ZIMBABWE’S heavily-indebted government appears to be selling the family silver to the Chinese in exchange for long-term loans. The advances, now totalling more than US$532 million in the last four years, have been secured in exchange for lucrative concessions in the tourism, agricultural and mining sectors.
The US$150 million upgrading and expansion finance for the Victoria Falls airport ratified last week by parliament, along several other Chinese loans in preparation for Zimbabwe’s co-hosting of the United Nations World Tourism Organisation General Assembly next year, completed yet another coup by the Chinese in their pursuit of a larger slice of Zimbabwe’s tourism sector cake.
In return, Zimbabwe pledged revenue from the Harare and Victoria Falls airports to China in the event that it fails to service the loan. The two are the busiest airports in Zimbabwe — a country endowed with attractive tourist resorts, wildlife and mineral wealth, but remains poverty-stricken mainly due to misrule and mismanagement. Exogenous factors have worsened the situation.
The Victoria Falls contract in Article 6 pledges all revenue from Harare and Victoria Falls airports in case the state fails to settle its financial obligations to the Export-Import Bank of China.
Article 6.11 reads: “In the event the borrower fails to perform the obligation of payment and or repayment under this agreement, the revenue generated from Zimbabwe’s Victoria Falls Airport and passenger service charge generated from Harare Airport collected into the escrow account and other account proceeds shall be utilised to repay to the lender all the principal amount drawn and outstanding under the facility.”
The clause further states: “The borrower’s obligations under this agreement shall not be derogated by the establishment of the escrow account.”
An escrow account is a separate bank account for keeping money that belongs to others.
Not content with moving into Zimbabwe’s retail, construction and mining sectors, China has been quietly but aggressively manoeuvring itself into the core of the country’s tourism industry, increasingly showing signs of recovery after being shunned by tourists during a decade-long political and socio-economic meltdown which led to negative publicity, as well as a perception of volatility, lawlessness and travel warnings. In the last two years, the Chinese have constructed two hotels in Mutare and Harare, with another three more luxury hotels in the offing in Victoria Falls and Mutare city centre. They are also building another upmarket hotel and shopping mall in Harare near the National Sports Stadium in Harare.
The hotels would have casino licences and lure gambling tourists.
Harare, Mutare and Victoria Falls form the hub of the country’s tourism industry that at its peak contributed nearly a quarter of Zimbabwe’s Gross Domestic Product. Harare is the main gateway and commercial centre to Zimbabwe while Mutare and Victoria Falls offer premium tourism packages, with the splendid and rugged eastern highlands and one of the seventh natural wonder of the world, the mighty Victoria Falls, being major drawcards.
However, Zimbabwe in the next 20 years may not enjoy the financial benefits of these loan facilities since most of the revenue would be used to service the debt, while more funds would be repatriated to China as dividends to shareholders.
Zimbabwe’s debt has shot to close to US$11 billion, approximately 111% of the country’s GDP. Economists say despite the Chinese loans appearing cheap and “developmental”, the country is sinking further into a debt trap which will manifest itself in the next five to six years when loan repayments become due.
The Chinese have not only gained ground in tourism, but have also secured significant stakes in mining, agriculture and property sectors.
They have become a major player in the country’s economy through their state-owned enterprises like Anjin Investments — involved in a controversial diamond mining venture with the military at Chiadzwa — and Sino-Zimbabwe Holdings. According to Global Witness’ recent report, Anjin has the most lucrative diamond concessions given in exchange for the US$98 million for the construction of the army’s National Defence College along Mazowe road.
The Anjin projects also have an escrow account for channeling diamond revenues to the Chinese to repay the US$98 million which has caused a storm in the coalition government. Finance minister Tendai Biti has accused Anjin of failing to remit enough revenue to the cash-starved national fiscus.
Sino-Zimbabwe also has an interest in agriculture through Sino-Cotton, chrome mining along the Great Dyke belt and properties like Livingstone House and Gecko Gardens. The Chinese also have many other investments in different sectors of the economy.
Political analyst Ricky Mukonza says the Chinese are gaining ground on Zimbabwe’s economic landscape, while becoming some sort of new “imperialists” as traditional Western hegemony declines in some regions.
Last year trade between Africa and China increased a staggering 33% from the previous year to US$166 billion. This included Chinese imports from Africa amounting to US$93 billion, comprising largely mineral ores, petroleum, and agricultural products while Chinese exports to Africa totalling US$73 billion, comprising largely manufactured goods.
Trade between the African continent and China increased further by over 22% year-on-year to US$80,5 billion during the first five months of 2012. Imports from Africa were up 25,5% to US$49,6 billion during these first five months of 2012 and exports of Chinese-made products, such as machinery, electrical and consumer goods and clothing/footwear increased 17,5% to reach US$30,9 billion. China remained Africa’s largest trading partner last year for the fourth consecutive year.
In 1980, the total Sino-African trade volume was US$1 billion.