FINANCE minister Patrick Chinamasa has moved to address Zimbabwe’s funding challenges in terms of getting loans and lines of credit from China by engaging China Export & Credit Insurance Corporation (Sinosure) — a leading a state-funded policy-oriented insurance company — to resume guaranteeing loans from Chinese banks to Zimbabwean companies.
As reported in the Zimbabwe Independent on August 15, Sinosure had been refusing to secure loans to Zimbabwean companies because government was failing to repay arrears to China amounting to over US$60 million.
Chinese financial institutions have also been reluctant to give funding to local companies because of Zimbabwe’s poor credit rating and high political risk.
Sinosure is a state-funded policy-oriented insurance company established for promoting China’s foreign trade and economic cooperation.
It began operations in 2001 and has formed a nationwide service network, with its business guideline being providing insurance service for foreign trade and investment, fully supporting the development of foreign trade and economic co-operation, promoting economic growth and employment and equilibrium of international balance of payments.
Chinamasa, who is currently in Beijing along with President Robert Mugabe and other ministers from the economic cluster on a state visit, had been sweating as Sinosure refused to guarantee loans from Chinese financial institutions, mainly China Exim Bank, to Zimbabwean companies because of government’s failure to repay arrears already amounting to over US$60 million.
As reported in the Independent recently, the Zimbabwean government is hoping to secure a US$4 billion financial rescue package from China although Chinamasa said the main issue was securing a Master Loan Scheme for funding development projects, particularly those infrastructure-related.
Besides signing an agreement on that, Mugabe and his team also signed deals for projects across various sectors ranging from energy, water, power generation and road construction.
Announcing the deals to the state media, which accompanied the government delegation, Chinamasa also stated he had signed an agreement with Sinosure to provide cover for them.
“I have signed a memorandum of understanding with Sinosure, China’s government chief underwriter, to ring-fence whatever loans we will access from this country in future,” Chinamasa was quoted as saying.
He added that he had also requested Sinosure to give insurance to loans to local government-owned companies, including TelOne and NetOne.
About a fortnight ago, this paper reported that Sinosure had decided to stop giving insurance cover for loans to Zimbabwe, which has been defaulting on arrears on loans advanced to re-capitalise some of struggling companies as well as for infrastructural developments.
“Sinosure is unhappy with Zimbabwean government’s failure to pay up on loans and are refusing to guarantee Zimbabwean government backed loans,” a senior government official told the Independent then.
“Zimbabwe has fallen behind on payments of arrears to China and these are in the region of US$60 million. These loans were acquired for projects like Ziscosteel, which is currently not functioning and this is likely to affect further disbursement of funds, particularly to the large-scale projects like the proposed construction of solar power plants which were hoping to access funding from China Exim Bank.”
Chinese ambassador Lin Lin had also suggested three weeks ago in an interview with this paper that there is the possibility of more stringent rules before loans can be advanced to Zimbabwe.
“Between the two (Chinese and Zimbabwean) governments, there is no problem (since) concessionary loans being provided by Exim Bank for current projects like the Victoria Falls Airport upgrade and the Kariba South Power Station expansion project have a low interest rate of only 2% and the repayment period is for 20 years,” Lin said.
“But 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.”