China MegaDeals Crumble
5 February 2016
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Zimbabwe and China’s much-vaunted multi-billion dollar mega-deals in various sectors of the economy are hanging in the balance amid indications that Sinosure, a leading Chinese insurance company, is reluctant to guarantee more financial loans from Chinese banks unless Zimbabwe clears at least US$50 million in debt arrears and shows commitment to paying its debts estimated at US$1,5 billion.
As of 2014, China had advanced more than US$1 billion in concessionary and preferential loans to Zimbabwe in addition to US$100 million in grants and interest free loans, according to information provided by the Chinese embassy in Harare.
By the time Vice-President Emmerson Mnangagwa visited the Asian powerhouse in July 2015, seeking an emergency rescue package, loans advanced to Zimbabwe had grown to US$1,5 billion. The Chinese asked Mnangagwa to ensure that government comes up with a payment plan to settle the debts.
Initial agreements for the deals, which are now in jeopardy, were first signed between the two countries when President Robert Mugabe visited the world’s second largest economy in August 2014, resulting in optimism that Zimbabwe would receive US$4 billion to fund projects in construction, energy and telecommunications sectors among others.
Chinese leader Xi Jinping reciprocated the visit last December resulting in the two countries converting the Memorandum Of Understanding into concrete ag-reements.
China agreed to extend loans to Zimbabwe amounting to over US$1,1 billion for the expansion of Hwange Power Station and TelOne’s broadband access project.
Government officials revealed Sinosure officials visited Zimbabwe in January as part of a Chinese delegation following up on the deals. The officials expressed unwillingness to guarantee loans to Zimbabwe because of the country’s poor loan repayment record.
“During the visit of some Chinese officials last month, the issue of clearing arrears on previous debts was raised and government was made aware that Sinosure will not guarantee any loans expected from the China Export and Import Bank. This means loans to fund the projects in energy, telecommunications and construction will not be forthcoming until Zimbabwe clears its arrears,” said a government source.
“Our hope as a country lies with China and if that money does not come, then we will be in trouble, should I say, we will be in a mess as a country. Our light at the end of the tunnel is China honouring those deals,” he said.
Attempts to get comment from Sinosure were unsuccessful as they were unreachable by telephone. However, its website indicates that although it is state-funded, “it is an insurance company with independent status of legal person”.
Established in 2001, Sinosure is mandated among other things, “to promote Chinese exports of goods, technologies and services and national enterprises’ overseas investment, by means of export credit insurance against non-payment risks.”
This is the second time Sinosure has raised the red flag over Zimbabwe’s poor debt repayment record.
In 2014, the insurance firm also refused to guarantee loans from Chinese banks to Zimbabwean companies because of the government’s failure to repay arrears already owed to China amounting to over US$60 million.
Finance and Economic Development minister Patrick Chinamasa signed two loan agreements for the expansion of Hwange Power Station and TelOne’s fibre optic project with chairperson of the China Eximbank Hu Xiaolian.
An amount of US$98 617 482,19, also at a concessionary rate of 2% per annum over 20 years, will be extended to TelOne to finance backbone network and broadband project. China also gave Zimbabwe a grant of 400 million Chinese renmimbi (US$65,5 million) for the construction of the new Parliament building and the National Pharmaceutical Company (NatPharm) warehouse.
The loans, according to Chinamasa, will take effect in the first half of 2016. The finance minister on Wednesday told delegates attending a World Bank function that three energy projects are expected to reach financial closure this year.
Zimbabwe’s solar power projects, including the US$202 million for the 100 megawatt plant set for Gwanda, in Matabeleland South, is also in jeopardy. Zimbabwe Power Company executives were this week scheduled to travel to China to finalise funding arrangements for the projects with Export Import Bank of China.
The bank, however, needs a guarantee from Sinosure before releasing any funds.
Former Chinese ambassador Lin Lin, who left Zimbabwe four months ago, warned of the possibility of Sinosure refusing to guarantee new loans to Zimbabwe in an interview with this newspaper.
“For any new projects, which need more loans from the Chinese side, we should also consider the capability of the Zimbabwean side. The banks and even insurance companies have their own terms for providing or giving guarantees for any lines of credit so it needs goodwill and good understanding on both sides. I hope there will be more co-operation and more projects with the help of Chinese institutions,” said Lin.
Sinosure’s concerns will come as a blow to Zimbabwe which already owes several other multi-lateral lending institutions billions in debt arrears, including more than US$1 billion owed to the World Bank. The African Development Bank is owed in excess of US$600 million while the International Monetary Fund is owed over US$120 million.
Finance minister Patrick Chinamasa has committed himself to paying up the arrears on the IMF/World Bank debts in the hope of opening up avenues for further loans but even that may not be enough as the United States could still block any future lending to Zimbabwe until the country makes significant improvements to its human rights record including respect for property rights.
Only last week, Bob Corker, the US Senate committee chairperson on Foreign Relations wrote to the US Treasury secretary Jacob Lew, requesting the American government to block any new lending to Zimbabwe until the latter meets conditions that include the “restoration of the rule of law, electoral reforms and security sector reform.”
Chinamasa did not answer calls to his mobile phone this week or respond to messages seeking comment. The Chinese embassy also failed to respond to emails sent earlier in the week despite asking for written questions.
However, a top government source said failure to honour the Chinese deals puts Zimbabwe in a very tight spot, as all hope lay with the Chinese pouring in US$4 billion into the local market. – Independent

2 Replies to “China MegaDeals Crumble”

  1. Nothing new here.Every sensible person knew that the much lauded Visit to Zim by XI JIpink was just a smoke screen,the so called Mega deals were a smokescreen to falsy vindicate a Failed Look East Policy.Now more than 2 months after signing of those Bogus deals,Zim is on its knees more than ever and is now trying to re-engage the West to get a Bailout coz China simply won’t do.China is only good at keeping Matibili in Power until he dies and offcourse Looting our Minerals.

  2. Nothing new here.Every sensible person knew that the much lauded Visit to Zim by XI JIpink was just a smoke screen,the so called Mega deals were a smokescreen to falsy vindicate a Failed Look East Policy.Now more than 2 months after signing of those Bogus deals,Zim is on its knees more than ever and is now trying to re-engage the West to get a Bailout coz China simply won’t do.China is only good at keeping Matibili in Power until he dies and offcourse Looting our Minerals.

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