Is China a messiah or monster to Zim? | The Herald

via Is China a messiah or monster to Zim? | The Herald May 20, 2014

Among the major ones relates to the issue on whether the world’s second largest economy may possibly take over the United States in terms of national output (gross domestic product). Another debate is that of Beijing’s so-called scramble for African resources. In recent years, China’s economic presence in Africa has led to a heated argument, some of it well-informed and some of it not, about the nature of Chinese involvement and its implications for the continent.

Closer to home, the media was awash last week with news on China requesting Zimbabwe to use its mineral proceeds to guarantee any future loans.
Some circles took this stance as possibly a sudden U-turn and some as a harsh position by the world’s second largest economy over its political ally. Other circles saw this move as bolstering their view of China’s sinister plot to colonise African resources.

A few questions have thus been raised on China’s proposed stance of seeking mineral resources as collateral. Chief among these is whether Beijing is really a messiah or monster to Zimbabwe? Furthermore, what does it mean for the domestic economy if it pursues such a strategy into the future?

To put things into perspective, China’s position of requesting mineral resources is not a new occurrence as they are not the pioneers of these resource-backed loans.

History has shown that in the early 1970s when Beijing was poor and still in its infancy in terms of economic development and without adequate capital for infrastructure projects, they pursued this style of borrowing.

The lenders in this case were Japan, Europe and the US. Key to note was the fact that these deals were touted as a form of “win-win” cooperation.
Within two decades, China diversified its economy, became the world’s factory, and turned from an exporter to an importer of raw materials.

This perspective highlights that offering collateral was not initiated by China but by other economic giant’s notably Western nations. Nonetheless, the revival of the world’s second largest economy came at a cost as much of its environment was destroyed in the process.

Soon after benefiting from resource-backed loans, China became a giant and began to offer them to other poor developing countries. These loans were neither altruistic nor a creepy plot to colonise African countries. Instead they were rooted in China’s experience that natural resources could help a poor country develop and diversify its economy.

In China’s view, they offered a win-win solution. An analysis from this perspective reveals that Beijing’s stance towards Africa may possibly not be a selfish move as most loans offered are at concessional rates. Remarkable cases of such loans were offered to Ghana and Angola.

The Bui Dam in Ghana is an example for China’s resource-backed lending. In 2007, China Export-Import Bank (Exim) approved $562 million in loans for this hydro-power project on the Black Volta River at an annual interest of 2 percent with a grace period of five years and amortisation period of 20 years.

Ghana mortgaged its cocoa exports to access the loan. In the case of Angola, China disbursed an oil-backed loan directly to Chinese companies, which are building roads, railways, hospitals and other infrastructure projects in the war-battered country. British, French and German banks have also issued oil-backed loans to Angola.

A reflection from Ghana and Angola’s case highlights that poor countries do benefit immensely from such facilities. China’s investment in Africa grew from $210 million in 2000 to $3,17 billion in 2011. Officials from Exim Bank announced in November 2013 that by 2025, China would have provided Africa with $1 trillion in financing, including direct investment, soft loans and commercial loans.

Thus the intention of China’s aid to Africa is benign but not altruistic. As such poor countries including Zimbabwe may benefit if they pursue these loans. Whereas other groups may regard the Chinese as being selfish but can they “really” offer loans in exchange for nothing?

Thus the writer believes the stance by the Chinese assuming Zimbabwe agrees to a comprehensive financial package may not be “harsh” as they have done it with other nations. China is even reported to be contemplating offering resource-backed loans to developed countries including the US. As such, it is slowly proving to be the modern way of lending.

With the local government saddled by a debt overhang to the north of $7 billion, offering resources a security may be the only step for accessing capital.

This is so because, most foreigners regard the indigenisation policy as largely rigid and also lack of acceptable property rights have seen capital inflows being timid. Hence, Zimbabwe may ride on its long standing relationship with its ally as a way of unlocking finance.

But the harsh reality which is a debate for another time is that even those from the East normally referred to as “close allies” are now requiring collateral. What is it that they are seeing now? Is it a sign of low confidence? Or possibly it was just a misconception by local policymakers that by having close allies they would access credit at virtually low or zero cost?

Whilst acknowledging the positive side of the Chinese aid to Zimbabwe, the writer believes issuing collateral alone may not be an end if ever the domestic woes are to be reduced. Policymakers may need to seriously adhere to improving accountability especially in key sectors.

This area implies that corruption may need to be reduced and ultimately stemmed within each and every section both with the government and by corporates. Such a move will yield significant benefits through improving accountability of minerals and subsequently earnings that would accrue from such.

The setting up of a Mining Promotion Corporation by the Mines and Mining Development Ministry mandated to find new mineral deposits which can be used as security for accessing new credit lines is noble.

However, there is more that must be done so that economic growth, standard of living parallels with the status that Zimbabwe has among the few nations blessed with huge mineral reserves of gold, diamond, platinum, coal just to name a few.

With the issue of mineral securitisation rising, policymakers may possibly need to exude their energy in continuous improvement of policies that are meant to unlock foreign direct investments into the economy. Proper use of the funds unlocked from such loans will be essential as misuse of funds will stall economic progress.

Also policymakers may need to realise that use of mineral resources as collateral impacts positively or negatively on the future generations to come. With the continuous weakening of aggregate demand, the Ministry of Finance may thus need to expedite its capital raising initiatives lest the economic ship further sinks. – FinX.

 

COMMENTS

WORDPRESS: 14
  • comment-avatar
    John Thomas 6 years ago

    The Herald is happy to support the mortgaging of our children’s future. Nothing can now save ZANU. You journalistic wh0res at the Herald are surplus to our requirements. The president has already cornered the market.

  • comment-avatar
    roving ambassador. 6 years ago

    What a load of rubbish . He says Ghana mortgaged cocoa , is that the same as mortgaging the minerals under ground. Wasn’t they are gone thats it. Cocoa ,is a replenish able commodity.
    Zanu has already made a decision to give the country to the Chinese ,this is the propaganda machine of Moyo trying to soften the people up before the big announcement.
    We are in trouble people. Our children’s inheritance is gone.
    Treason .
    Betrayal , Judas .

    Shame on you Mugabe

  • comment-avatar
    mandy 6 years ago

    The Chinese are all gone. The left at the turn of the century. Do not ask me where they went because if you look them up in China you will certainly not find them. Most probably they have all followed Chairman Mao to the grave.

    A tour of China will reveal only capitalists and entrepreneurs looking for investment destinations where they can realize a profit. Nothing more and nothing less. In Chinamasa’s own words Zimbabwe is ”too small” to matter to anyone out there. The biggest trading partner for China can never be Zimbabwe no matter how much we try. So it follows that they really do not have any interests here. Did the recent Chinese premier’s visit to Africa not vindicate this simple truth? It is Nigeria, Kenya, Angola and South Africa that mean anything to the Chinese. Together the countries toured by the Chinese Premier make for a total of close to a market of 300 million people as compared to Zimbabwe’s 13 000 000. They can get gas from Russia. The same goes for chrome and platinum. Lets not talk about uranium and other minerals alternatives are everywhere. Zimbabwe can never buy weaponry from the Chinese to make any significant difference to the portfolios of their military industrial complex. As for construction projects they are still up to their necks in work in China itself as they renew the old communist buildings. So when, your silliness invite them to guard against the west by adopting a look east policy they wonder what is in it for them. This level of stupidity really is astounding. It is a legendary Zuze. It is a pity that it is costing us in human suffering.

    • comment-avatar
      Zvichapera 6 years ago

      Mandy, you are spot, Zimbabwe is too insignificant in terms of trade. We are struggling to get a 10billion dollar loan, as an entire nation, when serious movers and shapers below the age of 30 ( Mark Zuckerburg) are acquiring other technology platforms for $19 billion.

      In the event that we get the loan , the likes of Chombo and other corrupt crew like the Harare town clerk at need to sacked. We cannot have this anymore, where goods are supplied at 5 times the market price, and top of the range cars are being purchased with impunity.
      The country needs competent managers and entrepreneurs to manage this loan, and not the incompetent policy makers

  • comment-avatar
    Roving Ambassador 6 years ago

    Mandy, I beg to differ. Why visit a country the you already own? All these other states he visited was to concretize their hold on Africa.I by passing Zim,they are also putting pressure on their surrogates to be more subordinate.
    You have had ZANU crying for like a baby for their Chinese master’s attention.

  • comment-avatar
    Chaka 6 years ago

    China may be a genuine lender. The concern with us fellow zimbabweans is that our zpf gvt is composed of a bunch of looters who will misuse the funds and be unable to pay back, leaving China the option of taking over all our mines.

  • comment-avatar
    JOHNSON 6 years ago

    this is nonsense. We do not need any chinese loan. We need policy shift and citizen beneficiation. Chinese deals are shrouded in mystery and they promote a lot of corruption. they support wrong priorities because at home they dont care about their own nationals. They evicted their people before the olympics they were hostig to build stadiums, they hide national disasters, they are resource greedy and unscrupulous. they support bloody regimes. they take and never give. They destroy industrialisation via cheap imports. They violate environmental laws. They operate like the mafia. They beat employees etc. The Chinese are bad news. Whoever likes the Chinks is likely a crook. There is nothing good about the CHINESE. Whose friends are they? Of the people? Of the elite? Who benefits? The Chinese are BAD NEWS. We hate the Chinese in Africa. We can rely on our own resources.Remove the borrowing syndrome and go to policy and lawfulness. The Chinese support neither. Whoever supports the Chinese model of lending is a fool and enemy of the people of Zimbabwe. The built a defence college. what kind of investment is that? TO HELL WITH THE CHINESE LOAN AND GOODS AND ALL THEIR ETHICS.

  • comment-avatar
    JOHNSON 6 years ago

    IF ONLY THE CHINESE COME WE ARE EXTINCT AS DODOS.

  • comment-avatar
    Petal 6 years ago

    Be honest loans are coming with strings attached from the Buffoons

  • comment-avatar
    Johnny k 6 years ago

    Go and find where the diamond money all went over the last decade, arrest the chefs like Mpofu, Munangagwa, Mugabe Chiyangwa and Rautenbach and keep them in jail until the money stashed off shore returns,then we will not need China’s money – Oh hang on, it was chinese companies who stole the money now they want more resources to lend our own stolen money back to us because the diamonds are finished. ZANU Mbava culture

    • comment-avatar
      Parangeta 6 years ago

      “CHEFS like –
      Mpofu,
      Munangagwa,
      Mugabe
      Chiyangwa and
      Rautenbach” –
      so where are their restaurants?

      Oh! you mean CHIEFS!

  • comment-avatar
    Wilbert Mukori 6 years ago

    What makes China’s involvement in Zimbabwe totally unacceptable is that the the Chinese are propping up a corrupt and tyrannical regime politically and undermining the nation’s efforts to achieve real and meaningful democratic change for their own selfish gain.

    China’s position on human rights and good governance is well known – these are internal matters. China will continue to do business with regimes with some of the worst corruption records and human rights violations. The Mugabe regime has some of the worst human rights records in human history.

    With Mugabe China has gone the extra mile with Mugabe in that the Chinese have actively interfered in the country’s internal affairs by propping up the dictator. The Chinese have held build Mugabe’s oppressive Zanu PF machinery, selling his shipload of arms and is right now building Zimbabwe’s $200 million spy university.

    It was not out of generosity that China has propped Mugabe all these decades; the tyrant has rewarded them by awarding them very lucrative contracts and unfettered access to the country’s resources. Mugabe has been selling Zimbabwe one piece at a time to the Chinese for what tantamount to nothing more than a piece of calico cloth.

    The Chinese know Mugabe has failed to raise even a single dollar for his ZimAsset economic recovery programme and the tyrant is desperate for cash so desperate he will sell everything of value left in the country and the nation’s future and hope just for a few million Yuan. The Chinese are driving a hard bargain, they are moving in for the kill!

    What the Chinese must know and understand here and now is that the next democratic government in Zimbabwe will NOT honour any of the dodgy deals Mugabe has signed with China.

  • comment-avatar

    Wilbert is right, the Mdc ‘should make it clear not only to China but to everyone else, that zanu is the “government ” only by fraud and that any loans that they wish to make to these crooks will not be honored by any future governments. It will hasten the demise of zanu without mortgaging the future.

  • comment-avatar
    Mapingu 6 years ago

    The article is sure a pack of rubbish especially as the author is clearly telling us Zim’s problems are financial and nothing else. Yet truth of the matter is Zim’s problem are largely a result of Zanu pf kleptocracy – institutionalized greed, theft and corruption by zanu pf clique.

    So the solution is not about how sound any availed credit lines are. As long as Zanu pf is in power then any credit lines of whatever nature simply serve to enrich zanu pf fat-cats not the country. Even if some biblical Jesus would miraculously dish out money to zanu pf government, just like manna, it will not benefit the country. Mugabe and cronies will ship out all of it, as usual, to countries like China, etc, to build individual empires.

    This is really the problem in Zim which the author appears to be oblivious of. So, if Chinese give zanu pf money it will simply be double win for China; and zero benefit for Zim. Mugabe, as usual will take all the money back to China to build & buy more mansions there. So, China will simply have eaten its cake & have it back again. I mean China will still get Zim minerals and still have their money in the country to develop their country.

    What a win-lose situation. The author is surely daydreaming by quoting a host of examples where such arrangements have worked while s/he must know better that those countries don’t have Zanu pf governments. Yes, they may have bad governments, but truth is no Africa government currently matches zanu pf government in terms of greed, corruption, impunity, kleptocracy, inhumanity, etc.