CRISISBOOM

By Malcolm Moore, Shanghai 8:13AM GMT 10 Feb 2011

When Yang Jiechi arrives in Harare on Thursday, for the first visit by a Chinese Foreign minister in a decade, he is almost certain to be bearing gifts.

After almost three years in which China has publicly shied away from Zimbabwe, there are signs that Beijing has its eyes, once again, on the country’s rich mineral reserves.

Since the deadly elections in 2008, which forced Robert Mugabe, Zimbabwe’s president, to form a “unity” government with his opponent Morgan Tsvangirai, relations have cooled while Chinese officials hedged their bets over the country’s leadership and squirmed in the fierce glare of international condemnation.

“China gets embarrassed when embarrassing details become public,” said Philip Barclay, a former British diplomat in Harare and the author of Zimbabwe, Years of Hope and Despair.

“And the Chinese weapons shipment which arrived in 2008, just at the time when violence broke out around the Zimbabwean elections, was very embarrassing. They really did not like that,” he added.

On Thursday, however, Mr Yang is likely to start negotiations over a significant injection of Chinese investment.

According to Tapiwa Mashakada, the Zimbabwean Economic planning minister, Mr Yang may be carrying with him as much as $10 billion of investment from Beijing.

“We have met with officials from China Development Bank and they have said they are willing to invest up to $10 billion,” he said, at a business conference in Harare earlier this month.

“The Chinese are looking into mining development, that is exploration and exploitation, agriculture, infrastructure development and information communication technology,” added Mr Mashakada, a member of Mr Tsvangirai’s Movement for Democratic Change party.

Previous rumors suggested, however, that the money on the table is actually a $3 billion loan from China’s Export-Import (Exim) Bank. Both sums dwarf previous Chinese investments in Zimbabwe, and Mr Mashakada’s claim represents more than twice the value of Zimbabwe’s entire economy last year, and more than all other Chinese direct investments in Africa in 2009 put together.

“It is a pie-in-the-sky figure,” said Mr Barclay. “It is much larger than previous Chinese investments and when they do invest money, the Chinese expect concrete benefits, usually closely linked to concessions,” he added.

More likely are targeted deals, perhaps for Zimbabwe’s platinum and zinc mines. Zimbabwe has the second-largest reserves of platinum in the world after South Africa.

Details of the Exim bank deal reported in Zimbabwe’s respected “Independent” newspaper cite documents proposing a “master-loan facility” aimed at resuscitating Zimbabwe’s struggling economy after years of hyperinflation and disastrous government policies.

In return, China reportedly wants control over platinum deposits currently owned by the Zimbabwean government in the Selous and Northfields concession covering 68 square miles and valued at between $30 billion to $40 billion.

More controversially, China may also have its eyes on the Marange diamond fields in Chiadzwa. In late 2008 the Zimbabwean military is alleged to have seized control of the fields, shooting illegal miners from helicopter gunships.

Currently, a small proportion of the diamonds from this vast mine are certified by the Kimberley Process to avoid being tagged as “blood” diamonds, but a much greater quantity is thought to be bought up by dubious traders with profits flowing to Mr Mugabe’s Zanu-PF.

China already mines one alluvial diamond concession at Chiadzwa in partnership with the government under the banner of Anjin Investments. There have also been rumors that China may be involved in further illegal mining activities, but they have never been confirmed.

In addition, some Chinese investment could flow into agriculture. China imports a significant quantity of tobacco from Zimbabwe, and may have one eye on a future source of food for its growing middle class.

Around 5,000 Chinese workers live in Zimbabwe, and the two countries have a relationship stretching back to the founding of Robert Mugabe’s Zanu-PF, whose Marxist revolution was partly funded by Beijing. Over the years, China has found it easy to do business with a country that was run along similar lines, with Zanu-PF’s politburo making unilateral decisions.

It is not clear if dealing with the unity government and Mr Tsvangirai’s MDC party will be to Beijing’s taste, but for Zimbabwe there seems little option.

“The MDC will send China warm and fuzzy messages too,” said Mr Barclay. “Although the investment from China is not a particularly good fit, the Chinese are the only investors out there. There was a small delegation from Germany in 2010, but they backed off.”