China has invested in Zambia since the country, as the first Southern African nation, established diplomatic ties with China immediately after independence in 1964. The first Chinese investments in Zambia materialized in the form of development aid, and since then, China has undertaken at least 35 development projects in Zambia. During the past decade Chinese investments have changed. By the end of 2006 a total of 200 Chinese companies and FDI stock of more than 570 million US$ was recorded by the Chinese Centre for Investment Promotion
Anders Bastholmand Peter Kragelund
and Trade (CCIPT). These investments are characterized by a combination of political and economic interests. But the historical friendship is still an important factor for contemporary Chinese investments in Zambia. Kenneth Kaunda, the first president of Zambia, describes it like this:
Th e Chinese investments in Zambia today are diff erent than the investments of the 1960s and 70s – today there is a lot of economic interest (...) [but] I believe that, even today, the history of political friendship between Zambia and China plays a very important role for Chinese investments in Zambia.7
Figure 6.2 depicts the development of Chinese investments in Zambia from 1993 to 2006. The numbers represent the amounts registered in investment licenses with the Zambia Investment Centre (ZIC) and thus only provide a rough ap- proximation of real investment figures.8
Figure 6.2 Approved Chinese FDI licenses in Zambia 1993–2006
It should be noted though, that the largest Chinese investment in Zambia ever, namely the 200 million US$ Chambishi Copper Smelter, which caused total reg- istered licenses in manufacturing to reach 210 million US$ in 2006, cannot be represented properly within the range of the graph. Moreover, the second largest
210 0 5 10 15 20 25 30 35 40 45 50 19 93 19 94 19 95 19 96 19 97 19 98 19 99 20 00 20 01 20 02 20 03 20 04 20 05 20 06 $ U S m illio n
State-driven Chinese investments in Zambia
Chinese investment in Zambia (the 150 million US$ investment in the Cham- bishi Copper Mine) is not included in the figure, because this investment was licensed by the Ministry of Mines and Minerals Development and not by ZIC.
Figure 6.3 Distribution of Chinese FDI : the four largest sectors
Even though the Chambishi mine is not registered by ZIC it is included in Figure 6.3, which depicts the sectoral distribution of Chinese investments in Zambia . A large proportion of the value invested in the manufacturing sector (approximate- ly 230 million US$) is closely related to mining activities. The Chambishi mine along with the Chambishi Copper Smelter and Sino-Metals Leach and Acid Products Zambia Ltd., which constitute our mining case, make up more than 60 percent of all Chinese investments in Zambia and they are all subsidiaries of the same Chinese state-led group: the China Nonferrous Metal Mining (Group) Co. Ltd. (CNMC). There are six other Chinese mining investments in Zambia, but these are considerably smaller, below five million US$ each.
Twenty Chinese companies were operating in the construction sector in Zam- bia in 2006; all of them established in the past ten to fifteen years. Until recently, most of them were state-owned, but the rise of private companies in China has influenced ownership configurations overseas. The Centre for Chinese Studies (2006: 55ff ) asserts that half of the Chinese construction companies in Zambia in 2006 were privately owned.9 Among the Chinese construction companies in
Zambia are the large SOE, China Jiangxi Corporation (CJC), and the smaller privately owned company, Zamchin Construction (ZC). CJC is one of the three
40 315 13,5 10 160 0 50 100 150 200 250 300 350
Ma nufa cturing Mining C onstruction Agriculture Othe r
US $ M il li o n
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largest Chinese construction companies in Zambia and has invested six million US$ since 1995, while the ZC, founded in 1998, made an initial investment of around 400,000 US$. Together the two construction companies, which consti- tute our construction case, form 16 percent of Chinese investments in the Zam- bian construction sector.
In the agricultural sector, the largest Chinese player is the state-owned China State Farms Agribusiness Corporation (Group) Co. Ltd (CSFAC). CSFAC owns three farms in Zambia , the China Zambia Friendship farm, Jhonken Friendship Farm, and Jhonken Estates. The three investments of CSFAC, which constitute our agricultural case, amount to 2.9 million US$, constituting almost a third of Chinese agricultural sector investments in Zambia.
Th e Chinese state and Chinese investments in Zambia
Th e Chinese state backs Chinese investments in Zambia via diff erent channels and at diff erent scales. At the highest political level, the Chinese government lends its support to Chinese investors by means of the FOCAC as well as by paying offi cial state visits to the country.10 At this level, negotiations concerning Chinese
development assistance and investments take place, and Chinese leaders use their authority and access to the Zambian political elite to positively infl uence the con- ditions for Chinese investments in Zambia. Th e relationship between the Chinese government and the Zambian ruling party, Movement for Multiparty Democracy (MMD), is very close. Th e Chinese government openly supports MMD, both fi - nancially and rhetorically.11 Th e close and personalized linkages between the Chi-
nese central government (along with its representatives in Zambia at the Chinese embassy) and the Zambian political elite provide the Chinese investors with a very direct channel of communication with the Zambian authorities that may facilitate advantageous investment terms vis-à-vis other investors.
Support from the Chinese central government produces a range of more con- crete supportive measures in Zambia , in the form of four central organizations set up at the request of the Chinese state to support the Chinese investors in their day-to-day activities, namely the Chinese Embassy, the Association of Chinese Corporations in Zambia (ACCZ), the CCIPT, and the Zambian branch of Bank of China (BOC).
The Chinese Embassy, and specifically the Economic Counsellor’s Office, is the most important contact for Chinese investors in Zambia . Here, investors get advice on investment options and crucial support to establish contacts with Zam- bian authorities and the Zambian elite. The Embassy is the extended arm of the Chinese political leadership and it is directly involved in investment negotiations.
State-driven Chinese investments in Zambia
The ACCZ, established in 2005, functions as the Chinese Chamber of Com- merce in Zambia with around 60 Chinese member companies. ACCZ was estab- lished by political decree of MOFCOM (which also funds it), and falls directly under the authority of the Economic Counsellor’s Office in Zambia (with the Economic Counsellor himself presiding over the organization and hand-picking the members of the board amongst the senior management staff of the larger Chinese companies in Zambia). ACCZ takes care of the interests of the Chinese companies both vis-à-vis the Zambian public and the Zambian authorities, com- municating and promoting the cause of the Chinese investors directly with local authorities and indirectly through public media. ACCZ also educates its mem- bers in the rules and regulations of Zambia and handles immigration and labor cases for Chinese companies on behalf of the Chinese Embassy.
The CCIPT, like the ACCZ, is a parastatal organization established in 2002 upon the request of MOFCOM.12 The primary function of CCIPT is to identify
suitable investment options, provide practical support (in the form of accom- modation, transport and communication), and facilitate contacts with relevant Zambian authorities for potential or newly arrived Chinese investors.13
The last supportive institution in place in Zambia , the BOC Zambia branch, is different from the other institutions as it is not a political organization or in- stitution per se. Rather, BOC is a state-owned commercial bank. In the Zambian context, however, BOC’s investment is strictly political and entirely non-com- mercial. This first Chinese bank in Sub-Saharan Africa was established in Zam- bia by political decree of then vice-premier Zhu Rongji in 1997 with the purpose of facilitating operations of Chinese investors in Zambia. Since it was established ten years ago, BOC has made no profit. BOC is not in Zambia to make profit but to facilitate the day-to-day activities of Chinese companies in Zambia. Accord- ing to Mr. Zhu, the manager of BOC Zambia, all Chinese investors in Zambia use BOC for daily banking operations and for transferring money to and from China .14 BOC, thus, is a strategic investment that considerably reduces the dif-
ficulties of Chinese investors to manage their banking affairs in a foreign context. Another concrete outcome of the Chinese state’s policy is the opening of the Zambia -China Economic and Trade Cooperation Zone. Hu Jintao was partak- ing directly in the negotiations over the coming investments in the newly estab- lished economic zone, which is situated around the Chambishi mine in the Cop- perbelt. This zone is the first of three to five exclusively Chinese Economic and Trade Cooperation Zones that, according to the Beijing Action Plan 2007-2009, is to be established in African countries before the end of 2009. This zone will benefit CNMC, which has been assigned by the Chinese government to manage the zone. The aim is to build a production chain centered around CNMC’s key enterprises and to create an export hub for locally produced Chinese products
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to the Southern African region. The Chinese government will strongly support investments in the zone via cheap financial packages, through state-owned banks, and by Chinese development assistance and Hu Jintao pledged a total of 800 mil- lion US$ in investments over the next three years.