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Mugabe mortgages economy-analysts

Shakeman Mugari
ZIMBABWE’S “Look East” policy will not rescue the country from its current economic crisis so long as it is seen as an alternative to Western aid and trade or geared towards importing substandard goods.

Zimbabwe adopt

ed the Look East policy two years ago to spite the West after a series of diplomatic stand-offs with traditional European trading partners over human rights abuses and the breakdown of the rule of law.

European Union countries imposed selective sanctions on President Robert Mugabe, his ministers and cronies in protest at a stolen election in 2002. Mugabe turned to the East to source lines of credit and to help him revive an ailing economy.

But analysts are sceptical that the Look East drive will pay dividends as it is founded on an uneven trading field heavily tilted in favour of China and other Asian countries.

Local manufacturers say Zimbabwe-China relations resemble that of a rider and a horse. They say Mugabe is blindly mortgaging key sectors of the economy to the Chinese who by virtue of their emerging economic muscle will swamp the Zimbabwean economy. Eventually the Chinese will hold Zimbabwe hostage because they are not in the business of charity — or even solidarity — but profits, experts warn.

There are fears Zimbabwe could soon turn into a dumping ground for China’s substandard exports in the textiles, electronics, telecoms and avionics sectors. Chinese companies are set to tighten their grip on Zimbabwe’s military supplies sector as the country cracks under an arms embargo from European countries. Their buses are already falling apart on urban routes.

The retail sector is reeling under a barrage of inferior goods from China. The Chinese imports have also rendered the fragile local manufacturing sector unviable with their cheap commodities that have not led to any meaningful impact on the country’s 70% unemployment rate.

Apart from the larger imports, other Chinese products being pushed onto the local market include footware, kitchen utensils, clothing and bicycles. Zimbabwe now imports products which are manufactured locally like matches, cooking oil and washing powder.

Chinese companies have moved into the market aggressively as they take advantage of Zimbabwe’s desperate situation. In a rush to be seen to be reaping benefits from the new policy, Zimbabwe has marginalised local producers who are already struggling under the unbalanced economies of scale, analysts say.

This wholesale embracing of Chinese products has irked industrial players who accuse government of engaging in political calculations at the expense of the economy. Zimbabwe National Chamber of Commerce (ZNCC) president Luxon Zembe said Zimbabwe was destroying its manufacturing sector because of its blinkered approach to the Chinese.

“Zimbabwean manufactures cannot be expected to compete against the Chinese. China has big economies of scale which we don’t have. We must not be parochial in our approach,” Zembe said.

He said the government’s political approach to the issue over-exposed the economy.

“The textile and retail sectors are in trouble because of those (Chinese) products. We risk destroying our own economy,” he said.

Retail companies have borne the brunt of the Chinese products.

Bigger companies like Edgars, Truworths and Bata have also come under pressure from the substandard footware and fashion that has been dumped on Zimbabwe. A snap survey shows that almost one in every two shops in Harare’s CBD is selling Chinese products at 40% lower than the conventional outlets.

“The problem with our leaders is that they don’t look at the economy strategically,” Zembe said. “They must not allow Zimbabwe to be a free-for-all economy where inferior products just flood the market to the detriment of our manufacturers.”

The troubled Zimbabwe United Passenger Company (Zupco) recently bought 50 buses from a Chinese company, FAW. The purchase was made despite the existence of other local bus manufacturers that had tendered for the supply.

The imported buses, which experts say are not suitable for Zimbabwe’s roads, have already started breaking down. They have also proven to be a heavy financial burden, as they require Zupco to import experts to train local mechanics. About 10 of the buses broke down within a week of their arrival in the country, indicating that there was no due diligence before Zupco bought the buses.

The “zhing-zhong” boom has also gripped the state security forces. The Air Force of Zimbabwe last week bought six K-8 jet trainers from China. The K-8 is a less expensive replica of the British-made Hawk, which originally formed the core of Zimbabwe’s airfleet before the arms embargo, which led to Britain refusing to supply the country with spare parts.

The army also received armoured personnel carriers while the police acquired anti-riot gear, mobile water cannons and other equipment.

Crisis-ridden parastatals are also feeding at the Chinese trough barter deals whose benefits are yet to be seen.
Hwange Colliery Company recently signed a barter deal with China North Industries Corporation (Norinco).

Hwange will supply coke and coal to the company in exchange for earth-moving equipment and trucks.

Tel*One is also on the verge of acquiring mobile phone network equipment from China’s Huawei Technologies.

National Railways of Zimbabwe is said to be in the process of finalising a deal to buy wagons from China. The power utility, Zesa, also has a fleet of vehicles from China in addition to the pending deal to rehabilitate the Hwange power station.

Air Zimbabwe will soon be flying “zhing-zhong” planes on domestic and regional routes after the acquisition of two 60-seater MA60 aircraft. Zimbabwe is the first country to fly the planes since they were placed on the international market. Their durability has not been put to practical test elsewhere in the world.

The Chinese have also done little toward development of big business that creates employment. They are content with going into established business especially the parastatals where they are guaranteed political protection by the government. They are also content with cash businesses without a long-term approach to set up permanent structures that contribute to the infrastructure.

First vice secretary-general of the Zimbabwe Congress of Trade Unions (ZCTU), Collen Gwiyo, said the influx of Chinese entrepreneurs would lead to an unregulated industry, which becomes accountable to politicians instead of proper government structures.

“An unregulated industry does not pay tax and it is a recipe for cheap labour — that is dangerous for the welfare of the workers,” Gwiyo said. “Already there is a problem where these guys are paying starvation salaries — that is because they are not regulated.”

It is not clear whether the Chinese businesses dotted around the city are paying tax. Chinese industry is notorious for low wages and the same trend is now encroaching into Zimbabwe.

Analysts said the government’s Look East programme was a fallacy because it was not based on proper strategies designed to maximize benefits from the deals. He said in turning to the East the government has neglected key European market trading partners that still consume the bulk of the country’s projects.

Business in Zimbabwe still relies on European and North American markets for survival. Even listed companies are still battling to push their commodities into Europe instead of China.

“Europe remains the biggest consumer of our horticulture products, while regional countries also take products from our industry. It’s all political,” said an economics lecturer from the University of Zimbabwe.

Perhaps the irony of the Look East approach is that same Asian countries that Zimbabwe befriends are desperately knocking on the doors of European and North American countries to be let into their markets. Despite its political differences with the US, China has aggressively pushed its products into that market.

Unlike the South African government that works closely with business in foreign ventures, Mugabe normally sidelines business leaders when he signs foreign investment deals. South Africa has moved aggressively into Angola and Mozambique because of the proper structures of cooperation between government and business.

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