BY BRIAN CHITEMBA
ZIMBABWE’S economy remains at risk of exploitation as the government continues to mortgage natural resources to secure loans, according to Veronica Zano, an official with the Southern Africa Resource Watch (SARW).
The country is already in debt distress, with billions of United States dollars in loans including from Chinese banks unsettled.
Zimbabwe owes about US$10 billion to multilateral lenders, including the World Bank and the Paris Club.
The country has recently been offering platinum claims and goldfields as collateral.
Addressing an Africa Forum on Debt and Development (AfroDAD) last week, Zano said the natural resource boom that started at the turn of the millennium birthed a new financing model called “resource backed loans” (RBLs).
Under the model, countries access funding collateralised by future streams of income from their natural resources.
She said RBLs were loans provided to a government or a state-owned company in which the repayment is made in the form of natural resources.
- Chamisa under fire over US$120K donation
- Mavhunga puts DeMbare into Chibuku quarterfinals
- Pension funds bet on Cabora Bassa oilfields
- Councils defy govt fire tender directive
“Examples of the catalogue of the public debt inferred by the government include the US$1,2 billion expansion of the Hwange Thermal Power station, the expansion of the Kariba South power station and the construction of the new Parliament building,” Zano said.
“Opacity due to lack of access to information has led to speculation about Zimbabwe’s collateralised loans from its minerals amounting to about US$6,8 billion, most of it being owed to China Exim Bank.
“After a High Court order, in February Finance minister Mthuli Ncube announced details of loans by the Reserve Bank of Zimbabwe (RBZ) from the African Export-Import Bank (Afreximbank), which amounted to US$1,4 billion between December 2017 and December 2019.”
Zimbabwe is endowed with a huge mineral resource base whose exploitation should be a key source of revenue for government.
But the actual contribution of extractive industries to sustainable development in African resource rich countries continues to be mired in financial, economic, governance challenges.
“Government revenue generated directly from the exploitation of the sector can take a variety of forms, including production shares, royalties, taxes, dividends and signature/discovery bonuses,” Zano said.
“If managed effectively, the additional fiscal space generated by this increased revenue can be used to promote growth.”
Takudzwa Chikumbu of Transparency Zimbabwe International said corruption had contributed to the exponential growth in domestic debt in Zimbabwe.
“The implications of assuming both private and state-owned enterprise debts on the country’s indebtedness, credit rating and public confidence and trust cannot be over-emphasised,” he said.
“In recent years, public enterprises’ contribution to the economy declined from 60% to about 2% with 70% of these entities technically insolvent. Instead of financing national priority infrastructure and productive sector projects with high economic and social impacts and projects that can generate sufficient revenues to repay the loans as provided for under Section 12(a) of the Public Debt Management Act, the country became worse,” he said.
He said the assumption of the US$495 million Ziscosteel and RBZ’s US$1,35 billion by the state despite the citizen contestation was costly.
“The RBZ Debt Assumption Bill in 2015, resulted in the sharp rise in domestic debt from US$1,676 billion in 2014 to US$2,239 billion,” Chikumbu said.
“On passing both laws, the government was only concerned with; providing clean balance sheets for the RBZ and ZISCO Steel and enable the two institutions to attract international funding.”