ZIMBABWE and China have entered into a US$5 billion deal involving the mortgaging of the countryâ€™s platinum resources worth US$40 billion which will benefit Beijing more than Harare.
The deal â€” which secures half of the US$10 billion that Zimbabwe is desperately looking for to fund economic recovery â€” is likely to cause controversy in parliament due to lack of transparency and massive financial prejudice to the country.
Information to hand shows that Finance minister Tendai Biti has signed a cautioned Memorandum of Understanding (MoU) with the Eximbank of China (Eximbank) for the platinum-backed US$5 billion loan on condition of explicit legal documentation and declaration of the obligations of the Chinese.
â€œZimbabwe and China have reached a US$5 billion platinum-backed deal,â€ a government source said. â€œBut the problem is that the loan facility benefits China far more than Zimbabwe. This has caused problems in certain circles of government and will definitely become an explosive issue in parliament.â€
The deal is structured in a controversial manner. Zimbabwe will get US$5 billion from Eximbank of China and in return the Chinese get 50% equity in a US$40 billion platinum concession without paying anything.
The US$5 billion will be converted into equity for the Chinese, although it falls US$10 billion short of the total value of their shareholding.
Since the platinum concession is worth about US$40 billion, this means the Chinese will collect US$20 billion out of their 50% equity â€” a whopping US$15 billion profit â€” at the end of the transaction.Â Â
Sources said Eximbank was very happy with the deal. The Zimbabwe government is said to be sulking but has no choice but to go along since it is bankrupt.
Eximbank is the official export credit agency of the Chinese government. It was founded in 1994, and is nowÂ the worldâ€™s largest export credit agency.
Prime Minister Morgan Tsvangirai said this week Zimbabwe had secured a US$950 million loan from the Chinese. China also donated 4 000 tonnes of soyabean seed which sources described as â€œsweetenersâ€ to the mega-buck deal.
Zimbabweâ€™s inclusive government has secured about US$3 billion since it came into office in February. Tsvangirai recently toured Europe, the United States and Scandinavia in search of money, but only brought home pledges of a modest US$500 million.
Sources said Biti held a meeting at his offices on June 8 with Reserve Bank officials to discuss the US$5 billion deal with China. They said although Biti has already signed the MoU, he was worried about the skewed structure of the deal which prejudices Zimbabwe of billions of dollars.
â€œIn fact, the deal is badly structured because in the end Zimbabwe loses the sort of amount of money (US$15 billion) which can make this economy the most vibrant in Africa outside South Africa,â€ a senior Ministry of Finance official said. â€œItâ€™s a major deal but a financial rip-off in many respects.â€
Sources said at the meeting with Biti, central bank representatives also said the deal was exploitative. Biti tasked Reserve Bank experts to come up with a blueprint on how Zimbabwe can get maximum benefit from its mineral resources.
A paper is also being worked out on mining legislation to provide a workable framework and clear lingering controversies which beset the money-spinning sector of the economy.
Zimbabwe has more than 40 different types of precious minerals which make the country potentially one of the richest in Africa. However, the country is currently going through a major crisis. Analysts blame leadership and policy failures for the countryâ€™s failure.