Needy Zimbabwe held hostage by Chinese loan over multi billion dollar resource

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Zimbabwe and China have inked a controvesial US$5 billion deal that has mortgaged the country’s platinum resources worth US$40 billion. China is set to benefit more than Zimbabwe.

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.

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 “sweeteners” to the mega-buck deal.

Zimbabwe’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.

According to the deal structure 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 – a whopping US$15 billion profit – at the end of the transaction.

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 now the world’s largest export credit agency.

Biti held a meeting at his offices on June 8 with Reserve Bank officials to discuss the US$5 billion deal with China.

Biti tasked Reserve Bank experts to come up with a blueprint on how Zimbabwe can get maximum benefit from its mineral resources.

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 country’s failure.

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