Chinese involvement in Mozambique

Chinese investment in Mozambique has focused on various sectors, reflecting Beijing’s attempts to promote Chinese companies overseas. Construction has been of particular interest to China, with over 30 Chinese construction companies currently based in Maputo, Henan International Cooperation Group, for example, was responsible for the construction of the bridge over the Incomati River. In 2009, roughly one-third of all road construction in Mozambique was being carried out by Chinese companies.

Claude Kabemba's picture

Director of the Southern Africa Resource Watch (SARW)

October 4th, 2012

Chinese investment in Mozambique has focused on various sectors, reflecting Beijing’s attempts to promote Chinese companies overseas. Construction has been of particular interest to China, with over 30 Chinese construction companies currently based in Maputo, Henan International Cooperation Group, for example, was responsible for the construction of the bridge over the Incomati River. In 2009, roughly one-third of all road construction in Mozambique was being carried out by Chinese companies. Projects include the Muxungwe Inchope road built in 2007, the Chitma Magoa road, and Moamba Bridge over the Incomati River completed in 2008. Chinese companies have also been involved in urban water supply systems, investing US$30 million in rehabilitating the water supply system of Maputo, and US$25 million in Beira and Quelimane.

Eximbank signed a memorandum of understanding (MoU) with the Ministry of Public Works to fund the construction of a US$300 million hydroelectric dam in Moamba. The bank also signed an MoU to finance the Mpanda N’kuwa dam worth US$2,3 billion in 2003. The MoU has since expired but the project, which was awarded to the Brazilian firm Camargo Correira and its Mozambican partner Insitec, will be the first Eximbank project to be carried out by a non-Chinese firm. In the telecommunications and transport sector, Eximbank provided funding for the construction of Maputo’s modern international airport. This project was funded through a concessional loan worth US$75 million, and was completed in November 2010.

In 2008, China was Mozambique’s third-largest trading partner after South Africa and Portugal. Mozambique accounted for 5 percent of China’s imports and 4,7 percent of its exports. Trade between the two countries increased by 48 percent in 2008 compared to 2007, largely due to an increase in Chinese imports of oil seeds, sawn wood, and chromium ore. According to data from the World Trade Atlas, Mozambique’s exports to China are dominated by wood products, which account for 70 percent of its exports, followed by vegetable products (18 percent), chromium (10 percent), precious stones and cotton (2 percent). This pattern of trade with China is consistent with other non-oil African countries. Despite China’s rapid increase of trade with Mozambique, much of Mozambique’s export remains directed towards other markets. The Euro Zone and South Africa are principal buyers, suggesting that, although China has increased its share in trade with the country, Mozambique remains far from dependent on the Chinese demand for its exports.

Trade links are also significant in the fishing and forestry sectors, which have experienced increasing interest from China. Commercial fishing accounts for 3 percent of Mozambique’s GDP and provides employment for artisanal fishermen. However, Chinese companies are accused of illegal fishing using long liners and gill nets that catch turtles and sharks, and large-scale poaching of shrimp and lobsters. The forestry sector in Mozambique is dominated by Chinese buyers and has become one of the most contentious issues concerning Chinese activity in Mozambique.

Until recently, fisheries and timber represented the two main sectors where Chinese businesses have been involved in natural resource exploitation. Since the 1990s, Mozambique has experienced an explosion in the level of forest cutting, and this has very much been fuelled by China’s appetite for wood. China has become one of the world’s largest importers of timber, and the world’s leading importer of logs. Log imports have increased from 4,5 million m3 RWE to 24 million m3 RWE. This is due in part to a rise in Chinese consumer demand for forest products, and also due to China’s significance as a major world manufacturer, capturing nearly one-third of the global furniture market.

In 1998, China issued a ban on logging of its own national forests. Since then domestic timber production halved from 80 million m3/year to 40 million m3/year, and in 2002 the deficit was estimated to be 60 million m3/year. To meet this demand, China has become the world’s largest importer of timber, with the main suppliers being Russia, Malaysia (mostly illegal logs from Indonesia), Papua New Guinea, and Gabon. According to a recent report, in the period 1997-2006, Chinese imports of forest products and secondary fibre increased from 40 million m3/year to 142 million m3/year RWE. Apart from Gabon, African countries are not among the main suppliers of timber to China, but their supply is still significant. As one the largest importers of timber, China has a preference for importing logs as opposed to semi-processed wood, and according to data from International Tropical Timber Organisation (ITTO), since 2005 roughly 80 percent of China’s recorded timber imports have been logs and not sawn or ply wood. African countries are not an exception to this rule, and most of the timber trade between China and Africa involves logs (85 percent of the total exported to China in 2006).

In 2006, African countries exported 2,6 million m3 of forest products to China, accounting for around 3 percent of China’s product imports. Mozambique is among the six top African exporters of wood to China, accounting for around 5 percent of the trade in 2006. The country jumps to fifth place amongst the top exporters of logs to China (5,8 percent of the trade). Although Mozambican woods represent a small percentage of Chinese imports of timber, the fact is that most timber exported by Mozambique ends up in China. Since 1997, China and Hong Kong have received around 88 percent of Mozambique’s annual timber exports, especially logs. The National Directorate of Lands and Forests of the Ministry of Agriculture estimates that Mozambique’s export of logs stood at around 20 thousand m3/year in the period 2008/2009, whereas the export of sawn wood stood at around 80 thousand m3/year. Most of this wood, according to the National Directorate, went to China.

The Chinese presence in the Mozambican timber business has mainly been as buyers of unprocessed logs rather than directly in the logging process. According to the report Tristezas Tropicais, which was published by a coalition of NGOs in 2009, prior to 2004 most Asian buyers present in Zambezia province relied on local loggers to gain their produce. The buyers would provide credit to simple license holders to cover their license fee and operating costs necessary to hire or buy equipment. The predominantly Asian buyers control the timber market, fixing prices. The community of buyers is dynamic, with individuals coming and going from year to year. By 2008, there were several Chinese log buyers in Zambézia: Chung Tai Li, Today Traders, South Pacific, Harley Timber, and Chong Sun Wood Products.

Chinese involvement in natural resource extraction has not been as significant in Mozambique as it has been in neighbouring countries. Much attention has been given to Chinese involvement in oil-rich countries such as Angola and Sudan, and coal- and copper-producing countries such as Zambia. In the case of Mozambique, most of its natural resources have yet to be exploited, with the exception of the timber industry (which has been intensively exploited since the end of the civil war in 1992). More recently, there has been Chinese interest in the exploitation of Mozambique’s coal reserves, with Chinese inroads into the Moatize and Mucanha-Vuzi coal mines in Tete province.

In July 2010, the Australian Riversdale mining group signed an MoU with the Chinese multinational Wuhan Iron and Steel (Group) Corporation (WISCO) for exploitation of these coal reserves. It provides for the acquisition by WISCO of 40 percent of the Zambezi Coal Project, which will bring the value of the project to US$2 billion, according to Riversdale Chief Executive Michael O’Keefe. Riversdale has also signed a logistics partnership agreement with the China Communications Construction Company (CCCC) for Zambezi coal. This marks a significant achievement for Chinese firms in terms of natural resource acquisition in Mozambique. The coal mines in the north will undoubtedly be of great impact economically, environmentally and to the local community in the years to come.

Public buildings and infrastructure have dominated much of Chinese aid to Mozambique. The first major donation was the rehabilitation of the country’s parliamentary building in 1999. This was followed by the construction of the Joaquim Chissano International Conference Centre, which was built with a donation of US$5 million in 2003, the Foreign Ministry building in 2004 also with a donation worth US$12 million, and low-income housing in Zimpeto. By means of concessional loans, China has built the office of the Auditor General (worth US$40 million), two primary schools, an anti-corruption centre, a prison in Matola and the National Stadium, which was worth US$50 million and was handed over to the government in November 2010.

Debt cancellation has been another important aspect of Chinese cooperation with Mozambique. In the 1990s, as Mozambique embarked on its economic reform programme, it became the first country to benefit from the Highly Indebted Poor Countries (HIPC) initiative led by western donors. During the 1980s, Mozambique had already signed several agreements with China to cancel debt, which by 2001 resulted in US$21 million of debt relief, with a further US$30 million in 2007.

In agriculture, China has pledged major investments in modernising the sector. This includes efforts to improve agricultural research. In 2007, an agreement was signed with the University of Eduardo Mondlane to conduct research on rural development and agriculture and the establishment of the Umbeluzi Institute of Agricultural research in Maputo. A significant Chinese investment in this area was the joint project between Mozambique and the China Grains and Oil Group, which led to the Beira soya processing plant, worth US$10 million.

About the author(s)

Claude Kabemba is the Director of the Southern Africa Resource Watch (SARW). In 2006, the Open Society Initiative for Southern Africa (OSISA) asked him to spearhead the formation of SARW. He holds a PhD in International Relations (Political economy) at the University of the Witwatersrand (Thesis: Democratisation and the Political Economy of a Dysfunctional State: The Case of the Democratic Republic of Congo). Before joining SARW, he worked at the Human Sciences Research Council and the Electoral institute of Southern Africa as a Chief Research Manager and Research Manager respectively. He has also worked at the Development Bank of Southern Africa and the Centre for Policy Studies as Policy Analyst. Dr. Kabemba’s main areas of research interest include: Political economy of Sub Saharan Africa with focus on Southern and Central Africa looking specifically on issues of democratization and governance, natural resources governance, election politics, citizen participation, conflicts, media, political parties, civil society and social policies. He has consulted for international organizations such Oxfam, UNHCR, The Norwegian People’s Aid, Electoral Commissions and the African Union. He has undertaken various evaluations related to the work of Electoral Commissions and civil society groups interventions in the electoral process in many African countries. He is regularly approached by both local and international media for comments on political and social issues on the continent. His publication record spans from books (as editor), book chapters, journal articles, monographs, research reports, and newspaper articles.

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