Zim firms must look East

MANYIKA KANGAI

Zimbabwe’s political ties with China date back to the time of the liberation struggle, when China provided weapons and training for Zanu-PF’s military wing, the Zimbabwe African National Liberation Army (ZANLA).

This relationship was solidified after independence with the establishment of diplomatic ties and making gestures like  the construction of the National Sports Stadium.

The Zimbabwean government turned to China and formally launched the Look East Policy in 2003 after the United States of America’s Congress passed the Zimbabwe Democracy and Economic Recovery Act (ZIDERA) in 2001, placing the country’s government on a credit freeze.

The United Nations Security Council resolution calling for sanctions against Zimbabwe was vetoed in 2008 by China and Russia, undermining efforts by the United Kingdom and the United States to put pressure on Zimbabwe.

Zimbabwe has been referred to as a “old friend” by Chinese President Xi Jinping, and the Zimbabwean government has called China an “all-weather friend”.

Although there has always been a chance for Zim businesses to look east due to the strong political ties between Zimbabwe and China, very few have taken advantage of this.

It’s time that this changes.

China is the second largest economy in the world and the fastest growing economy.

The International Monetary Fund (IMF) predicts that China’s economy will grow by 5.2% while the US economy will grow by 2.2%, despite the fact that the country’s economy has essentially been shut down for three years due to the Covid 19 pandemic, while the largest economy in the world, the United States of America is projected  to grow by 2.2%.

Additionally, China plays a significant role in the BRICS, an economic bloc, which consists of South Africa, Brazil, Russia, India, and China.

Does it not make sense for Zim businesses to invest time and money in searching for opportunities in China when doing so could have significant financial rewards?

When Tencent was a startup in 2001, South African company Naspers invested US$32m in it; today, the investment is worth up to US$175bn.

If Naspers had not made a deliberate investment in looking for opportunities in China, that deal would not have taken place.

Businesses from Zimbabwe must frequently go to expos and trade shows in China to establish contacts and research the Chinese market.

As part of its “Go Abroad” policy, China, which has over US$3 trillion in reserves, has encouraged its businesses to go  and make investments abroad since 2000.

China is therefore a source of capital. Recent investments in Zimbabwe totaling more than US$1bn  in the purchase of lithium mines and another US$1bn in the construction of processing facilities demonstrate that the Chinese are willing to make investments in Zimbabwe given the right circumstances.

Businesses in Zimbabwe should actively look to raise capital in China. Our listed companies ought to conduct roadshows in Shenzhen, Shanghai, and Hong Kong to woo Chinese asset managers.

How much more liquid could the Victoria Falls Stock Exchange be if Chinese investors were participating?

Lines of credit are a problem for Zimbabwean banks, but have they made any efforts to establish connections with Chinese banks?

If a Zimbabwean bank and a Chinese bank have a good working relationship, they can connect their clients, do structured trade finance deals, or collaborate to finance projects.

More than 1.4 billion people live in China. For any business, breaking into the Chinese market is like winning the lottery.

Tobacco (about US$301m), iron and steel (about  US$215m, and about 85% of the other goods Zimbabwe businesses exported to China last year totalled about US$603m.

Businesses in Zimbabwe should seize chances like the upcoming 6th China International Import Expo in November to promote their goods in China and cultivate relationships with distributors.

Businesses in Zimbabwe that offer the same product can combine their efforts to increase scale.

China anticipates importing goods and services worth more than US$10 trillion over the next five years, creating a historic opportunity for Zim companies to tap into the sizable Chinese market.

China is the largest manufacturer in the world.

As a result of its low labor costs, technically skilled workforce, good infrastructure, stability, and competitive currency, it has earned the moniker “factory of the world” and has long been a desirable location for manufacturing.

American and European companies with bases in China produce two thirds of the goods produced there.

Since everything is produced in China, Zimbabwean businesses should look there for technology, equipment, and other goods.

Businesses in Zimbabwe can bypass the middleman and go straight to China when ordering in bulk.

Zimbabwe businesses have access to a variety of trade shows and expos where they can meet numerous suppliers and manufacturers.

The government has historically supported nations like Mozambique and the Democratic Republic of the Congo (DRC) in their efforts to win wars and to forge positive political ties, but very few Zimbabwe companies have taken advantage of this goodwill to conduct business in these nations.

Although the Look East Policy has been in effect for 20 years, very few Zimbabwe businesses have taken it seriously.

The government has kept up good political relations with China, so there is still room for Zimbabwe companies to conduct legitimate business there. However, they must enter and take advantage of the opening.

The locomotive effect is the tendency for one large country’s economic growth to spread to another, causing it to grow as well. There will be some winners and the Zimbabwean economy may experience the locomotive effect if businesses in Zimbabwe start taking an active interest in looking East.

 

 

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