ZIMBABWE: 'Look East' policy staves off collapse with grants and deals

[ This report does not necessarily reflect the views of the United Nations]

HARARE, 29 Jul 2005 (IRIN) - President Robert Mugabe's 'Look East' policy took him to China this week for further trade deals to help rescue Zimbabwe's ailing economy, which is suffering the effects of an aid freeze by Western lenders.

China is at the forefront of the Look East initiative, which seeks trade and political agreements with Asian countries considered friendly to Zimbabwe, rather than traditional western partners, who have been critical of alleged human rights abuses and electoral fraud.

Zimbabwe has seen an unprecedented influx of Chinese goods over the past two years, and now a high-powered delegation, led by Mugabe on a week-long visit, has reportedly struck a number of commercial and loan agreements in exchange for trade and mineral concessions.

Innocent Makwiramiti, chief executive officer of the Zimbabwe National Chamber of Commerce (ZNCC), said the government had turned to Asia to save the economy from collapse.

"Given that Zimbabwe's traditional trading partners in the European Union and the United States have drastically scaled down on business or stopped completely, it is natural for the government to look elsewhere in order to save the country from total collapse, and there is nothing bad about that," Makwiramiti remarked.

"But there is no need to be over-enthusiastic about doing business with China, particularly because the Chinese are here, first and foremost, because of their own business interests - they have identified Zimbabwe as a viable market for their mass-produced goods," he told IRIN.

The International Monetary Fund (IMF) and the World Bank have ceased financial assistance to Zimbabwe, which has contributed to its foreign currency crisis. Western investors have also shied away in response to ongoing political and economic problems.

According to the official Herald newspaper, the new agreements with China included a grant worth US $6 million to import maize, finance expansion of the Hwange thermal power station and some commercial projects, and extend a loan to the Zimbabwe Electricity Supply Authority (ZESA).

About four million people need food assistance in the wake of a drought last year, while ZESA has been failing to meet the country's power demands because it does not have adequate foreign currency to pay outside suppliers.

Mugabe also met with the chairman of the ruling Chinese National People's Congress and President Hu Jintao who, the Herald said, pledged to help protect Zimbabwe's sovereignty against perceived hostile western countries.

Chinese business people have established retail shops in the capital, Harare, and other major towns, mostly selling cheap electrical goods, clothes, blankets, toys and beauty products.

Retailers are enjoying brisk business after informal markets offering cheap alternatives were closed down under Operation Murambatsvina, a government cleanup exercise launched in mid-May ostensibly to crack down on illicit trade in foreign currency.

The shops are popular with people who cannot afford to buy at the upmarket departmental stores because many items, especially clothing, are often only a quarter of the price. While a modest television set is sold at around Zim $8m (US $450) at established shops, Chinese ones cost as little as Zim $1m (US $56).

However, Makwiramiti warned that the country may soon find itself unable to sustain the business deals it has struck with China due to ongoing forex shortages.

"The ZNCC is aware that the Chinese are demanding international commercial rates for whatever services they would be rendering to Zimbabwe - nothing is coming for free or at preferential rates, and if we do not find ways of generating forex we might find ourselves in a worse situation soon," he said.

Harare-based economist John Robertson has recommended that the government mend its relations with the IMF, World Bank, USA and European countries in order to revive the economy.

"China itself is looking to the West, and there is no way we can sustain our economy by limiting trade to China, or one or two other Asian countries, because that will give the country short-lived relief, Robertson told IRIN. "Let's make sure that we talk to the IMF so that it can resume financial assistance, for that is how we could once again get steady forex inflows."

He complained that some Chinese products, such as the buses and planes, were seen as unreliable; the same complaint has been made against apparel and electrical goods.

The police recently announced that it will be arresting people for using the term 'zhing zhong', which derisively refers to the cheap Chinese goods. Several people have been arrested for using the term and charged under the Miscellaneous Offences Act for "conduct likely to provoke the breach of peace".

But Portia Chitima, living in Harare, said people should not complain about the substandard goods. "No-one is forced to go and buy from the Chinese - those that have money can go and buy things from expensive shops, but for some of us who earn poor salaries, we do not have a choice but to go to China Town (a complex housing Chinese traders).

"It is true that their clothes or electrical goods do not last long, but those that buy them should treat them with extra care, so that they can use them for as long as possible. The government can also make a law that compels the Chinese to give warranties for the goods they sell," Chitima suggested.

She said there was nothing new about Chinese products because Zimbabwean cross-border traders used to go to Botswana and Zambia to buy and then re-sell them at informal markets before the Chinese came.

The Zimbabwean government recently approached South Africa for a US $1 billion loan to import food and fuel; some of it is expected to go towards servicing the IMF debt.

President Thabo Mbeki said South Africa was considering lending its neighbour a helping hand, for fear that failure to do so might have a negative impact on his country's economy.

Zimbabwe has also approached Iran, which has led to a US $120 million investment by FARB Co, an Iranian firm, in the expansion of Kariba South Power Station, whose operations are vital to the electricity supply.

[ENDS]