Mugabe returns from China with signatures

via Mugabe returns from China with signatures – DailyNews Live 1 September 2014 by Fungi Kwaramba

HARARE – President Robert Mugabe jets into Harare today from a begging trip in China only holding a bag of secretive agreements and signatures but with no cash to revive an economy which is virtually on its knees.

Instead of raising hope among the suffering millions of Zimbabweans, most of whom cannot afford a meal a day, the deals Mugabe and his entourage of ministers sealed in China have become a cause for concern not only because industrialists were snubbed but due to the veil of secrecy attached to the agreements.

Information on the nurture of deals that Mugabe and his entourage have signed remains sketchy.

The State media claims the “mega deals” will in the long run breathe life into the comatose economy.

However, it is not clear how a broke government will repay China, and how the deals will ease the suffering of Zimbabweans blighted by shrinking incomes and failing social services. What China will get in return also remains another big question.

A close look at one of the so-called nine mega deals shows nothing extraordinary about the agreements at least in the economic sense, analysts said.

For instance, Foreign Affairs minister Simbarashe Mumbengegwi is reported to have signed another agreement on behalf of the Zimbabwean government on mutual exemption of visa requirements for holders of diplomatic and service passports.

Speculation had been rife that Beijing would pour billions of dollars into the country’s empty coffers — but the reality is that there will be no budgetary support from China, a fact confirmed by Finance minister Patrick Chinamasa recently.

“No country sets aside a lump sum payment for no specific projects. Projects must demonstrate their ability to pay for themselves. You will not come to China to ask for money to invest in a project that won’t pay for itself. That would not make economic sense,” Chinamasa was quoted in the State media as saying.

Before Mugabe flew to the East, the media speculated that the country would get a windfall of between $4 billion and $10 billion — figures which would ease the financial pain that the country is experiencing.

Obert Gutu, a former government minister and now a government critic said the Chinese are masters at striking deals favourable to themselves.

“China is arguably the current leading global deal maker. The Chinese are very smart entrepreneurs, with an eye for the finer details and the small print in all commercial  agreements that they transact.

“One thing is for sure, in invariably all their deals with African countries, the Chinese almost always end up with the bigger portion of the profit to be made.

“China is in Africa to make money. The Chinese are not in Zimbabwe on a charity mission. If Zimbabwe isn’t careful enough, the Chinese will sell us a dummy. In this world of mere mortals, there is absolutely no free lunch. With the Chinese,  if they scratch your back once, you have to scratch their back 10 times over in return,” said Gutu.

In 2009, at the height of the country’s economic woes, Zimbabwe signed an $8 billion deal with China where Sino-Angolan company, Sonangol was supposed to invest in gold and platinum refining, oil and gas exploration, fuel procurement and distribution, and housing development, but it is not clear what transpired of the deal.

Dewa Mavhinga, Crisis Coalition Zimbabwe chairman, cautioned against celebrating the so-called “mega loan deals from China without having full details about the nature of the loans, what they are for, what the repayment terms are and what government mortgaged to secure them.”

“The Chinese are not extending these loan facilities for charity; they are in it primarily to secure their own economic interests.

“There is need for government to fully disclose details of these loans and explain how they benefit the people of Zimbabwe and then administer them guided by principles of transparency and accountability,” said Mavhinga.

He added, “another major problem about these Chinese mega deals is that Zimbabwe is already saddled with a massive national debt of more than $10 billion, these Chinese loans only add to our debt burden, and for Zimbabwe to secure such loans when it has such a bad credit record it means desperation under which the country may have been forced to make huge concessions in return for the loans.”

Although Zimbabwe has signed some deals with China, largely in telecommunications, road and rail development and power generation, analysts contend that the country could be losing in the deals.

In China, Chinamasa signed a “securitisation framework” with the China Export and Credit Insurance Corporation (Sinosure) for all projects that government is seeking funding. The agreement is designed to provide the Chinese with some form of security.

According to Chinamasa, “securitisation, which we have already agreed, is not to mortgage our minerals but to set aside a portion of cash flows that arise when we are exploiting our mineral resources, whether diamond and gold.”

“As you know, companies which are exploiting our diamonds, gold, are liable to taxation, royalty, depletion fees and other aspects of taxation and basically the framework which we have agreed is that from those taxes, I can set aside a portion of those cash flows towards servicing any loans that I secure to fund various projects.”

A local news agency questioned the semantics behind securitisation.

Reads part of the publication’s piece: “As far as securitisation goes, much seems to have been lost in translation. Or technicalities. Or semantics. Providing security for a loan is not nearly the same as securitising the loan, although one can understand how confusion might arise around the two concepts.”

Observers say Mugabe’s desperation has provided the Chinese with a perfect window.

Tired of the governance benchmarks and political reform strings attached to Western aid and investment, countries like Zimbabwe are finding it easier to deal with China, whose leaders have a policy of “non-interference” in domestic matters.