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The roulette tables at the Great Wall casino have suddenly fallen silent. A few miles away, Lusaka’s most popular Chinese restaurant is virtually empty, the only guests a handful of wealthy Africans.
The ripples from the global economic meltdown have finally washed up on African shores. Nowhere is that more noticeable than in Zambia, one of the continent’s largest copper and cobalt producers and home to the largest Chinese community in Africa.
Zambia has been badly hit by the world economic slowdown. Copper prices have plunged from over $8,500 a tone a few months ago to around $3,380 a tone, slashing the government’s foreign currency earnings by almost two thirds.
More than 4,000 Zambian miners have been laid off and several more mines are reportedly about to close. Last week Zambian airways, the national carrier, filed for bankruptcy, hit hard by a sharp drop in traffic and a collapse of some 70 percent in the value of the Kwacha, the local currency, in just two months.
“These are really bad days. There has been a sharp drop in foreign currency coming into the country… I have never known it so tough here,” said Li Zhi Jie, who runs a construction company in the capital, Lusaka. “It is harder now than any time since I came here 15 years ago, but there are many new opportunities too,” he said with a smile.
Mr. Jie is one of more than 10,000 Chinese living and working in Zambia, drawn by the opportunities presented by China’s previously insatiable appetite for commodities which ushered in a five year boom with average economic growth of over five percent a year.
On the surface that community seems to have disappeared almost as quickly as it arrived. However, contrary to many reports the Chinese are not leaving and, instead, are quietly taking advantage of the crisis to dig in and position themselves for a better future.
“Appearances can be deceptive,” Mr. Jie explained. “Chinese are good gamblers, they know this is a time to make good bets, get bargains… Now is time to be careful, keep low profile but do good business,” he said.
That indeed appears to be Beijing’s new strategy in Africa where its presence has been resented by Western countries who accuse it of turning a blind eye to repressive regimes, such as Sudan, and using cheap labor to undercut competitors.
Despite falling demand as its own economy contracts, China has been quick to re-assure relieved African governments it has no plans to cut investment. Africa will be spared the sort of slump it previously experienced when the Western world’s industrial output shrank.
Instead government sources say Beijing is now on the prowl looking for bargain basement deals as hard-pressed westerners, hit by stock market crashes, pull out.
“Africa’s largest China town may suddenly be quiet, but don’t be misled – they are not leaving, they are quietly rubbing their hands in glee as they see westerners pull out. They are in for the long haul and can see all sorts of bargains on offer,” said one government source.
Zambia’s President Rupiah Banda confirmed this week that talks with China on taking over mines previously owned by Israeli, European and Canadian investors were at an advanced stage. He added he was confident Zambia’s close ties with China would help cushion it from the worst effects of the recession in the West.
“We don’t have the type of problems we had in the past… We can get Chinese investors. You know the Chinese and perhaps the Indians seem to be the only people to have money left to invest in the mines. Several Asians, including the Chinese, are interested in coming to Zambia to take any empty mines,” he said.
China, which has pumped billions of pounds in aid and loans into Africa in the last 10 years, has an estimated $2 trillion in foreign currency reserves which it plans to diversify away from Western economies and dollar-denominated funds.
Economists say it plans to use this war chest to buy up operations abandoned by western companies – a move which delights many African countries who say former colonial powers resent China’s presence because they see Africa as their own turf.
Over the past decade, a third of all new trade and investment in Africa has come from Asia, most of it from China with India a close second. Economists say that even though demand from these countries has fallen, it has not collapsed and demand from emerging economies will ensure prices recover and remain buoyant.
Copyright 2009 Times Newspapers Ltd.