President Robert Mugabe was due to dash off to China over the weekend to beg for a $4 billion financial rescue package for Zimbabwe to avert an imminent economic disaster that has seen his government fail to finance itself.
The complex deal, wrought in months-long negotiations under the Joint Zimbabwe-China Permanent Commission, is aimed at stabilising Mugabe’s beleaguered regime and strengthen its finances, but it leaves strong doubts about the flouting of tender procedures and the sidelining of the State Procurement Board in the talks.
After days of talks, ministers Patrick Chinamasa (Finance), Simbarashe Mumbengegwi (Foreign Affairs) and Mike Bimha (Industry and Commerce), who travelled as part of an advance delegation to Beijing last Tuesday, finalised measures yesterday to secure a rescue deal that will culminate in Mugabe signing an agreement on economic cooperation this week, building on ties at a time the debt-laden Zimbabwe is seeking new sources of aid.
“The president is leaving today (Saturday), basically to discuss bilateral relations (with China). The talks will centre around finance, industry, commerce, mines and agriculture,” Joey Bimha, the permanent secretary in the ministry of Foreign Affairs said.
Authoritative sources said Zimbabwe and China will also sign a deal to finance construction of a power plant in Zimbabwe and that government was exploring lines of credit with China as it grapples with economic recession, an unemployment rate above 80 percent and more than $10 billion in foreign debt.
Chinamasa has said he was seeking a “comprehensive” rescue package.
Asked categorically to state if Zimbabwe was seeking a financial rescue package, Bimha said: “We are seeking cooperation.”
In three trips to China, Chinamasa has been told that Beijing wants to leverage any loan to Zimbabwe with minerals, but he has baulked at this proposal amid warnings from the World Bank.
Zimbabwe will be placed under increased surveillance by an enhanced Chinese presence on the ground, after Beijing ruled out budgetary support.
The Chinese will instead channel the cash through their companies, which will in turn implement various projects across key sectors of the economy. Zimbabwe will have to deposit
funds to service its debt in a special account to guarantee repayments.
The deal, if it materialises, is being hailed as a step forward for Zimbabwe, but experts warn that Harare will need more help to improve liquidity to the level envisaged in its economic blueprint, ZimAsset.
China is calling Mugabe’s four-day official visit “a symbol of the deepening of bilateral traditional friendship”.
Bimha expressed gratitude for the aid China has offered since Zimbabwe’s independence in 1980, and said there was a meeting of the Joint Zimbabwe-China Permanent Commission underway
“There is a meeting as we are talking,” Bimha said yesterday.
Lin Lin, Chinese ambassador to Zimbabwe, said on Friday, Mugabe’s trip to China, the 13th trip he has made to Beijing, “will start a new chapter for our bilateral relations”.
The trip could also open up the Chinese markets for struggling Zimbabwean firms.
Mugabe’s visit to China comes at a time when he is increasingly also re-engaging with the West after decade-long differences over policy, including his government’s often-violent seizure of white-owned commercial farms for redistribution to landless blacks and his drive to seize majority stakes in foreign firms.
Lin said China has given Zimbabwe aid amounting to over $1 billion in recent years, and has helped the troubled country with preferential, concessionary and commercial loans.
The loans have bankrolled a $100 million National Defence College just outside Harare, $144 million Harare water project, medical equipment for hospitals, Victoria Falls airport expansion and the Kariba South hydropower expansion.
It has also pumped $100 million into Zimbabwe in grants and interest-free loans over the past three years, according to Lin.
Meanwhile, the International Monetary Fund and the World Bank have withheld fresh support for Zimbabwe since 1999, aggravating the country’s economic crisis.
Mugabe, who has held power since his country’s independence from Britain, denies critics’ accusations that his policies have destroyed Zimbabwe’s economy.
Mugabe is expected to arrived in Beijing today and tour the north eastern provinces before visiting the headquarters of top vehicle makers.
He is to meet Chinese Premier Li Keqiang, and top officials in the Communist Party hierarchy, officials said.
Observers said while this may be the most important deal in Zimbabwe’s post-election history, there was need for full disclosure and transparency about this aid package to make
sure Mugabe does not mortgage the country to China in exchange for aid.
There are growing fears that Mugabe wants to mortgage the Great Dyke, a rich mining belt that cuts across the country, in exchange for the loans.
Dewa Mavhinga, chairperson of pro-democracy group Crisis in Zimbabwe Coalition, a conglomeration of more than 350 civic society groups, and senior Africa researcher with Human
Rights Watch, said China may be known for a number of cheap commodities in Zimbabwe but certainly its aid packages do not come cheap.
“The question that needs to be asked and answered is: How will Zimbabwe pay back China’s $4 billion loan? This loan is unlikely to resolve Zimbabwe’s deep seated economic problems which are as a result of bad economic governance, corruption and kleptomaniac loot and plunder of our national resources. To revive our economy, Zimbabwe must first get its economic policies and economic governance right, in fact, a true sign of bad economics is the belief that all economic problems can be solved by borrowing” Mavhinga said.
Other economic experts said the deal was an “important result” that averts a “nightmare scenario.”
While the deal provides time for Zimbabwe to put new crisis measures in place over the coming months, it means the southern African country will struggle for years without economic
Many economists question whether Zimbabwe can pay off even a reduced debt burden, suggesting the deal may only delay a deeper default by a few months.
Stephen Chan, a professor of world politics at the School of Oriental and African Studies at the University of London, told the Daily News on Sunday that Zimbabwe needs large-scale
budgetary support and a standby budgetary programme, and the Chinese government has enough on its plate politically and economically to feel unable by itself to do that.