SOUTH Africa is prepared to enter into investment arrangements with Zimbabwe instead of providing convenient rescue packages or bailouts which President Robert Mugabe desperately needs.
Elias Mambo/Hazel Ndebele
This comes as it emerges South African President Jacob Zuma (pictured) has been behind-the-scenes encouraging the state-owned Development Bank of Southern Africa (DBSA) to fund projects in Zimbabwe to help the country’s economic recovery, while also promoting his country’s investment agenda.
Senior South African government officials told the Zimbabwe Independent this week Zuma believes Zimbabwe should be assisted to recover, but does not think giving Mugabe a rescue package is the way to go as it would not address real issues.
Officials say Zuma’s government is also worried about Zimbabwe’s country, political and sovereign risk, as well as poor credit rating, among other issues, hence its reluctance to give it a bailout.
“Zuma believes South Africa can help fund viable infrastructural projects where returns on investments are also guaranteed. As a result, his government is encouraging the DBSA to look into funding Zimbabwean projects as part of an attempt to help the country recover and ensure internal stability,” said the official.
DBSA CEO Patrick Dlamini confirmed this week that his bank was working on modalities to fund more projects in Zimbabwe.
“We are working on modalities to continue funding projects in Zimbabwe to promote intra-regional trade,” Dlamini said. “Zimbabwe is amongst countries which we will continue funding and we are engaging the Ministry of Finance and our political principals to support that.”
DBSA is a South African state-owned development bank focused on funding infrastructure to address capacity constraints and bottlenecks in order to optimise economic growth potential. It prioritises water, energy, transport and ICT as its key focus areas.
Dlamini said DBSA was specifically interested in infrastructure projects in areas such as rail, road and energy.
DBSA funded the rehabilitation of the Plumtree-Bulawayo-Harare-Mutare highway after extending a US$206,6 million loan to Infralink, a joint venture between the Zimbabwe National Road Administration (Zinara) and a South African company Group 5 Limited.
One of the conditions for the loan was that Infralink, where Zinara was the majority shareholder, would fund a debt service reserve account (DSRA) with two quarterly loan instalments during a two-year capital grace period.
Thereafter all surplus cash generated by Infralink was to be directed to a maintenance reserve account which would be used to fund periodic as well as major maintenance interventions.
Mugabe, who has been travelling around seeking a financial bailout, went to South Africa in April — his first state visit in 20 years — where he asked for a rescue package to revive the moribund economy.
In briefings with South African government officials, a candid Mugabe reportedly painted a bleak picture of the economy.
Other than South Africa, Mugabe has also sought financial rescue packages from China, Russia and multi-lateral institutions such as the International Monetary Fund, but his efforts have been futile as the countries and financial institutions insist that he should first pay arrears, while also creating an enabling business environment for investors to come to Zimbabwe.
The IMF and other financial institutions insist Zimbabwe should clear its debts, respect the rule of law, including property rights, while also crafting clear and progressive investment policies, as well as clarifying its controversial indigenisation policy. Zimbabwe is grappling with a severe liquidity crunch and is saddled with an unsustainable US$10-billion debt overhang and arrears.
Officials say South Africa believes it will be mutually beneficial to fund infrastructural projects as this will boost regional trade and stabilise Zimbabwe, stemming the wave of immigrants into its borders.
There are reportedly millions of Zimbabweans living in South Africa. As company closures and job losses intensity in Zimbabwe, more people are crossing the Limpopo River in droves to seek to refugee there. Pretoria believes helping Harare to stabilise the economy is the best way to stop the wave of immigration to its shores.
Since 1994, South Africa has been growing its business portfolio and partnerships northwards to sub-Saharan African countries as part of its expansion across the continent. Good road and rail infrastructure in Zimbabwe will enable the speedy movement of goods throughout the region and into Africa interior where South African companies are investing billions.
South Africa is facing an energy shortage and would want Zimbabwe to sell it electricity if it funds its power projects. In addition, DBSA is also looking at funding water projects as South Africa also needs water.
DBSA officials visited Tokwe-Mukorsi Dam when they attended a water conference in Harare in June as they sought to assist the government to finish building the dam as part of a deal for South Africa to import water from Zimbabwe. South Africa is currently importing water from Lesotho.
“DBSA will fund Zimbabwe using taxpayers’ money, therefore it is only fair that South Africa also benefits from the projects such as energy and water generation,” a senior South African government official said this week.
“When the DBSA delegation came to Zimbabwe for the water conference in June, it toured places like Tokwe-Mukorsi Dam to assess the situation.”
DBSA officials discussed funding the project with then Water minister Saviour Kasukuwere, who has since moved to the Local Government ministry. They also engaged then Zimbabwe National Water Authority chairman Michael Ndoro, who has since resigned.
South Africa’s approach is similar to that of other countries such as Russia and China which have also sought to fund infrastructural projects rather than bail out the government through budget support.