Concerns over Zimbabwe’s mortgage resources
BY BRIAN CHITEMBA
ZIMBABWE’s economy remains under threat of exploitation as the government continues to mortgage natural resources to secure loans, according to Veronica Zano, head of Southern Africa Resource Watch (SARW).
The country is already over-indebted, with billions of US dollars in loans, including Chinese banks, outstanding.
Zimbabwe owes around $ 10 billion to multilateral lenders, including the World Bank and the Paris Club.
The country recently offered platinum concessions and gold deposits as collateral.
Speaking to an African Debt and Development Forum (AfroDAD) last week, Zano said the natural resource boom that began around the turn of the millennium has spawned a new financing model called “back to back loans”. resources ”(RBL).
Under this model, countries access finance secured by future income streams from their natural resources.
She said the RBLs are loans to a government or public enterprise that are repaid in the form of natural resources.
“Examples of the government’s deducted public debt catalog include the US $ 1.2 billion expansion of the Hwange thermal power plant, the expansion of the Kariba South power plant, and the construction of the new parliament building.” Zano said.
“The opacity due to lack of access to information has led to speculation on Zimbabwe’s secured loans from its minerals amounting to around $ 6.8 billion, most of it owed to China Exim Bank.
“Following a High Court order in February, Finance Minister Mthuli Ncube announced details of the Reserve Bank of Zimbabwe (RBZ) loan details from the African Import-Export Bank (Afreximbank), which amounted to $ 1.4 billion between December 2017 and December. 2019. “
Zimbabwe is endowed with a huge mineral resource base, the exploitation of which should be a key source of revenue for the government.
But the real contribution of extractive industries to sustainable development in resource-rich African countries continues to be mired in financial, economic and governance challenges.
“Government revenue generated directly from operating the sector can take various forms, including production shares, royalties, taxes, dividends, and signing / discovery bonuses,” Zano said.
“If managed effectively, the additional fiscal space generated by this increased revenue can be used to promote growth. “
Takudzwa Chikumbu of Transparency Zimbabwe International said corruption has contributed to the exponential growth of domestic debt in Zimbabwe.
“The implications of taking over the debts of private and public companies on the country’s indebtedness, credit rating and public confidence and trust cannot be overstated,” he said.
“In recent years, the contribution of SOEs to the economy has grown from 60% to around 2%, with 70% of these entities technically insolvent. Instead of financing priority national infrastructure and productive sector projects with high economic and social impact and projects that can generate sufficient income to repay loans, as provided for in Article 12 (a) of the Management Law of public debt, the country has deteriorated, ”he said. noted.
He said it was costly for the state to take over Ziscosteel’s US $ 495 million and RBZ US $ 1.35 billion despite the citizen challenge.
“The RBZ Debt Takeover Bill in 2015 led to a sharp increase in domestic debt, which rose from $ 1,676 billion in 2014 to $ 2,239 billion,” Chikumbu said.
“By adopting the two laws, the government was only concerned with; provide healthy balance sheets to RBZ and ZISCO Steel and enable the two institutions to attract international funding.