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Namibia, China: Curious Cases of Bribery

Namibia, China: Curious Cases of Bribery

Stratfor Today » July 25, 2009 | 1656 GMT
 
Summary

The Namibian government announced another bribery case involving a Chinese company, the second in the past week. China’s financial involvement in Namibia and Rio Tinto’s ownership interest in the Namibian mining sector suggest a possible link between the Namibian crackdown and the lingering Rio Tinto case in China.

Analysis

The Namibian government announced July 23 that Namibian President Hifikepunye Pohamba has suspended the country’s defense force chief for allegedly accepting kickbacks from a Chinese company that supplies the Namibian military. This followed a July 17 announcement by Namibian authorities that three people, including one Chinese citizen, had been charged with bribery in a case involving the Chinese company Nuctech, which used to be headed by Chinese President Hu Jintao’s son, Hu Haifeng.

China has made considerable investments in Namibia. According to contracts signed in 2007, the Chinese would purchase Namibian products worth $34.7 million and had promised more in concessional loans and export buyers credit. Because of this, STRATFOR finds it odd that Namibia would be willing to take on the high-profile Nuctech case, implicating not only a Chinese company but also a company that has ties to the Chinese president’s son.

The Chinese have blocked all media on this case within China, and STRATFOR sources say their personal e-mails on the subject are being blocked. Indeed, with China in the midst of its own anti-corruption crackdown, it could be quite troublesome for Hu’s son to be implicated in a corruption scandal in another country.

The timing of Namibia’s crackdown is also curious, coming only a few weeks after the Chinese Ministry of State Security detained four Rio Tinto employees, including one Australian citizen, for bribery during contentious iron-ore price negotiations. Even if Chinese companies were engaged in bribery in Namibia, Namibia would not likely be inclined to spoil its relationship with China without receiving something in return.

If there are strings being pulled, the source believes, Rio Tinto is the puppeteer. Rio has a 69 percent interest in the Rossing uranium mine in Namibia, which is the fifth-largest uranium mine in the world. It produces 8 percent of the world’s primary uranium oxide and is a major contributor to the Namibian economy. For the past 30 years that the mine has been in production, it consistently has been able to sell contracts well above spot-market prices because buyers fear a supply risk and are willing to pay extra to maintain a uranium supply from an independent country. On July 9, Rio Tinto announced plans to increase production at the mine, and on July 20 the Namibian president visited the mine at the invitation of Rio Tinto.

This may merely be a coincidence, but as we recently noted, on July 17 — the same day that Chinese Vice Foreign Minister He Yafei indicated to Australian Foreign Minister Stephen Smith that the Rio Tinto espionage investigation may be dropped, leaving only the bribery investigation — Nuctech’s African representative was detained on bribery charges. Other sources note that the Chinese companies involved in the two bribery cases may have failed to bribe the right person, or that Namibia was simply fed up with Chinese corruption and these companies were obvious offenders in Namibia’s anti-corruption campaign.

However, the timing is such that we must consider Rio Tinto’s hand in the Namibian crackdown on the Chinese companies, while Australian citizen Stern Hu, general manager of Rio Tinto’s iron-ore division in China, remains in custody in China without formal charges.