China's passion cools for Zimbabwe's natural resources

China's love affair with Zimbabwe's Robert Mugabe and his willingness to hand over his country's bounteous natural resources in return for guns, spendable cash and protection from the United Nations appears to have run its course.

The relationship shows all the signs of having cooled from the passionate union forged in the battles against colonialism 40 years ago to a tense and increasingly prickly business relationship.

Chinese banks and resource development companies are not short of courage in accepting risks to invest in dysfunctional states like Zimbabwe, which entrepreneurs from other nations avoid like the plague.

But the Chinese scramblers for African investments are much happier dealing with Zimbabwe’s neighbours like Mozambique, Zambia, Botswana, Malawi and South Africa than with the demented regime of 86-year-old Mugabe and its semi-functional partnership with the Movement for Democratic Change led by Morgan Tsvangirai.

On the Chinese side there is clear irritation with forking out cheap loans and other inducements that Mugabe and his cronies don’t intend to honour. And Mugabe and his colleagues in the ruling ZANU-PF kleptocracy believe they are getting ripped off by Chinese state-controlled investors who take advantage of Zimbabwe’s international pariah status to gobble up the country’s wealth at fire-sale prices.

So there is a tetchy atmosphere evident in reports last week that negotiations are underway for China to invest about $10 billion in Zimbabwe’s mining and agricultural sectors.

This is an astonishing amount of money for Zimbabwe, which was once the only fully functional country in Africa with several hugely profitable export industries. But Zimbabwe’s total gross domestic product last year was only $6 billion.

The most controversial part of the Chinese offer seems to be the proposal by the Export-Import Bank of China (Eximbank) to put up $3 billion for investment in agriculture, fertilizer production and pharmaceuticals manufacturing.

The $3 billion is, said the Zimbabwe Independent newspaper last week, described in official documents as a "master-loan facility."

So the Chinese want some solid collateral and they have decided what they want is mortgages on Zimbabwe’s massive platinum deposits, believed to be the world’s third largest after South Africa and Russia.

The concessions in Zimbabwe’s Selous and Northfields districts cover 110 square kilometres.

But Mugabe’s men are balking at this deal, as much as they would love to get their hands on China’s $3 billion.

Estimates of the value of the platinum deposits run between $30 billion and $40 billion. Handing China rights to these deposits for a paltry $3 billion has Mugabe’s boys backing right away from the deal.

And there’s another problem. Zimbabwe had already mortgaged the platinum reserves to Eximbank.

Back in 2009, when Mugabe was even more hard up for cash than he is now, the platinum reserves were put up as collateral on a measly $200-million loan from Eximbank. Zimbabwe has been trying to pay this off and regain control of its platinum resources, but at the moment they are still encumbered.

There’s another, more deeply policy-based reason China is finding its dealings with Zimbabwe tiresome in the extreme.

In 2000 Mugabe accelerated a policy of confiscating white-owned farms in the name of providing land for black farmers.

Well, Mugabe and his boys couldn’t resist the temptation to keep the farms for themselves with the result that Zimbabwe went from being a food exporter to a nation with half the population facing famine, even after a third of its 12 million people had fled to neighbouring countries.

Now Mugabe wants to do the same with what remains of Zimbabwe’s manufacturing and resource industries.

In 2009 the government introduced an "indigenization" law, which required that at least 51 per cent of all companies operating in the country be owned by Zimbabweans.

But faced with the threat by foreign companies to stampede to the exit, Mugabe’s government never implemented the law.

Last week, however, Zimbabwe’s Minister of Indigenization and Empowerment, Saviour Kasukuwere, announced that drawing up regulations for the legislation is at "an advanced stage" and the law forcing foreign companies to hand over 51 per cent of their equity to Zimbabweans — for which read Mugabe and his gang — will come into force no later than the end of this month.