Mugabe’s decision to nationalize Zimbabwe’s diamond industry has caused particular alarm in Beijing. Under Zimbabwe’s new rules, Chinese mining companies are forced to operate under the umbrella of the Zimbabwe Consolidated Diamond Company (ZCDC).
In 2015, Anjin, a leading Chinese diamond mining company appealed to the Zimbabwean Supreme Court to challenge the legality of the ZCDC’s monopoly.
Even though Chinese investment is vital for Zimbabwe’s economy and Chinese diplomats have pressured Zimbabwean policymakers to moderate their indigenization laws, Harare has refused to kowtow to Beijing’s demands. Mugabe has insisted that indigenization legislation is necessary to redress economic inequalities created during Zimbabwe’s colonial past.
Mugabe’s position has broad support within the ZANU-PF. Senior Zimbabwean officials believe that the Zimbabwean government does not earn enough tax revenues from profits made by foreign companies in Zimbabwe.
Patrick Zhuwao, Zimbabwe’s Minister of Youth, Indigenization, and Economic Empowerment views the integration of foreign companies under Zimbabwean government control as the ideal way to rectify this revenue shortfall.
Zimbabwe’s unwillingness to comply with the demands of Chinese investors has strained the Beijing-Harare relationship. Nevertheless, it is possible that the China-Zimbabwe rift on indigenization could be overcome.
Mugabe’s recent public statements suggest that he might be open to making a compromise with China. On April 13, Mugabe admitted that his indigenization proposals are creating “confusion” that is discouraging foreign investment to Zimbabwe.
Mugabe has also criticized ZANU-PF government ministers calling for rapid, sweeping indigenization, claiming that this approach would alarm international investors.
In the short-term, Mugabe needs to uphold Zimbabwe’s indigenization policy to ensure that hardline nationalists in the ZANU-PF remain loyal to his government.
However, Mugabe could eventually reconsider his position and convince extreme nationalists in the ZANU-PF of the dire economic consequences of applying Zimbabwe’s indigenization laws to Chinese companies. Should Mugabe pursue this course, the China-Zimbabwe alliance could return to its former strength.
Even though China’s relationship with Zimbabwe has been defined by personal camaraderie between senior Communist Party of China (CPC) officials and Mugabe, China hopes to maintain Zimbabwe as an ally even if the ZANU-PF is eventually toppled.
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