The Dragon and the Mamba: China’s Growing Presence in Mozambique

Publication: China Brief Volume: 11 Issue: 9

In just the past three years, the People’s Republic of China (PRC) has established an impressive foothold in the former Portuguese colony of Mozambique in southern Africa. While China’s relations with Mozambique date back to the early 1960s when the Chinese Communist Party (CCP) supported the small African nation’s struggle for independence, China remained—until recently—a marginal player in a country where South Africa, the United States, Britain and Portugal were the main political and economic drivers. In late April, Senior official Li Changchun, a member of the Standing Committee of the CCP Central Committee Political Bureau, made an important good-will visit to Mozambique that highlighted the growing ties between the two countries. While trade between China and Mozambique was a mere $208 million in 2007, by 2010 it reached $690 million. Indeed, China has been investing heavily in the country’s infrastructure, mining, and agriculture. For example, Chinese state-owned Eximbank granted the Mozambican government more than $2.3 billion for the construction of a mega dam in the central part of the country. Chinese companies have built roads, bridges, military installations and hospitals, among others throughout the country (Macahub, May 19, 2009; O Pais, February 7). Furthermore, Beijing contributed $160 million to modernize the country’s main airport and built several important national buildings, among them the national stadium, the ministry of foreign affairs, the parliament and the country’s largest convention center. China is fast emerging as the most important foreign power in Mozambique.

More Investments to Come

China’s single largest investment in Mozambique (so far) is a $1 billion investment in the coal mining sector by Wuhan Iron and Steel (Financial Times, June 24, 2010). In 2010, Mozambique national radio announced that the Chinese company Kingho has expressed its intention to invest $5 billion in the country’s growing coal sector (African Press Agency, July 22, 2010). Following an investment seminar hosted by the Mozambican government in Shanghai in June 2010, Chinese business interests pledged upward to $13 billion in investment for the next 10 years in areas such as infrastructure, mining, agriculture and tourism (Reuters, August 27, 2010). Around the same time, Chinese banks announced $165 million in investments. The money is to be invested in a cement plant, a cotton processing facility and agricultural projects.

Chinese businesses have also been pouring money into the cement sector with investments worth $78 million in a cement plant in Magude, while CF-Moz has pledged $38 million for a cement plant in Matituine. In 2010, China Development Bank granted $110 million to Mozambique for another cement plant in Beluane in the south. The massive plant is expected to produce one million tons of cement a year (Radio Mocambique, March 4). The growing investments in the cement sector are ostensibly aimed at dealing with China’s shortages and reducing costs. Moreover, Chinese companies stand to make good profits as a result of the country’s growing infrastructure expansion and an ongoing spree in construction.

Direct flights between Mozambique and China are expected to start in 2011, this will further increase economic interaction. China is the fastest growing tourism market in the world with 50 million Chinese tourists in 2010, and Mozambique’s tourism sector is also growing. Chinese tourism companies reportedly hope to bring a million Chinese tourists to Mozambique over the next 10 years, thereby making the PRC the most important source of tourists for the country (Radio Mocambique, August 28, 2010). There is no definitive data on the number of Chinese residing in Mozambique, with numbers ranging from as low as 7,000 to as high as 12,000.

China has also shown significant interest in the country’s large fertile land as way to meet its growing food demand and shrinking arable land. In May 2008, Li Zhengdong, the Director for International Cooperation of the Ministry of Agriculture, announced that the Chinese government was in negotiations with Mozambique to lease land for cereal production. The Mozambican government denied the report. Yet, in August 2010, following the investment seminar in Shanghai, the Shanghai Chamber of Commerce stated that the Mozambican government was offering Chinese investors one hectare of land for eight dollars for a yearly lease (Gongsibaike.com, July 23, 2010). Chinese business interests from Macau were reported to be in negotiations for the lease of several thousand square kilometers of land for biofuel production. China has also invested $15 million in an agriculture research center in the country, and built three processing plants for various agriculture products.

Several Chinese companies have started prospecting for mineral resources such as diamonds, rubies, cold, iron and marble. The Chinese have, since the early 2000s, been heavily involved in exploiting the country’s rich timber resources and importing enormous amounts of timber. Chinese involvement in the timber sector in Mozambique is rather controversial, with widespread illegal logging that saw the Mozambican government cancel several licenses to Chinese companies. The Chinese have also been accused of plundering the country’s fisheries particularly for shark fins [1]. Nevertheless, China is not the only culprit here.

With the intent of assisting with education and building its soft power, China has also provided hundreds of scholarships to Mozambique with more than a 100 Mozambican students now pursuing higher education in the PRC. Despite these efforts, most Mozambicans still prefer to pursue their studies in the West due to a perceived better quality of education and better financial bursaries. This may soon change, however. Beijing has also sent agricultural specialists, doctors and military advisors to assisted the Maputo government, and Chinese is now being taught at several educational institutions.

Beyond the land of the Mamba

China’s presence is growing fast around several of Mozambique’s neighbors, particularly in Zambia, Tanzania and Zimbabwe. Zambia and Tanzania are hosting two of China’s Special Economic Zones in Africa, with Zambia being developed as a major mining and agricultural hub. Both Zambia and Zimbabwe are landlocked countries whose nearest exit to the sea is by the central ports of Mozambique. Mozambique lies on a strategically important maritime route since the Mozambique Channel provides an important alternative rout to the Suez Canal. In July 2010, the author wrote in the China Brief that the Chinese were interested in modernizing Mozambican harbors to export the goods from their growing ventures in the interior of the continent and that the Mozambican ports of Nacala and Beira were the most likely (See "China Building Africa’s Economic Infrastructure: SEZs and Railroads," China Brief, July 22, 2010). On January 31, Mozambican media reported that Chinese interests were negotiating with the government to modernize and expand the Beira harbor. The Chinese investors did not specify how much money they were willing to invest, stating simply that they had a lot of money to invest (Canal De Mocambique, January 31). The spokesperson for the consortium, George Wang, stated:

    “We have extensive interests in the diamond industry in Zimbabwe. So far we have     been using the land route all the way to Durban. If the Beira harbor is modernized,     countries like Zambia and Malawi will also use the port for it’s much closer than     Durban” (Canal De Mocambique, January 31).  

A BRIC that breaks

China is not alone in its interest in Mozambique—India and Brazil have also begun to invest heavily in that country. Just like Beijing, New Delhi’s interests appear to extend beyond Mozambique. Indian companies have a strong presence in manufacturing, mining and services and, unlike many Chinese companies, they tend to employee large numbers of locals. Some Western academics have argued that China imports large numbers of workers from the mainland to Africa due to the lack of skilled workers. Yet, Indian companies investing in the same countries do not seem to have that problem—neither do Malaysian, South Korean or Brazilian companies.

The import of thousands of Chinese workers into Africa has been a source of tension between the Chinese and labor unions throughout Africa. Yet, in the past two years, the Chinese government has grown more aware of this problem and has been addressing the issue with some degree of success in places like Cape Verde, Namibia and increasingly in Mozambique. Industrial relations between Chinese managers and workers have also been very problematic, with wide-spread accusations of racism and physical abuse (The Associated Press, April 6). In 2009, the provincial government of Manica warned Chinese company Henan International Cooperation over its industrial relations record and demanded the Chinese treat workers fairly; other local governments have expressed similar concerns (AIM News, July 7, 2009). Beijing already faces significant difficulties in enforcing its own labor laws in China; doing it in Africa is an even greater challenge. Yet, as labor costs increase in China, more Chinese companies are moving their factories to the most stable African countries to take advantage of local cheap labor, just like Western companies did in China years ago.

India has focused its investment in areas where China has also being investing heavily, particularly in the mining sector. India has pledge to invest $1 billion in the coal sector and has offered $45 million in trading and technology transfer to the country’s mining sector (O Pais, January 11). In 2010, following President Armando Guebuza’s visit to India, New Delhi granted his country a $500 million credit line for infrastructure, mining and agriculture. India has also funded the construction of several important buildings (AIM News, September 30, 2010). Yet, India is clearly losing the race in Africa; its democratic system makes the disbursement of large loans slow and complicated. In early 2011, Mozambican Prime Minister Aires Ali said that India needed to be more efficient and quicker at keeping its promises (A Verdade, March 28).

With the exception of the U.S. Navy, the Indian navy is by far the dominant force in the Indian Ocean, and India has been growing quite apprehensive over China’s growing presence in East Africa. In 2008, the Indian military established an electronic listening center in Madagascar, just off the coast of Mozambique and near Mauritius, the home of one of China’s Special Economic Zones (SEZ), and a country home to a large Indian community (India Defense, July 28, 2007). In 2007, at the request of the Mozambican government, Indian warships patrolled the capital’s coast during the Summit of Heads of state of the African Union. Mozambique is important for both China and India from a resource and energy point of view as well as from a strategic point of view. As both countries’ navies expand their interest in the Indian Ocean, the importance of East Africa will likely increase and may perhaps lead to greater conflict.

Brazil, another rising power, has also been investing heavily in many of the areas of Mozambique’s economy where the two Asian giants have been concentrating their efforts. Brazilian mining giant CVRD is competing with Chinese and Indian companies for Mozambican coal and has invested heavily in that sector. Since 2009, CVRD has invested $1.3 billion in coal mines in the central provinces of Zambezia and Tete, so far excluding Chinese and Indian investment (O Globo, February 28, 2009; Macauhub, November 1, 2010). Brazilian steel giant CSN has since invested $179 million in a joint venture with Australian mining giant Rio Tinto in steel processing plants. Brazilian investors have announced their intentions to invest up to $6 billion in biofuel and take advantage of the Mozambican government allocation of 60,000 hectares of land for foreign investors.

Brazil has been involved economically with Mozambique for decades and resents the growing presence of the newcomers, particularly China. Since April 2009, China became Brazil’s largest trading partner, and many in Brazil are unhappy with China’s growing dominance of the local economy and its encroachment on Brazil’s traditional markets. In order to balance China, Brazil has entered in joint ventures with Japanese, European and Australian companies, while also engaging India (Reuters, July 10, 2010).

So far the FRELIMO government in power since 1975 has been able to play a sophisticated balancing game, preventing any one country from having an overwhelming dominance over the country. In February, the Mozambican government refused to grant to India three additional blocks of coal mining in order to prevent that country from dominating this vital sector.

Conclusion

China is fast emerging as the most important economic and diplomatic player in Mozambique, bringing billions of dollars in investments and asking no questions. While there have been a few issues of tension such as Chinese workers and environmental degradation, Sino-Mozambican relations have been perceived as largely beneficial for both countries. While the West has closed its markets to Mozambican agricultural products through heavy domestic subsidies, China has exempted 420 Mozambican agricultural products from tariffs. In a time when the West is facing a serious economic crisis, China and other emerging powers are becoming crucial for the wellbeing of several African nations. Sino-Mozambican relations are likely to continue to grow with Beijing emerging as the main economic and strategic player in Mozambique and in East Africa. China is now quickly replacing the continent’s traditional former colonial powers as the main actor. Yet, riots, high crime rates and poor infrastructure hinder an even faster expansion of Chinese influence in Mozambique. Furthermore, as pressure grows in China and India for energy resources and other commodities, it remains to be seen if Mozambique will be able to maintain its delicate balancing act. As the African saying goes: “when elephants fight, the grass gets trampled.”
 
Notes:

1.    Loro Horta, “China’s Relations with Mozambique: A Miss Blessing,” Center for Strategic and International Studies, April 18, 2008, at http://csis.org/blog/china%E2%80%99s-relations-mozambique-mixed-blessing.