Saturday, January 05, 2019

The Scramble for China

An escalating strike among Zimbabwe's  doctors at public hospitals over low pay and medical supply shortages is entering its second month.

Zimbabwean President Emmerson Mnangagwa declared, “Zimbabwe is open for business” and what it has meant is severe austerity measures that hit the poor hardest in a country already reeling from skyrocketing poverty and unemployment.

In November, Zimbabwe’s finance minister, Mthuli Ncube, announced the annual budget, which he summarized with the phrase “austerity for prosperity,” quoting the 19th century British philosopher John Stuart Mill: “I have learned to seek my happiness by limiting my desires, rather than in attempting to satisfy them.” This was an attempt to build rationale for cutting expenditure on most sectors of the economy. In fact, Ncube has quoted the late UK Prime Minister Margaret Thatcher, who saw her neoliberal economic policies as the only path, often saying “There Is No Alternative” (TINA). Ncube believes that this will attract foreign investment, particularly from China, which is now considered a savior of Africa. This, he hopes, will help alleviate the financial crisis and open the market for international trade relations that will bring a much-needed foreign currency injection to boost failing local industries.Even prior to his speech, Ncube had begun implementing austerity, with his most unpopular move being the imposition of a 2 percent tax on electronic money transactions. Almost every Zimbabwean pays with mobile money, debit card, or by bank transfer because of a cash shortage tied to a spiraling trade deficit.

Since 2010, China has invested US$10 billion in Zimbabwe, which is a meager slice of the US$230 billion invested in the rest of sub-Saharan Africa in the same period. According to the International Monetary Fund, Zimbabwe has one of the world’s most fragile economies (probably the worst for a country without any wars or devastating natural disasters). It has external debts of US$9 billion — more than half the size of the nation’s GDP — and needs more than US$15 billion for an immediate economic revival.With western countries and investors wary of investing in Zimbabwe without massive restrictions and pre-conditions that the country looks unlikely to meet, China is the only global powerhouse willing to throw a bone, supposedly with “no strings attached.” Last year, a meeting between Mnangagwa and China’s President Xi Jinping ended in a promise to write off Zimbabwe’s debt to China, which had been accrued under former President Mugabe’s rule. With the recent announcement by Xi Jinping that China will invest US$60 billion in Africa, one can begin to connect the dots that Ncube’s fiscal policy is a clean-up act to attract more loans and investment by showing a commitment to paying back the money. this is a game being played by almost all African nations. The Scramble for China is on, with countries competing for the biggest slice of China’s cake. Last September twice as many African leaders attended the China-Africa cooperation summit in Beijing as the last UN general assembly.

The austerity measures are a calculated display by the government to show that Zimbabwe, under Mnangagwa’s leadership, is worthy of getting a bigger slice of the Chinese pie because their money will be used efficiently, and this time debts will be paid. But, as several governmental bodies, development organizations, and economic analysts have already warned, small African countries like Zimbabwe risk being entangled in China’s debt trap — owing more than they can pay back in reasonable time.

New hand - Same whip

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