Zambia is another African country with an economy that is heavily dependent on natural resource extraction and one that has welcomed massive Chinese investment as a means to develop those resources. Zambia consistently ranks among the top four recipients of Chinese FDI on the continent,with the copper industry serving as the primary attraction.
Chinas aggressive pursuit of the countrys resource wealth has also generated significant discontent among Zambians, who have accused Chinese companies of abusive working conditions and complicity in the countrys systemic corruption. This has given rise to riots and even political movements that ultimately placed one of Chinas biggest critics in the presidency, Michael Sata. Many of the anti-Chinese threats he made in the leadup to the election, however, were smoothed over after his victory, in large part, not surprisingly, by the continued scaling up of Chinese economic and financial support. Present conditions, however, increase the risk of turmoil once again being directed at Chinas presence in the country. Over a prolonged period, or if especially pronounced, the decline in market prices for copper (or even a shrinking Chinese budget for continued investment in Zambia) has the potential to be destabilizing. China and its companies are, as they have been in the past, a likely target.
In total, China takes 70% of Zambias copper-related exports (and 85% of total exports), with two thirds of government revenue derived from exporting this one mineral. As the largest importer of copper of any country globally, China has moved aggressively into Zambia over the past two decades to secure these assets. These moves have been accompanied by investments in the countrys transportation, power and telecommunications infrastructure, including through the operations of some companiesthat are known PLA contractors. Although their operations in Zambia are not always defenserelated, the dualuse nature of their skillset and their principal government client create the opportunity for these firms to pursue a strategic agenda via their investments.
Meanwhile, the bilateral economic relationship has grown significantly across the board. In 2013, China’s outbound direct investment stock in Zambia totaled $2.2 billion, compared to $144 million in 2003. There has likewise been a large migration of Chinese citizens (from China) to Zambia, with new Chinese arrivals increasing by 60% since just 2009.This growth in Chinese citizens living in Zambia increases the likelihood that China would want to put in place mechanisms to protect these populations, letalone their assets, if deemed necessary.
Several Chinese government-run organizations have been established over the years to coordinate the countrys business activity and contract awards in Zambia, taking a hands-on approach at the state-to-state level to ensure the outcome sought by Beijing. Specifically, five organizations have been set up at the request of the Chinese state to support Chinese businesses active in the country in, among other ways: selecting their projects; ensuring their contract awards are under suitably favorable terms; and nurturing the necessary political relationships to make sure such investments proceed smoothly.
Excerpted Deals and Transactions:
- In November 2015, China announced its intention to invest $300 million in a new 1,000-hectare industrial park outside of Lusaka that is being called the One Belt, One Road Industrial Park. More than 30 Chinese companies have reportedly invested, with future investment expected to rise to $1 billion.
- In April 2008, CNMC and Jilin Haorong Non-Ferrous Metal Group Company created a joint venture (JV) with the North Korean Government called the Korea Ku’mho Joint Venture Company (a.k.a. Korea Jinhao Mining Company, a.k.a. DPRK Ku’mgang Mining Company) to mine for gold. CNMCs Zambian subsidiaries have been singled out, including by Human Rights Watch, for the harsh working conditions across myriad investments in the country.
- In July 2009, the privately held Zhonghui Mining Group (based in Hong Kong), signed an agreement with Zambian authorities to invest $3.6 billion in copper mining activities in the Copperbelt and northwest provinces, including the planned development of the Ichimpe copper mine. The company also reportedly planned to build a major copper smelter in Kitwe with a 300,000-ton capacity. At the time of the investment, Zhonghui was the largest private Chinese entity operating and investing in sub-Saharan Africa. The project ended in charges of corruption for public officials and the deal seemingly being canceled.
- Chinese companies have been heavily involved in financing and building a number of hydropower development projects in recent years, including construction work on the Kafue Gorge Lower hydropower plant, the Tezhi Hydropower Plant and the Batoka Gorge Dam project among other power generation projects.
- The Link Zambia 8000 project was launched in September 2012 with a goal of building 8000 km of roads across the country. Zambia issued bonds in the amount of $3 billion to make the project a reality. Among the companies involved in the project are PLA contractors, Poly Technologies and AVIC International, whose affiliates have been responsible for a significant portion of the two countrys defense-related business, primarily in Zambias procurement of aircraft.