Look East Policy Failing

Friday, 11 April, 2008

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Tino Zhakata

A middle-aged Chinese man grins through tobacco-stained teeth as he flips through a wad of Zimbabwe dollar notes, before stuffing them in the cash register.

Situated in Harare’s central business district, this new shop, called Ci Xiang, is one of the many Chinese-owned outlets that have sprouted in major towns over the past four years.

The businesses have done well since the demise of their main competitors at the cheap end of the market, the Zimbabwean-owned flea markets destroyed during the government’s widely condemned Operation Murambatsvina (Drive Out the Rubbish) which targeted informal traders as well as urban shantytowns homes.

Although the Chinese shops - which mostly sell inferior-quality electrical goods, clothes, footwear, toys and cosmetics - have been accused of driving already hard-hit indigenous businesses to the wall, they are popular with poor Zimbabweans.

Ci Xiang is doing brisk business. “Please check on Saturday - a new consignment will be here by that time,” the shopkeeper tells a disappointed customer.

The goods on offer are keenly priced: a pair of men’s shoes retails at just 200,000 Zimbabwean dollars, about eight US dollars at Ci Xiang, while at an upmarket store in Harare the cheapest pair would cost four times that. Chinese-made televisions go for as little as one million Zimbabwean dollars, an eighth of the price of a modest set in the mainstream shops.

“Everything has become so expensive, but at least most of us can get a thing or two at these Chinese shops - although they won’t last long,” Cletus Piki, a self-employed fruit vendor in Harare, told IWPR.

Chinese goods are widely regarded as sub-standard, and go by the derogatory name “zhing-zhong”, a term the Zimbabwean authorities find so offensive that police say anyone using it will be arrested for “conduct likely to provoke a breach of the peace”.

“No one is forced to go and buy from the Chinese,” said Harare resident Portia Chitima. “Those who have money can go and buy things from expensive shops, but for those of us who earn poor salaries, we do not have a choice but to go to China Town [a complex housing Chinese traders]. It is true that their goods do not last long, but those that buy them should treat them with extra care so that they can use them for as long as possible.”

The government of President Robert Mugabe has been courting China assiduously, with the result that the country’s economic engagement goes far beyond shops selling bargain-priced goods.

Zimbabweans now ride on some 1,000 Chinese buses, and the ailing national carrier Air Zimbabwe has bought three MA60 passenger planes from Beijing.

There have also been significant defence-sector purchases - the air force recently received six Karakoram-8 jet fighter/trainers and the security forces have received thousands of Kalashnikov-type assault rifles, plus riot gear, army trucks and water cannon to suppress demonstrations.

Beijing supplied sophisticated radio-jamming equipment to block pro-democracy broadcasts from the London-based radio station SWRadioAfrica, which quit Zimbabwe two years ago after agents of Mugabe’s Central Intelligence Organisation blew up its Harare transmitter.

The trade relationship with China is part of Mugabe’s policy known as “Look East”, which involves luring investment from countries with successful economies. China is the major target of the policy, although attempts have also been made to attract Malaysian, Indonesian, Singaporean, Vietnamese and Iranian investors.

The Zimbabwean leader embarked on the campaign after falling out with rich western countries and international financial institutions over failed economic policies as well as allegations of human rights abuses and electoral fraud. No doubt he hopes his prospective Asian partners will be less fussy about such matters.

China is certainly interested in a new market for its goods – from cheap toys to military jets. Analysts say Beijing is particularly keen on Zimbabwe’s platinum deposits, second in size only to South Africa’s. China is currently the leading consumer of platinum, taking nearly 20 per cent of world production.

But the relationship is not an equal one and the Chinese are naturally here to look after their own interests, not to rescue the Zimbabwean economy.

"There is no need to be over-enthusiastic about doing business with China, particularly because the Chinese are here, first and foremost, because of their own business interests – they have identified Zimbabwe as a viable market for their mass-produced goods," said Innocent Makwiramiti, chief executive officer of the Zimbabwe National Chamber of Commerce.

A political analyst at the University of Zimbabwe, who preferred not to be named, told IWPR, “The developments between China and Zimbabwe are not an isolated and benevolent expression of brotherhood. Both sides are in need of something.”

One example of this quid pro quo is the offer to hand over to Chinese management some of the arable farmland confiscated from white owners. These farms, which were originally designated for landless blacks, have tended to be handed out to government ministers and other regime loyalists, who have failed to make them productive.

State-owned companies such as power utility Zesa (Zimbabwe Electricity Supply Authority), the Hwange Colliery, the TelOne telecoms company and the Agricultural and Rural Development Authority have entered into cooperation agreements with Beijing, although little substantial has come out of them yet.

“Zimbabwe has literally mortgaged most of its key assets to the Chinese in the hope that it would get assistance. Without overstating the point, Zimbabwe is a desperate ally for China,” said a local banker, who did not want to be named.

Mugabe has found that the Chinese drive hard bargains. Their telecoms supplier Huawei Investments demanded a slice of Zimbabwe’s profits from mining and tobacco, in addition to a cash down payment, before it would supply 160 million US dollars’ worth of equipment for the telephone network. In April this year, a prospective Chinese partner pulled out of negotiations to rescue the loss-making Zimbabwe Iron and Steel Company for fear of incurring a huge deficit itself.

“For China, Zimbabwe is economic small fry, but for Mugabe’s ruling ZANU PF government, China offers the only way out of a deep hole it has dug for itself,” said one analyst, who asked to remain anonymous. “ZANU PF [Zimbabwe’s ruling party] needs to claw something back from China for what it has thrown away from the rest of the world - investment to restore a ruined economy and to cover the foreign currency gap, the energy gap, the food gap and the agricultural production gap.”

Aside from the economic aspects, this analyst sees a strong political dimension to the relationship. “ZANU PF needs the Chinese for something more sinister as well – perhaps it is only the Chinese who are prepared to assist Mugabe and ZANU PF to stay in power against the wishes of their own people,” he said. “Since their own people do not enjoy democratic freedom of expression and participation, there is no check on what types of regimes Beijing supports elsewhere.”

China was one of the few countries to publicly endorse Operation Murambatsvina.

The Look East policy has failed to bring substantial relief to the government’s efforts to grapple with its fast-shrinking economy.

Gross domestic product has fallen for each of the past seven years, and unemployment is running at 80 per cent. Inflation has now shot up to 255 per cent year-on-year, after enjoying relative respite at a rate of around 120 per cent. The Zimbabwean dollar has plunged to an all-time low of 25,000 to the US dollar - it was 5,700 to one in December 2004 – and, significantly, the black-market rate shows an even heftier depreciation to 45,000 to the US currency.

The pace and scale of the collapse is virtually unprecedented for a country that is not at war. "I can't think of a country that has experienced such a decline in peacetime," said Martwig Schafer, the World Bank’s representative in Zimbabwe.

Mugabe, who last year told the International Monetary Fund, IMF, to “go to hell”, led a high-powered delegation to China in August to beg for money to settle Zimbabwe’s IMF debt arrears, but returned home with a paltry six million US dollars. That sum is only enough to feed Zimbabwe’s hungry masses until the end of October, at a time when experts estimate that half the country’s 11 million people are in urgent need of food aid.

The meagre Chinese handout also leaves the government with nothing left over to pay for essential supplies of fuel, energy and medicines, let alone to cover debt repayments.

After this disappointing response, Mugabe turned to South Africa – but the rescue package offered by his neighbour is subject to tough conditions including substantive political and economic reforms, to which he will not agree.

Some analysts argue that in the end, Zimbabwe has little alternative but to try to mend its relationship with the IMF and other international institutions.

"We can’t really rely on China, which itself is focusing on increasing trade with the West,” said John Robertson, a leading independent economist in Harare. “What Zimbabwe needs is to mend relations with the West and multilateral institutions if we are to imagine any possible form of recovery from the mess we are in.”

In a surprise move at the end of August, the Zimbabwean government found 120 million US dollars to repay almost a third of the 295 million it owed in arrears to the IMF. The announcement came just over a week before the fund was due to consider expelling the country for failing to pay. It was unclear where the sum came from, given the government’s tight financial position.

What is certain, though, is that while Mugabe’s attempt to make new friends in the Asian tiger economies has increased his import costs, it has failed to boost the domestic economy.

“Basically Mugabe’s so-called Look East policy hasn’t helped,” said a Harare stockbroker who asked not to be named. “It hasn’t brought the intended results, which explains why the International Monetary Fund has been here. We can’t do without multilateral institutions really.”

Tino Zhakata is the pseudonym of an IWPR contributor in Zimbabwe.