FOCAC presents opportunities for expanding China-Africa cooperation

Munetsi Madakufamba

As Beijing prepares to host the 2024 Summit of the Forum on China-Africa Cooperation (FOCAC), I reflect on issues of possible interest to the Chinese investor, with focus on Africa in general and Zimbabwe in particular. I discuss how Zimbabwe and the continent of Africa can leverage on opportunities presented by the dual planks of FOCAC and the Belt and Road Initiative (BRI). Zimbabwe is a country with enormous potential that has been suppressed by over 20 years of Western sanctions, but is now rising as a strategic player in the 16-member Southern African Development Community (SADC). Zimbabwe has just become the chair of SADC for the next year. President Mnangagwa is on a State visit to China and will attend the FOCAC Summit this week with other African leaders.

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Impactful, transformative investments

China has been the biggest investor in Zimbabwe, coming from state-owned companies and the private sector, valued at US$300 million in 2023 alone, according to the Zimbabwe Investment and Development Authority.

Much of this investment has gone into mining, infrastructure (including energy and airports) and industry.

Most of the China-funded projects are completed on time, regardless of size.

For example, the US$533 million Kariba Hydropower project that added 300 megawatts (MW) to the national grid was completed in 2018, a thermal expansion project at Hwange added another 600MW this year, while the China-funded US$150 million rehabilitation of Zimbabwe’s main international airport in Harare is undergoing final touch-ups and already in use.

There are some common features of these Chinese investments which set them apart from investments coming from other source markets, and that is their speed, size, impact and transformative nature.

For example, the US$1,5 billion integrated steel manufacturing plant set up in Zimbabwe’s Midlands province by Chinese firm Dinson Iron and Steel Company (Disco) draws on upstream and downstream supply chains that go beyond Zimbabwe, benefitting its neighbours in SADC in many areas that include employment creation and helping them meet their own infrastructure construction and industrialisation needs.

Tsingshan Group, which owns Disco, has other subsidiaries invested in ferrochrome and coking coal agglomerating to about US$3 billion investment, with many similar, although not as big in size.

This is significant for a country like Zimbabwe that has been suffocating under Western sanctions for over two decades.

The social impact of Chinese investments in Zimbabwe has been most visible, with some of the major companies prioritising corporate social responsibility as they have invested in social sectors such as education and health for local communities.

Sinomine Bikita Minerals in Zimbabwe’s Masvingo province is one such example, where the company has drilled boreholes, electrified and built road infrastructure for local communities.

Resolute under Western sanctions

Resilience, creativity, innovation and hard work are traits that define Zimbabweans, acquired and well-tested during the challenging years of the country’s protracted liberation struggle in the 1970s.

Zimbabweans have always been a resilient and resourceful people, and adversities emanating from the last two decades of American-led Western sanctions have only emboldened this spirit of resilience.

The sanctions, particularly through America’s ZDERA (Zimbabwe Democracy and Economic Recovery Act), direct Western financial institutions to suspend balance of payment support, which has negatively impacted the country’s macroeconomic performance due to fiscal constraints and investment hesitancy.

The sanctioning of key agricultural and infrastructural developmental institutions has also made it difficult for the country to achieve its economic potential.

And only six out of 27 commercial banks have been able to perform international transactions, as international banks severed correspondent banking relationships, leaving the financial sector incapacitated.

The Government of Zimbabwe has been on a persistent diplomatic offensive to gain solidarity and raise awareness on the illegal nature of the sanctions as these were imposed with no UN approval.

China as a friend of Zimbabwe has led the global pushback, for example, in thwarting the anti-Zimbabwe movement attempts to legitimise their actions through the UN system.

The international campaign has also been crucial, coming from other progressive countries of the world, most notably Zimbabwe’s own neighbours in the Southern African Development Community (SADC), who set aside October 25 every year since 2019 as Anti-Sanctions Day, calling for the unconditional lifting of sanctions, among other solidarity measures.

SADC solidarity is also motivated by the fact that the collateral damage goes beyond Zimbabwe, affecting neighbouring countries, for example, if Zimbabwe fails to reach its macro-economic convergence targets pursuant to regional integration in the sub-region.

These efforts by the Government of Zimbabwe and the solidarity from allies have yielded important, albeit partial, victories with the staggered lifting of sanctions, the latest of which came this year when many of the leaders and companies on the US list were removed.

Zimbabwe and SADC will, however, not tire until the illegal sanctions are completely and unconditionally lifted.

A currency under attack

As a country under sanctions for over 20 years, Zimbabwe’s monetary sector has been under siege, which has been the main source of macroeconomic instability.

Although the country has a multi-currency monetary system, the US dollar has remained the preferred currency for domestic and international transactions, and as the store of value.

The main source of Zimbabwe’s inflation has been the rapid exchange rate depreciation, itself a result of sanctions assault on the local currency.

Five months after its introduction, Zimbabwe’s new currency has come under enormous pressure, despite marked improvements in overall economic performance.

Zimbabwe is the only country to register positive economic growth throughout the Covid era and is projected to grow by 3 percent, notwithstanding the effects of the drought from the last agricultural season.

Zimbabwe uses a multicurrency system that includes the USD, the Zimbabwe Gold (ZiG) currency and a basket of other international currencies.

However, the USD remains the dominant currency of transaction and store of value.

There are many factors that are contributing to the currency decline but three can be highlighted here.

First, the forex market in Zimbabwe is still imperfect owing to years of improvisations to beat the illegal Western sanctions.

As a result of an incapacitated banking sector, a thriving parallel market emerged as an alternative source of dollars to finance essential imports such as capital goods, fuel and medicine.

Zimbabwe has mostly functioned as a dollar-based economy, with 80 percent of transactions using the currency. Although this was now changing, dropping to 60 percent of transactions as of July 2024, businesses that accept the local currency quickly want to convert their money back to the USD, indicating that confidence is still an issue.

Second, Zimbabwe is currently suffering from a climate change-induced drought that has affected much of Southern Africa, depressing not only the output of tobacco, which is Zimbabwe’s biggest forex earning crop, but also enlarging the food import bill, further straining forex coffers.

Finally, remittances, which are the biggest source of forex for Zimbabwe, bringing in about US$1,5 billion every year, largely go through the parallel market, creating a cycle that is now slowing due to various measures.

Zimbabwe needs to bring in more forex through investment and exports, as well as import-substitution and reforms that can reassure the Diaspora to channel more of their remittances through the formal sector.

More gold reserves are needed to shore up the currency, particularly in reducing the operating costs in the sector, chief among them the cost of electricity, which is still high and unstable.

This is an area where more Chinese investment can be considered, as Zimbabwe is richly endowed in gold, and in electricity generation to ensure energy security.

China can leverage its technology and high efficiency to support these two critical sectors for Zimbabwe, and many others in the infrastructure and mineral value chains.

China cooperation can help Zimbabwe resolve its debt arrears

Zimbabwe’s total public debt was US$17,7 billion as of September 2023, of which US$12,7 billion was owed to external creditors while internal debt stood at US$5 billion.

Of the US$9,1 billion multilateral and bilateral debt, much of that is arrears and interest from defaulting on payments due to the constraints created by 24 years under sanctions.

Loans from China total US$2 billion, or 16 percent of external debt, received mostly in the last 20 years when Zimbabwe has been ineligible for loans from multilateral creditors.

China has been supportive of Zimbabwe’s efforts at clearing its debt obligations.

Since 2021, Zimbabwe has committed to clearing its arrears with multilateral and bilateral creditors, adopting the Arrears Clearance, Debt Relief and Restructuring Strategy to resolve the longstanding monetary challenges and improve its credit rating.

Further to that, the Central Pin Strategy adopted in 2022 pledges reforms on three planks, namely economic, political and compensation for white former commercial farmers whose farms were acquired under the country’s Land Reform Programme to address a legacy of colonial occupation.

Further political and diplomatic reengagement efforts are underway to normalise relations with the West, under the mantra “friend to all and enemy to none”.

China as a friendly country can help with Zimbabwe’s efforts towards normalising relations with the world, in particular for purposes of stabilising the country’s economy.

Industrialisation and “Made in Africa”

The single most important obstacle to establishing a “Made in Africa” hub and making the continent a competitive global manufacturing centre is the infrastructure gap.

China, through the Belt and Road Initiative and FOCAC, is changing the narrative, with US$200 billion having already been channelled to Africa’s development in the last 24 years, including in investment in infrastructure.

Given the magnitude of the gap, more is needed, with US$600 billion projected as the cost of implementing the SADC Infrastructure Master Plan 2012-2027.

The plan covers infrastructure such as transport, energy, transport, water, tourism and information and communication technology.

To improve Africa’s competitiveness, top on the list is energy, particularly in the context of industrialisation becoming the main development agenda in Zimbabwe and SADC.

The critical importance of energy in driving industrialisation cannot be overemphasised, and yet most countries in the region and in Africa in general suffer crippling power shortages.

Africa is on the lower end of the global energy divide between those who have it and the so-called energy have-nots, with a manifestly low kilowatt hour per capita.

While China has succeeded in providing universal access to energy for 1,4 billion citizens, Africa still falls far behind, averaging below 50 percent.

Zimbabwe fares relatively better at 60 percent, but that too shows there is still a lot of work to be done.

The emergent paradigm of “Green Structural Adjustment” adds to what is already a complex situation for Africa.

What is needed is energy cooperation that prioritises balance between green energy and other traditional energy sources as a quick transitional measure.

Zimbabwe lies at the heart of SADC, making it geographically strategic as a manufacturing and logistic hub, and facilitating regional connectivity and trade in Southern Africa.

The road network is currently undergoing extensive rehabilitation, the most comprehensive since the country’s independence in 1980.

Coupled with the country’s highly educated youthful population, there is potential for providing the human capital needed as a global manufacturing centre.

By implementing further measures to stabilise its currency, Zimbabwe can unlock the potential to become a serious “Made in Africa” hub.

Africa’s green energy transition

China can do well to help Africa with its advanced technology to harness the continent’s huge potential in renewable energy (RE) sources such as hydro, solar, wind and geothermal.

This is already happening and needs to be scaled up on two fronts; that is, FOCAC and BRI, leveraging on synergies with the African Union Agenda 2063.

For example, FOCAC’s 2015 Summit in Johannesburg resolved to close Africa’s energy gap by prioritising clean and green alternatives.

The 2018 Summit in Beijing followed this up by ensuring that a significant part of the US$60 billion pledged for development on the continent would be dedicated towards Africa’s energy infrastructure projects.

It is hoped that, of the energy investments in BRI countries projected to reach US$27 trillion by 2050, a significant chunk can be invested in Africa’s clean and green alternatives.

FOCAC Summit 2024 highly anticipated

In a world that is facing many challenges, including big-power rivalry, FOCAC presents a fresh South-South cooperation partnership that is mutually beneficial.

FOCAC emphasises mutual respect, equality and joint consultation.

These are very key features of FOCAC, which makes it different from other partnerships that Africa has with other countries and regional bodies around the globe.

It is common knowledge that FOCAC is China’s gateway to the Belt and Road Initiative through its multitrillion integrated connectivity programme for Asia and Africa.

Given Africa’s infrastructure gap and the new agenda for industrialisation in line with the aspirations of the African Union Agenda 2063, there is a keen interest in the synergies that can be provided by the joint implementation of the BRI by China and Africa.

It is in this context that the 2024 FOCAC Summit is highly anticipated in Africa, as we look forward to what new plans for cooperation will emerge and how to carry forward our traditional friendship, how we can deepen our solidarity and cooperation and open up new spaces for accelerating the common development of China and Africa.

We, therefore, look forward to discussions that can upscale current projects across the many economic and social sectors to produce the next level of pragmatic cooperation and for Zimbabwe, one that can propel it into an upper middle-income status by the year 2030, in line with President Mnangagwa’s vision for the country.

Zimbabwe has just been elected as chair of SADC for the coming year, and President Mnangagwa is already active in building and strengthening synergies for industrial development.

The forthcoming FOCAC Summit should, therefore, seize this opportunity to strengthen China-Africa relations through formalising and developing relations with SADC as a regional organisation of 16 countries, chaired by Zimbabwe for the coming year, and build a China-Africa community with a shared future.

This is aligned to the FOCAC theme of “Joining Hands to Advance Modernisation and Build a High-Level China-Africa Community with a Shared Future”, and should therefore be discussed and included in the FOCAC Declaration and Action Plan to be agreed at the forthcoming summit.

When Africa achieves real modernisation and industrialisation, it will lead to a better world.

This transformation will benefit everyone globally, as it will bring balance across the planet.

Development in Africa is crucial for the world as it is a large continent with a significant demographic dividend — a youth population of 60 percent.

This advantage sets Africa apart from other continents facing aging populations.

By achieving development, Africa can help to balance the world and address challenges such as migration.

China’s support for Africa’s development is therefore of strategic importance.

China does understand the circumstances that Africa faces, as China has walked a similar path.

Ultimately, the development of Africa will benefit everyone, attracting talent from its young population and from the Diaspora to contribute to a more balanced and prosperous world.

Munetsi Madakufamba is executive director of the Southern African Research and Documentation Centre (SARDC), a leading Zimbabwe based think tank and regional knowledge resource centre dedicated to policy research and analysis in a range of relevant subject areas, informing development, and contributing ideas and practical solutions to Africa’s challenges.