Friday 7 September 2018


PRESIDENT Emmerson Mnangagwa’s quest for a critical US$2 billion bailout package from China in a desperate bid to ease the country’s crippling liquidity crisis has hit a brick wall although the Chinese kept doors of negotiation open and pledged to continue funding infrastructural projects.

The failure has come as a body blow to Mnangagwa, who has promised to turn around Zimbabwe’s troubled economy, which is hamstrung by a liquidity crisis and foreign currency shortage as well as low investor confidence, among other challenges.

Harare has for some time also been engaging British multinational bank Standard Chartered Plc and other institutions to help raise US$1,8 billion to clear arrears to multi-lateral institutions under the Lima Plan, to enable the country to secure US$2 billion in fresh funding.

This followed the presentation of an arrears clearance plan to its creditors in Lima, Peru, in 2015, which was anchored on several financial sector and structural reforms, that have largely not been implemented.

Mnangagwa arrived in Harare yesterday morning after attending the summit of the Forum on China-Africa Co-operation (Focac) in Beijing. He held a bilateral meeting with Chinese President Xi Jinping on Wednesday, where he sought support to ease the liquidity crisis in the country.

He was accompanied by several officials, including outgoing Finance minister Patrick Chinamasa and Reserve Bank of Zimbabwe governor John Mangudya, who held meetings with officials from China’s financial sector, as part of a push to secure critical credit lines.

Speaking to the state media from China this week Chinamasa said: “We are looking at US$2,5 billion lines of credit to support the entirety of the productive sectors, tourism, mining, industry, agriculture and manufacturing, among others.”

Mangudya said: “Zimbabwe’s economic development hinges on the access to capital and in that vein we are excited that the US$60 billion package announced by President Xi Jinping is going to be accessible to African countries. We as Zimbabwe we are taking this matter seriously and engage with other financial institutions here and see how best we can make the economy improve through such lines of credit.”

Ministry of Finance and RBZ officials have for some time been negotiating for a loan from the Industrial and Commercial Bank of China (ICBC) and the Export-Import Bank of China, but a breakthrough has been slow in coming because the Chinese remain worried about Harare’s ability to repay loans.

The Zimbabwe Independent understands the major bottleneck this time around was the failure by Zimbabwean officials to demonstrate capacity and willingness to settle arrears from previous loans.

Officials said Zimbabwe has arrears of about US$300 million from previous Chinese loans.

“In financial cooperation, confidence is very important. At the moment China’s financial institutions might not have enough confidence in RBZ and Ministry of Finance officials. Zimbabwe owes China Eximbank and Sinosure, and one thing for sure is that if you want more lines of credit, you must pay back arrears or show commitment to pay,” an official close to the negotiations said.

“The arrears are not very much. They are less than US$300 million. It’s possible that if you pay that, you get much, much more. You also don’t have to settle the whole amount; you can make a payment plan of, say, US$10 million a month or a little amount. You can also talk about debt restructuring or ask for a grace period to repay the loans. But if you just stop paying and expect to get a bigger loan it becomes difficult.”

A Chinese embassy official told the Independent the Focac summit was a success for China and African countries, including Zimbabwe.

He expressed optimism that a solution will eventually be found to assist Zimbabwe to address its liquidity challenges.

“It (US$2 billion loan) still needs more time and discussions. It’s not something that can be finalised in one visit. A lot of work has to be done to persuade the Chinese and this requires innovation and proper planning. One of the top Chinese leaders once said ‘whenever you find any problem that can’t be solved, it doesn’t mean that there are no solutions; it means that you have not done enough investigative work’. There is need for more innovation, ” the Chinese official said.

The official said Zimbabwe, in theory, stood to benefit from the US$60 billion availed by Xi for China-Africa cooperation between 2018 and 2021. He said Zimbabwe would also benefit from the eight major initiatives with African countries announced by Xi for the next three years. These cover fields such as industrial promotion, infrastructure connectivity, trade facilitation, and green development.

The US$60 billion will comprise US$15 billion in aid, interest-free loans and concessional loans, a credit line of US$20 billion, a US$10 billion special fund for China-Africa development, and a US$5 billion special fund for imports from Africa.

Xi encouraged Chinese companies to invest at least US$10 billion on the continent in the next three years.

“We expect Zimbabwe to benefit from this US$60 billion, for example as part of measures to promote imports China will host the International Import Expo in Shanghai. We are encouraging those with quality products to exhibit at the expo, so that their products can be imported to China,” he said. “China will continue providing funding and implementing infrastructure development projects. We are looking at Kunzwi Dam, Batoka Power Project and possibly the North-South Road) Chirundu-Beitbridge highway as possible areas of co-operation.

“Zimbabwe and China also signed a memorandum of understanding for cooperation under the Belt Road Initiative, which means Zimbabwe has opened new sources of funding for projects.”

The official said for Zimbabwe to benefit from the US$60 billion facility it was important for government and embassy officials to assist each other to craft bankable and feasible project proposals.

On his last visit, Mnangagwa managed to secure project funding for the refurbishment of Hwange Power Station’s units 7 and 8, as well as the Robert Mugabe International Airport.

The initial agreement for the Hwange Power Station deal was signed in August 2014 when former president Robert Mugabe visited the world’s second largest economy.

China agreed to extend loans to Zimbabwe, amounting to over US$1,1 billion for the expansion of the power station.

However, insurance firm Sinosure refused to guarantee loans from Chinese banks to Zimbabwean companies including a loan meant for the expansion of the power station because of the government’s failure to repay arrears already owed to China.

The impasse has persisted because Zimbabwe still owes US$160 million to China Exim Bank and Sinosure.

Special agreements were however made on the Hwange thermal project and the Robert Mugabe International Airport, and the Victoria Falls International Airport in line with the elevation of relations.

China also extended a US$500 million loan for the Kariba South Extension programme while work on the construction of a new parliament in Mt Hampden near Harare will commence soon. Zimbabwe Independent


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