BY TATIRA ZWINOIRA THE Zimbabwe Coalition on Debt and Development (Zimcodd) has demanded the release of all terms and conditions of loans taken out by government, amid revelations that it gave the Chinese government platinum collateral worth US$27,87 billion for a US$200 million loan.
During a Parliament sitting last Wednesday, Finance minister Mthuli Ncube revealed that in October 2006, government contracted a loan from its Chinese counterpart worth US$200 million for farm mechanisation equipment.
However, as collateral, the Zimbabwe government offered 26 million ounces of platinum resources given that Zimbabwe is the third largest producer of the metal after South Africa and Russia. The ounces translated to US$27,87 billion at the time and US$22,56 billion at current prices.
This has prompted public outrage with demands of the release of information on all the loans signed by the government with China and other creditors.
“Going forward, all key terms of each loan contract should be approved by Parliament and be made public,” Zimcodd said in a list of several recommendations following Ncube’s revelation released last week.
“An independent debt audit will inform the scale and nature of the country’s debts, which are often not transparently publicised. An audit will also become a building block to popularise discussion about the legitimacy of certain debts and whether they should be repaid.”
Ncube revealed that the loan was currently in arrears amounting to US$172 million that could lead to the country defaulting at any time, as Treasury is broke, allowing China to make claim on the metal resource.
This is further backed up by a bilateral investment agreement between China and Zimbabwe signed on May 21, 1996, that came into force on March 1, 1998.
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Under section 3 of the bilateral agreement, after the expiration of the initial 10-year period following the agreement, either contracting party may, at anytime thereafter, terminate this agreement by giving at least one year’s written notice.
“With respect to investments made prior to the date of termination of this agreement, the provisions of Articles 1 to 11 shall continue to be effective for a further period of 10 years from such date of termination,” section 4 under this agreement states.
While there is an option to pull out of an agreement, it’s difficult for Zimbabwe to terminate any investments with China as Articles 1 to 11 lay out stringent hurdles involved, which include penalties and fees.
The country has one of the lowest debt-to-reserve ratios in the region, which Zimcodd puts at 0,3%.
“This is a key ratio as it shows how many dollars a country has in reserves for every (United States) dollar of debt owed to external creditors and its flexibility to react to adverse or unforeseen contingencies,” Zimcodd said.
The revelations of the platinum China deal came as the Chinese ambassador to Zimbabwe, Guo Shaochun said the Chinese debt trap was a lie made up by some Western countries and politicians to deflect responsibility and blame.
The Chinese debt trap refers to a diplomacy model that many accuse China of implementing to control national assets belonging to a poor and desperate nation who would have borrowed money, particularly its natural resources.
Shaochun made the remarks at the inaugural Zimbabwe Annual Investor Forum held last week by Alpha Media Holding’s Zimbabwe Independent and local financial advisory company PiggyBankAdvisor in Harare.
Herbert Murerwa was the Finance minister at the time the deal was signed.
Ncube also said they had taken loans from the Chinese government worth US$2,72 billion, of which US$152 million had been paid, leaving an outstanding debt of US$1,76 billion as of this month.
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