Heavy cost for mortgaging resources to China

HARARE - Zimbabwe's long-term economic survival prospects look dimmer by the day with analysts warning that the government's mortgaging of the country's minerals to Asians is sure to lead to more troubles in the future for the world's fastest shrinking economy.
President Robert Mugabe's governmen

t, at a loss as to how to permanently tackle an economic crisis that started at the end of 1999, has been parcelling out pockets of Zimbabwe’s mineral wealth to China and other Asian countries in return for mostly short-term assistance.
As part of its highly-vaunted “Look East” policy, the Zimbabwe government has entered into at least 15 deals with the Chinese, Iranians and other Asians, mostly on fuel, mining, electricity and communication.
Last week a Zimbabwean delegation led by Vice-President Joice Mujuru was in China where they signed at least five agreements that would effectively give the Chinese access to the country’s resources.  However, analysts told ZimOnline that the Asian expedition would only worsen Zimbabwe’s crisis in that the deals only served to expand the catchment area for Chinese and other Asian manufacturers to dump their products.
University of Zimbabwe (UZ) political science lecturer John Makumbe said Zimbabwe’s economy was structurally weak to sustain trade with China.
“The Chinese are an attractive country to trade with only if our manufacturing sector is not on death row like is the case at the moment,” said Makumbe.
The UZ lecturer said the Look East policy – which Mugabe adopted after falling out with the West – was in fact, contributing to Zimbabwe’s biting economic crisis by destroying its manufacturing base as many industries were forced to close after losing market share to mostly cheap Chinese-made products.
Harare economist James Jowa cautioned against continued Asian deal-making, warning that these deals were leaving the country vulnerable to the vagaries of world commodity prices.
“These countries are getting a cheap source of commodities at a time when international prices of these products are firming. If anything, all Zimbabwe is getting is a few days’ supply of oil, electricity and other things that we could as well produce locally if we get our act together,” said Jowa.
The recent World Economic Forum on Africa summit held in South Africa singled out China’s insatiable demand for commodities as one of the factors pulling the rising Asian giant to Africa.
Chinese demand is, in fact, believed to be the reason behind the recent firming of copper, gold and other commodity prices.
The analysts also believe that the current deal-making and attendant mortgaging of Zimbabwe’s resources could have serious repercussions in the event that the country’s economic fortunes normalise.
There was a likelihood that a future post-Mugabe government in Harare might want to review some of the deals or in the worst case might want to expel the Chinese and other Asian investors should Zimbabwe’s economic situation normalise. 
Zimbabwe is also bound to suffer heavy economic losses as prices of commodities continue to firm.
“I foresee future problems with regards to our own indigenisation policy for sectors like mining and manufacturing and also problems to do with relations between future Zimbabwe governments and the Chinese and Iranians,” said Jowa. – ZimOnline

Post published in: Economy

Leave a Reply

Your email address will not be published. Required fields are marked *