$1bn China Exim Bank loan conditions too stringent

A $1 BILLION loan from the China Exim Bank for the expansion of Hwange 7 and 8 Thermal Power Station comes with stringent conditions, including that the equipment and materials to be used during construction should come from China.

Source: $1bn China Exim Bank loan conditions too stringent – NewsDay Zimbabwe December 30, 2016

by VENERANDA LANGA

The $997,7 million loan agreement between Zimbabwe and China Exim Bank was approved recently by Senate.

Masvingo Senator Misheck Marava raised concern over a clause in the agreement which requires the purchase of materials to be done in China.

“The loan facility is very attractive and I think it is going to benefit the country, but I have got a few reservations in that under Article 2 on 2.6, they say ‘the goods, technology and services purchased using the proceeds of this facility shall be purchased from China preferentially’.

“When I read the document, I found out that there is insurance in place. Are we not caging ourselves or putting ourselves into a corner if we say preferentially from China alone?” Marava said.

Some of the terms of the loan agreement are that it will attract an interest of 2%, commitment fees of 0, 25% per undrawn amount and a management fee of 0,25% on the loan amount, with the loan repayment period being 20 years.

The money is to be used to construct two power generation units which will provide an additional
600 megawatts of power to the national grid.

Chinamasa said it was important for Zimbabwe to get the loan.

“Any loans other than from multi-lateral institutions are tight in terms of engineering, procurement and construction to the country from which you are borrowing. It is very important to say that when we enter into this, they will insist the design or engineering — yes, we input, but the design and the cost is at our own expense, but done, in this case, in China. That is an insistence.

“They do this in order to promote businesses and their own companies. They will insist that if there are any generators or any turbines that may be needed or manufactured, they must be manufactured in China. It is a must. They also insist that the contractor must be a Chinese company,” he said.

The Finance minister said even loan agreements from countries such as India had the same conditions, adding even Western countries were looking for capital from China under the same conditions.

“Clearly, there are items which cannot and should never be procured from China — for example, any sand, cement and a lot of other materials,” Chinamasa said.