as a dictator.
Zimbabwe returned to growth in 2009 after a long recession, when Mugabe was forced to share power with opposition rivals.

But his July 31 re-election last year, denounced as a fraud by opponents, questioned by the West but endorsed by African observers, has been followed by a rapid economic slowdown. But China sees the West's ostracism of Mugabe as an opportunity.

An editorial on Thursday in the Global Times, a tabloid run by the Communist Party mouthpiece the People's Daily, chided the West for its policy toward Zimbabwe and Africa in general.

"Western countries should offer the continent what it needs most. They shouldn't easily impose sanctions on 'disobedient' countries. Otherwise, they will largely fall behind China in the African continent," it said.

Global Times noted Mugabe chairs the Southern African Development Community and is in pole position to lead the African Union next year - indications of the respect the old liberation warrior still commands on the continent.

Chinese trade with Africa ballooned to $170 billion in 2013 from $10 billion in 2000. Between 2010 and 2012, over half of China's foreign aid of over $14 billion went to Africa.

Mugabe's Zimbabwe has been a beneficiary, with a big increase in investment, driven mostly by the Anhui Foreign Economic Construction Group (AFECC), which has ploughed money into Zimbabwe's diamond industry.

The Chinese have built a $234 million Harare shopping mall and a $100 million military academy and also backed hydropower and airport expansion projects.
But many Zimbabweans without formal jobs are still waiting for Beijing's largesse to directly touch their difficult lives.

"The problem is we have been hearing this story for so long, and it's hard to believe now," said John Chamunorwa, 46, who sells scrap metal and home-made bicycle spares in Harare.