Debt repayments only way out for Zim

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PRESIDENT Robert Mugabe and his lieutenants have repeatedly attempted to eschew basic principles of doing business which prescribe the necessity of having to pay back previous loans in order to access new ones in addition to respecting property rights and stamping out institutional corruption, among other essentials which attract investment.

Herbert Moyo

And it does not matter which direction one turns to in search of investment, whether it be Chinese, Europeans or Africans — all will demand clarity of investment policies and a conducive business environment, to ensure they get a return on their investment.

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The Chinese, which Mugabe describes as Zimbabwe’s “all-weather friends”, have shown that like everyone else, they will not tolerate corruption in parastatals and a government that does not repay loans.

If anything, Mugabe and his officials’ numerous and relatively fruitless travels to China to seek new loans in lieu of these accepted norms of doing business have given a new lease of life to the aphorism credited to academic genius Albert Einstein that “insanity is doing the same thing over and over again, but expecting different results”.

“Like everyone else, the Chinese are very tough creditors,” said legislator Eddie Cross, who is also the economic advisor in the opposition MDC-T party. “Business is business. Finance is finance. While the Chinese do not make politics their main issue as the West and its related institutions may do, they still insist on treating business as business without any hint of friendship in the transactions. They are very tough customers who will demand repayments and the sooner we learnt that the better.”

His remarks come in the wake of reports in last week’s edition of the Zimbabwe Independent that Zimbabwe and China’s much-vaunted multi-billion dollar mega-deals in various sectors of the economy are hanging in the balance.

This according to government sources is because Sinosure, a leading Chinese insurance company, is reluctant to guarantee more financial loans from Chinese banks unless Zimbabwe clears at least US$50 million in debt arrears and shows commitment to paying its debts estimated at US$1,5 billion.

Mugabe and his officials including Finance minister Patrick Chinamasa must have imagined that their efforts had been rewarded after several visits to China which culminated in the 2014 signing of Memorandums of Understanding (MOUs) worth US$4 billion to fund several projects in construction, energy and telecommunications sectors among others.

And the state media certainly made a song and dance of the December visit of Chinese President Xi Jinping which resulted in the MOUs being converted into concrete agreements. But as Sinosure’s latest demands demonstrate, the desperate Zimbabwean government is still nowhere close to unlocking the much-needed billions to rescue its moribund economy. And while it may be bad news for Mugabe and the Zimbabwean economy, there is however nothing new in the stance that Sinosure or China has taken regarding loans to Zimbabwe.

As recently as 2014 when the state media was trumpeting the “mega-deals” signed by the two countries, this newspaper reported that Sinosure would not be guaranteeing new loans from Chinese banks to Zimbabwean companies because of government’s failure to repay arrears already owed to China amounting to over US$60 million.

The writing was on the wall for the new deals as former Chinese ambassador Lin Lin had already warned in an interview with the Independent that while there would be no problems over funding for running projects, there would be far more stringent rules before new loans can be advanced to Zimbabwe.

“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.”

But the precedent had been set much earlier in 2004. As the Independent reported at the time, Mugabe’s week-long visit to China in December 2004 only yielded a paltry US$6 million for grain imports which were only enough to feed the starving multitudes for three months. The amount was nowhere near the US$4 billion that Zimbabwe desperately needed to pay its international debts at the time. Nor was it near enough to cater for fuel and power imports the country required at the time.

Fast-forward to 2016 and China is still singing from the same business handbook as the multi-lateral institutions in demanding debt repayments first.

“It is a question of business practices being generally the same everywhere,” said academic and political analyst Eldred Masunungure. “They (China) do a risk analysis like any business and they have downgraded Zimbabwe as a bankable country. The two countries may enjoy a political relationship but this is business where debts must be serviced,” added Masunungure.

Another analyst Oswell Binha added that what the Chinese are asking for is “nothing out of the ordinary as it is normal business practice that debts have to be repaid.”

“The issue of debt repayment has been topical not just with China or the western countries. Even locally with our IDBZ there is a need to pay. What we need is to inculcate the tradition of paying back,” Binha said.

Several business delegations that have visited Zimbabwe from different countries including Australia, France, Britain and even the Chinese, have been singing from the same hymn book. They have demanded that the government creates a conducive business environment by among other things clarifying economic polices such as the indigenisation laws while also respecting property rights among other things.

Zimbabwe, which is currently saddled with a US$10,8 billion debt overhang, is currently ineligible to access long-term finance from the World Bank, the International Monetary Fund and African Development Bank over non-payment of arrears since 1999.

The reality is that there is nowhere to run and as Binha noted, the country should just go back to the basics of repaying what it owes, whether it be to the Western-linked IMF and other institutions or the favoured eastern Chinese economic giant.

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