China makes $220 million move

China makes $220 million move

China makes $220 million move

Source: China makes $220 million move | Financial Gazette (News)

Shame Makoshori/Phillimon Mhlanga

CHINA yesterday became the first global power to offer financial support to President Emmerson Mnangagwa’s new administration, unveiling US$218 million in grants and loans and committing more funding as the international community starts to engage with a post-Mugabe Zimbabwe.

Announcing the deal, Zimbabwe’s Finance and Economic Planning Minister Patrick Chinamasa signaled that the country’s new administration, led by the sinophile Mnangagwa, was looking to pursue a China-inspired economic development plan.

The Chinese model’s key characteristics include robust State involvement in key sectors of what remains an essentially capitalist economy, led by a strong ruling party and often at the expense of political liberalisation.

“We look forward to China in terms of our development plan,” Chinamasa told reporters. “They have taken about 300 million people out of poverty, and we have no choice but to look to them in our development plan. At this point, China is the second largest economy in the world after the United States of America.”

“They have phenomenal growth rates, averaging seven to eight percent in the past 30 years. It is a model we should look to. They are the only source of infrastructure financing on the African continent. They have supported infrastructure projects in Ethiopia, Kenya, the Democratic Republic of Congo and Cote d’Ivoire,” the Finance Minister said.

Mnangagwa, a former vice president and long-term close ally of former president Robert Mugabe, succeeded Zimbabwe’s founding leader on November 24.

Mugabe, 93, had resigned on November 21 after the military took over his government a week earlier, ending a tense showdown with military generals and bringing the curtain down on his 37-year rule.
Zimbabwe’s ally China immediately embraced Mnangagwa’s administration, with President Xi Jinping sending a special envoy to Harare within days of his inauguration. Former coloniser Britain, whose Africa minister was in Harare shortly after Mugabe’s exit, has offered support and rapprochement after more than a decade of frosty ties following the Zimbabwe government’s oft-violent seizure of white-owned farms to resettle landless blacks.

Resource-rich Zimbabwe has gone through an extended economic crisis, but is widely acknowledged as one of Africa’s most promising economies.

Mnangagwa’s ascent has renewed international interest in Zimbabwe, especially after he promised to reform and break away from his predecessors policies, which have been blamed for the country’s economic woes and isolation by key powers.

While China has provided succour to Zimbabwe after the southern African country was frozen out of Western-dominated multilateral financial institutions, Beijing had itself grown impatient with Harare’s inability to service loans reported to amount to US$1,7 billion, extended since 2000.

However, on Wednesday, China indicated its intentions to reset ties with Mnangagwa’s administration.
Chinamasa and China’s ambassador to the country, Huang Ping, signed a US$153 million loan agreement for the upgrade of Harare’s international airport and a US$50 million grant for the construction of a new Parliament building on the outskirts of the capital. Another US$15 million grant was also signed for the upgrade of a high performance computing centre at the University of Zimbabwe.

“The Chinese government has committed to assist our good friends through thick and thin,” Huang told reporters during the signing ceremony, at the Finance Ministry’s offices in Harare on Wednesday.

“We will continue to assist the Government of Zimbabwe’s economic development plans, and more deals will be signed.”

China’s commitment to Zimbabwe is despite the country accumulating debt arrears to Beijing.
Yesterday, Chinamasa told The Financial Gazette yesterday that Harare had defaulted on Chinese debt about two years ago.

“We have run into difficulties,” Chinamasa told The Financial Gazette.
“We have not been able to service our debts in the past one or two years. This is where our friendship with China comes in. We are happy that the Chinese understand our difficulties. This is why we call them all-weather friends. With the Chinese, the umbrella is always there, whether it is raining or not. But we want to honour our debts,” said Chinamasa, who presents his first budget under Mnangagwa’s government this afternoon.

He said the 2018 National Budget would “show that we are back and we mean business”.
“We want to honour our debts, not only to China, but to the rest of the world,” Chinamasa told The Financial Gazette.

The US$153 million airport upgrade deal to expand the terminal building, rehabilitate the runway, install a new communication system and satellite station as well as refurbish the fire station has a seven-year grace period within its 20 year tenure, and a two percent interest rate.
The deals signed yesterday were agreed by Mugabe and Xi in December 2015, during the Chinese leader’s visit to Zimbabwe.
Last year, Zimbabwe completed the US$150 million Chinese-funded expansion of the Victoria Falls International Airport and is on the verge of completing the US$553 million Kariba south power plant, largely bankrolled by Beijing.

The first phase of the power plant upgrade, to add 300MW to Zimbabwe’s grid, was due to be commissioned this month.

“We have completed the Victoria Falls International Airport, and we have seen a quantum leap in arrivals, and hotels are full. We want to replicate this in Harare,” Chinamasa told reporters.
Zimbabwe has struggled to access funding for its capital-starved economy, mainly due to its inability to service old loans. The country has, however, recently undertaken to implement an arrears clearance plan with global lenders and last year paid off US$110 million to clear its arrears with the International Monetary Fund (IMF).
The plan, which did not enjoy the categorical support of Mugabe, had been put on ice, but now appears to have been revived under Mnangagwa and Chinamasa’s direction.

Under a deal agreed two years ago in Lima, Peru, Zimbabwe undertook to clear arrears to the IMF (US$110 million), WB (US$1,15 billion) and AfDB (US$601 million) by the end of April last year.
In October, the IMF’s Zimbabwe country manager, Christian Beddies, told The Financial Gazette that after a promising start, the strategy had run into problems.
“Nothing has changed since Lima,” Beddies said.

Yesterday, Chinamasa said the debt repayment plan to be unveiled in today’s budget would be part of a broad plan to revive the country’s failing economy and rebuild struggling industry.
Thirty percent of these are teetering on the brink of collapse, according to the Confederation of Zimbabwe Industries.