Chinese involvement in Zimbabwe

China is the prime consumer of several resources which Zimbabwe has in abundance, and investment trends in 2009 and 2010 show the high Chinese appetite for local mineral resources. China is ranked fourth in terms of the size of mining investment approved by the Zimbabwe Investment Authority (ZIA) in 2009, after British Virgin Islands (BVI), Mauritius, and South Africa.

October 4th, 2012

China is the prime consumer of several resources which Zimbabwe has in abundance, and investment trends in 2009 and 2010 show the high Chinese appetite for local mineral resources. China is ranked fourth in terms of the size of mining investment approved by the Zimbabwe Investment Authority (ZIA) in 2009, after British Virgin Islands (BVI), Mauritius, and South Africa.

China’s appetite for Zimbabwean resources is far from fading. If anything it is surging. For the first six months of 2010, its approved investment is second only to Isle of Man/ South African joint ventures (JVs), followed by South Africa, then Mauritius. According to data from ZIA for 2009, as many as 14 investors with an average investment portfolio of US$8 million each had their mining projects approved in 2009. This seems to be just the beginning of more Chinese investors to come. It has also been noted that Chinese involvement in mining can be indirect e.g. the US$500 million offered by Sino-Zimbabwe (Pvt) Ltd. to the Reserve Bank of Zimbabwe to purchase gold.

China ranks at number one in jobs created for each dollar invested. For every US$49 000 invested by a Chinese company, a job is created. In comparison, BVI needs US$817 000, Mauritius US$337 000 and South Africa US$169 000 to create one job. Chinese investment creates 17 jobs for every one created by BVI investment.  However China remains a laggard when it comes to involving local investors. Only 5 percent is taken up by local investors, compared to 51 percent in Mauritian companies, 37 percent in South African companies, and 20 percent in Isle of Man/ South African JVs.

For purpose of analysis Chinese investors in Zimbabwe from 2000 can be divided into two categories. The first is large corporate investors who come in the form of government-to-government arrangements. They are in most cases protected by government protocols and are generally engaged in joint ventures with state companies. In certain cases they are exempted from complying with certain rules and regulations. Companies such as Sino-Steel, Wamboa and Wanboa fall into this category. The second is comprised of individual investors. These are generally small investors who either sneak into the country or come through the ZIA like everyone else. They do not enjoy any privileges and are expected to meet the criteria set out by the ZIA like any other investor, foreign or local. Once the project is approved and registered, very little is known about them.

The Chinese strategy of involvement seems to be more targeted at controlling mineral resources than actual mining. The China Africa Development Fund (CADEF) was talking of venture capital with small-scale chrome miners where CADEF would have a 20 percent controlling stake. This has proved difficult because the current mining claims held by local small-scale miners are too fragmented. The advice the Minerals Marketing Company of Zimbabwe (MMCZ) has offered to the Zimbabwe Mining Federation (ZMF), which represents mainly small mining companies, is for the latter to encourage its members to consolidate their claims into syndicates. To circumvent this problem, small-scale Chinese companies have entered into agreements with small-scale Zimbabwean claim holders whereby the former work on the claims of the latter for a fee.

Partnerships with Chinese companies exist in copper, chrome and platinum mining. They are a result of joint cooperation agreements (JCAs) signed by the two countries. There have also been JCAs with the Russians since 2005. The Zimbabwe Mining Development Cooperation (ZMDC) has several joint ventures with a Chinese company, Norinco. They have a 50-50 share in Global Platinum, a 50-50 share in Zimbao (which mines copper), and a minority shareholding of 20 percent in Wambao (Norinco owns the balance with a small share belonging to another state entity), which mines chrome. ZMDC is also in partnership with chrome miner Star Communications of China on a 40-60 basis. Sino-Zimbabwe announced an $8 billion investment agreement with the government of Zimbabwe in 2009. While the perception was that this was a government corporation, emerging information suggest that Sino-Zim is officially a private company. It is involved in cotton contract farming and buying, and in chrome and platinum.

Two Chinese companies in 51-49 joint ventures with local indigenous investors were registered to mine diamonds in 2010. These are Sino-Zim and Anjin China-Zimbabwe.

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