SouthScan (London)

Zimbabwe: Scepticism Remains As China Comes to the Rescue

The Zimbabwe government this week gave coal mining rights to a Chinese company in exchange for opening two mines and setting up three thermal power stations in the investment-starved economy. But with previous agreements still to be fulfilled, questions remain on whether the deals will come to fruition.

Two Zimbabwean companies, Ele Resources and Hwange Colliery, have agreed to jointly establish coalmines and three thermal power stations with China Machine Building International Corporation (CMEC) in deals worth about US$1.3 billion.

The deals were facilitated by vice president Joyce Mujuru, who this week toured China at the invitation of the Chinese government.

Another, RioZim, this week also said it was in talks with two consortia from China and Indonesia about setting up a thermal power station at its Sengwa Coal Mine. But those talks have been going on since 2003 and company officials conceded that it was finding it difficult to attract investors in the present economic climate.

Zimbabwe's President Robert Mugabe has over the last six years been trying to forge close alliances with Asian countries. Investment from the West has dried up but China, Iran, and India indicated interest in investing in return for mining guarantees.

Meanwhile South African companies have taken control of the most profitable mines in the country. Implats, the world's second largest platinum producer, and Aquarius Platinum control Zimplats and Mimosa Mines while Anglo Platinum holds mining rights to Unki Platinum Mine near Gweru. SA tycoon Mzi Khumalo's Metallon Gold owns five of the largest gold-producing mines in the country. Some of its major banks, Nedbank, ABSA and Standard, either own or have controlling stakes in the biggest banks in Zimbabwe.

Just talk?

Analysts remain sceptical about the Chinese deals, after previous agreements failed to bear fruit, mainly as a result of the Zimbabwe government failing to meet its obligations.

"The trade deals with China needs to be put into reality so that we can practically see them rather than ending on talks. We still need investment from China but that should be genuine," said Eric Bloch, a local commentator on economic issues. Oscar Chiwira, of the National University of Science and Technology, said it was obvious that the Chinese wanted guarantees that their ownership of mines would not be reversed.

"The Chinese know that there are vast natural resources, mainly platinum, they can exploit, but they want to avoid a situation that is in the mining industry now when the government suddenly wakes up and wants to nationalise all mines," he said.

China National Aero Technology Import and Export Corporation (CATIC), which has been supplying the Zimbabwe government with passenger and military planes and electricity transmission equipment, said it was still owed money from previous ventures.

Mujuru has offered CATIC mineral concessions, thought to be the platinum reserves released by Zimplats two weeks ago, saying the Zimbabwe government had decided to use the country's abundant mineral resources to start joint ventures with foreign investors to escape Western economic sanctions.

CATIC has already been offered coal reserves at Sinamatela, near Zambia, in partnership with ZESA, the parastatal responsible for electricity generation, while CMEC is expected to help fund another mine at nearby Chaba, along with Zesa and Hwange.

CATIC president Wang Dawei asked the Zimbabwe government to give assurances that the mining concession would be legally transferred to the joint venture company.

Zimbabwe has meanwhile signed a US$60 million deal with China that will see state radio and TV transmission improved in return for chrome supplies.

Under the deal, which was signed in Beijing on Tuesday, Star Communications of China will provide new radio and television transmission equipment to extend coverage to all parts of the country.

The Zimbabwe Mining Development Corporation (ZMDC) is to provide security for the deal in the form of chrome.

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