Is China’s growing Zimbabwe alliance key to its bigger plans for southern Africa?

By China Morning Post

In Beitbridge, a border town in southern Zimbabwe, a mega industrial park that will eventually produce electricity, chromium-based materials and steel products is taking shape amid a major minerals rush in the southern African nation.

The US$3.6 billion plan to build Palm River Energy Metallurgical Industrial Park in the province of Matabeleland South is being led by one Chinese firm – Xinganglian (Shanxi) Holding Group, which aims to exploit abundant reserves of coal, iron ore, and chrome and position Zimbabwe as a major steel producer.

The project will cover 5,163 hectares (12,758 acres) within a special economic zone incorporating mining, power generation, coke production and steel manufacturing. It is expected to be built in five phases over 12 years.

Zimbabwe has become a key resource destination for China as companies continue to seal deals to establish mineral processing operations, including steel plants, at a time when such industries face decline in other countries, such as neighbouring South Africa.

The scope of the investments suggested that China had chosen Zimbabwe as its inaugural steel and chrome industrialisation zone in Africa, according to Lauren Johnston, a China-Africa specialist and associate professor at the University of Sydney’s China Studies Centre.

“This makes sense. Zimbabwe has a rich human capital and natural resource endowment,” Johnston said.

Xinganglian Holding Group, through its Zimbabwean subsidiary Xintai Resources, has said it will spend US$237 million on the first phase of the project to produce an annual 200,000 tonnes of ferrochrome, an intermediate product used in the production of value-added materials such as stainless steel, according to Zimbabwean officials.

In addition to its metallurgical operations, the Palm River Energy complex will include a 1,200 megawatt coal-fired thermal power station.

The investment came a few months after Chinese steel giant Tsingshan Holding Group, through its Zimbabwean subsidiary Dinson Iron and Steel, completed a US$1.5 billion iron and steelmaking facility.

Last year, the processing plant in Manhize, near Mvuma, a mining town about 200km (124 miles) south of the capital Harare, started producing pig iron, a major raw material needed to make steel, and steel billets.

The investment has positioned Zimbabwe as one of Africa’s largest producers of iron and steel. The plant will initially produce 600,000 tonnes of steel a year with production expected to reach 5 million tonnes in the final phase of the plant expansion.

At a launch ceremony on Monday for the Palm River park, Zimbabwean President Emmerson Mnangagwa credited his “government’s engagement and re-engagement policy” for securing the project, adding that the strategy continued to attract investors, especially from China.

A coal wash plant, with an annual capacity of 160,000 tonnes, had been completed as well as the chrome smelting plant, Mnangagwa said.

“I applaud the fact that the project targets the production of 2 million tonnes of chromium-based materials and one million tonnes of coke per year,” Mnangagwa said.

Charlie Robertson, an economist who specialises in Africa and author of The Time-Travelling Economist, said that in Zimbabwe, labour costs might be half of what they would be in South Africa.

“Or possibly, this is part of a quid pro quo in which China gets access to Zimbabwe’s raw materials, in return for China’s promise to invest in Zimbabwe’s industrial base,” he said.

Johnston said that unlike South Africa, however, Zimbabwe’s labour unions had been relatively disempowered while its government flew under the global radar.

“This makes it an easier place for China to operate than South Africa. Plus, as a result of the period under which Zimbabwe was sanctioned by the West, China is also deeply important as a trade and investment partner,” Johnston said.

As a result of this, she said, the Zimbabwean government was more deeply embedded with people who had closer ties to China.

Mnangagwa himself received military training in China in the 1960s, when he was a young member of the Zimbabwe African National Liberation Army, the military wing of the then ruling ZANU party that was fighting against British colonial rule.

Vast Potential

Huang Minghai, economic and commercial counsellor of the Chinese embassy in Harare, said the potential of Zimbabwe was vast, adding that nearly half of the Chinese firms investing in the country had targeted the mining sector.

Zimbabwe was “brimming with potential, a land blessed with abundant natural resources, a vibrant cultural heritage, and a resilient, hardworking people”, Huang was quoted as saying by media in Zimbabwe.

Xinganglian has promised to help train Zimbabweans in metallurgy and energy production. Zhou Xudong, the company’s chairman, said it would set aside US$500,000 to fund a scholarship to sponsor Zimbabwean youth to study in China. “Over the next few years, we will annually select five to 10 outstanding students from the Beitbridge region to receive scholarships,” Zhou said.

Johnston said the steel produced in Zimbabwe might also feed into China’s plans to be involved in construction across the southern Africa subregion, including railways, such as the planned refurbishment of Tazara, which connects Zambia’s copper belt region to Dar es Salaam port in Tanzania.

Chinese companies have also invested millions of dollars to acquire lithium mines, and have pumped more than US$1 billion into building processing plants in Zimbabwe. The country has recently emerged as a major source of lithium, an essential raw material for the lithium-ion batteries that power electric vehicles.

“Zimbabwe might become the inaugural hub for China’s southern African transportation and industrialisation plans, also due to its abundance of base industrial materials,” Johnston said.