China is investing heavily in Zambia

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    Copper the key in Chinese strategic moves on Zambian economy

    China is investing heavily in Zambia, with particular strategic interest in the African countrys big copper mining sector

    Author: Shapi Shacinda

    Posted: Thursday , 23 Oct 2008

    SHIMABALA, ZAMBIA (Reuters) -

    Zambia is courting investment from China, Africa's biggest emerging market partner, overlooking concerns from the West over poor labour and human rights records and welcoming the Chinese with open arms.

    The impoverished southern African country is the continent's top copper producer and will soon be exploring for oil near its border with Angola. To woo China, Zambia has offered tax incentives and other sweeteners, including express work permits for Chinese labourers.

    Chinese companies have, for their part, promised to invest $900 million in manufacturing copper products in an economic zone built for them, where they receive tax waivers on dividends and customs duty on capital equipment.

    Analysts say China is making inroads into Zambia and other African countries because of its loans and grants which come without the stringent conditions attached to funds from the West, and its investments are seen as a political talking point.

    Acting President Rupiah Banda has backed China's involvement in Zambia's economy and has made much political capital out of a recent u-turn on China by the main opposition leader, Michael Sata, his principal rival in the Oct. 30 presidential election.

    "Even those that have been against certain investors now say they want them in," said Banda at a recent campaign stop.

    In the last presidential election held two years ago, when he lost to the late Levy Mwanawasa, Sata called for the deportation of Chinese investors whom he accused of taking jobs from Zambians and paying poor wages to Zambian workers.

    But he now promises to work with China.

    "I have been misunderstood over China ... We will welcome Chinese investments, but we will not allow them to come here to cook food in market (stalls). We need their technology and they should create good jobs," Sata told an election campaign rally.

    In what is a now familiar sight across Africa, China's drive to secure minerals, oil, and a place for its workers and industries to thrive is converging with Zambian government plans to tap the potential of undeveloped regions.

    Some in Zambia are suspicious of China's motives, mirroring the ambivalence towards the Asian giant's investment push felt by many Africans.

    "The Chinese are well known for giving 'gifts' to government officials," said Chibamba Kanyama, a Lusaka-based economist.

    "In war-torn countries like Sudan or Congo, China has been seen as the better devil (compared to the West), because Western companies will not go into troubled areas to put up basic infrastructure like roads."


    Consultant Oliver Saasa of Premier Consult Ltd. said the controversy surrounding Chinese investments in Africa could end if authorities drew up regulations for investors.

    "The Chinese are not here to advance the Zambian economy but for their strategic interests and so it is incumbent upon authorities to create regulatory oversights that will ensure they operate within local legislation," Saasa said.

    Zambia says it has received pledges of about $4.3 billion in foreign direct investment in the eight months to August this year, the bulk of which is from Chinese firms.

    Most of their cash is aimed for Zambia's vast copper mines.

    Zambia depends upon copper and its by-product cobalt for more than 65 percent of government revenues, and the nation, which is seen by analysts as "resource rich" but "infrastructure poor", hopes that China can help unlock its wealth.

    One of the bigger Chinese investments is the $400 million expansion of the Kariba North Bank hydro power plant to generate 900 megawatts, up from 660 megawatts, to power copper mines. Yet another is a $250 million copper smelter.

    Zambia's chamber of mines said investment in mining was urgently required, regardless from where it came from.

    "The nationality doesn't matter ... Chinese, British or Americans, we need more foreign direct investments in mining. We need all of them," said Frederick Bantubonse, the head of the Chamber of Mines of Zambia. (Editing by James Macharia)

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