Political infighting in Zimbabwe threatens China’s investments and interests in its “all-weather friend”

China’s brotherly relationship with Zimbabwe dates back to the liberation war era. The Zimbabwe African National Union (ZANU), the predecessor of ZANU-PF, received China’s financial and military sponsorship in its fighting with the rival faction supported by the Soviet Union.

After independence, China continued to offer support to the Zimbabwean government, building a national stadium, hospitals, and power stations, and providing 35 percent of Zimbabwe’s imported arms from 1980-1999.

In 2012, China donated $150 million worth of grain to help several Zimbabwean communities that were suffering from a famine. More recently, China pledged $46 million to build a new parliament for Zimbabwe as a gift.

During his visit to Zimbabwe in December 2015, Chinese President Xi Jinping called China Zimbabwe’s “all-weather” friend, and committed multi-billion-dollar energy and infrastructure projects, including a $1 billion loan to finance the expansion of Zimbabwe’s largest thermal power plant.

To be sure, China has been a benefactor of its political and economic ties with Zimbabwe. China’s yuan or renminbi (RMB) is adopted as a legal currency in Zimbabwe, which may help pave the way for the RMB’s internationalization, or if not, at least Africanization, as China’s currency has been given more weight in several African nations’ currency reserves.

With little serious competition from other foreign investors except South Africa, and with the support of Mugabe-led ZANU-PF, China has been able to take advantage of the Zimbabwean agricultural industry, which has huge potential but awaits capital injection.

For example, Tianze, a local Chinese tobacco company established by the China Tobacco Import & Export Corporation in 2005, has given $100 million worth of interest-free loans to Zimbabwean farmers for tobacco production. Recently, more Chinese companies have invested in big tobacco farms that have been underworked by their owners, usually Mugabe’s cronies who were given the lands after their being seized from the white owners in 2000.

Zimbabwe is the fifth-largest tobacco exporting country in the world and China has the largest number cigarette users on earth, buying 54 percent of Zimbabwe’s tobacco annually.

While China’s economic reach to Zimbabwe becomes deeper, it also faces an enormous political risk. For example, the sudden enforcement of the indigenization law in March 2016 endangered the interests of all foreign investors, China in particular.

Passed in 2008, the indigenization law stipulates that all “foreign and white-owned companies with assets of more than $500 000 should cede or sell a 51-percent stake to black nationals or the country’s National Economic Empowerment Board.”

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