By Bernard Mpofu, HARARE, May 6 (The Source) – China wants Zimbabwe to use its mineral proceeds to guarantee any future loans, a Chinese official said on Tuesday, adding that Beijing had already extended nearly $1,5 billion in the last three years to Harare’s ailing economy.
In February, Finance Minister Patrick Chinamasa said the two countries were negotiating what he termed a comprehensive financial rescue package.
However, the minister has recently admitted that China, among other potential donors and investors, remain apprehensive about extending financial aid to debt-ridden Zimbabwe.
Outgoing Chinese embassy economic and commercial counselor Han Bing told The Source in an exclusive interview that the China Import and Export Bank and officials from the ministry of finance were working on technical details of the arrangement.
“We are discussing whether we can take proceeds of sales for some minerals as collateral for the loans,” said Han.
“The bank and the team from the ministry of finance are now working at a technical level on how they can set up such a mechanism, how much the collateral would be and how much loans they (Zimbabwe government) can get.”
In principle, the funding request and use of minerals as collateral has already been accepted, Han added.
He said Chinese loans to Zimbabwe were nearly $1,5 billion over the last three years – about 37 percent of the 2014 national budget at $4,1 billion – and that it was now burdensome for the government to repay.
However, Zimbabwe’s 2014 budget data showed funding from China since 1980 at over $430 million.
About 96 percent of Zimbabwe’s budget goes towards recurrent expenditure, and Chinamasa has said government has no capacity to repay its foreign debt of about $10 billion.
The economy has slowed down since President Robert Mugabe and his ZANU-PF party won the elections last year, ending a unity government with the opposition MDC which had helped stabilise the economy.
Last year, Zimbabwe earned $1,97 billion from mineral exports, making about 64 percent of foreign currency earnings.
“We are asking for collateral because it’s in accordance with rules and regulations when granting any loan, but it doesn’t mean that we will use the collateral. This is the concept that we are now discussing with the Zimbabwe government,” said Han.
On Monday, mines minister Walter Chidhakwa said the new Mining Promotion Corporation would be key in identifying mineral deposits which will be used for securitization of loans and in negotiating joint ventures between government local and foreign investors.
Commenting on bilateral investments, Han said Chinese inflows have grown from $35 million in 2010, to $460 million in 2011 and $600 million last year.
He said while China does not oppose the country’s indigenisation regulations – which compels foreign owned companies to cede 51 percent shares to local blacks – he urged government to have a consistent policy environment, citing a ban on the exports of raw chrome as an intervention that spooked investors.
“What is really harming the investor is the inconsistency in policy. When investors enter the market they make their decisions based on the existing policy. I didn’t see any companies close because of the indigenisation policy but I have seen companies close because of the change in policy,” Han said.
Chinese investments in mining and agriculture are yet to break-even in three years, he added.