BY now the Zimbabwean government should have gotten smart when it comes to mortgaging national resources to secure cash or any other important commodity.
After getting a heads-you-lose and tails-you-lose deal from Libya at the height of Zimbabwe’s economic crisis a few years ago, analysts say the troubled southern African nation should be shying away from such deals.
But recent reports that Finance minister Tendai Biti (below) could have signed a tentative agreement with China to secure US$5 billion in exchange for the country’s platinum paints a bleak picture of a desperate inclusive government keen on bolstering its empty coffers at any cost.Though Zimbabwe desperately needs critical foreign funding to lift the economy from the current doldrums, analysts say mortgaging national resources is not a sustainable strategy for any serious government.Economist Daniel Ndlela warned that mortgaging the country’s resources is never an option to consider for any country saying Zimbabwe should take a cue from Zambia’s experience.The economist highlighted how a copper boom in 2002 saw Zambia crying over spilt milk after initially agreeing terms with the Chinese.Ndlela said: “It is always a bad thing when a country resorts to mortgaging national resources in general. If in this instance Zimbabwe is going to do so, then it is definitely not a good idea.“In principle, it is never a good idea because countries ideally have to secure loans on their export merits. If a government is desperate then it might happen. But we have to look at the Zambian experience to learn. Zambia mortgaged its mineral resources when the government was desperate but after mineral prices started increasing on the international market, Zambia started complaining.” This, he added, saw the Zambians pulling out of the deal.“When there was a world mineral boom in 2002, the Zambians reneged on their own terms because prices had increased. In principle, mortgaging national resources has never been a good strategy for any country. It normally exposes serious desperation,” Ndlela explained.Ironically, this is not the first time Zimbabwe has mortgaged its assets. In 2002, Zimbabwe attempted to mortgage its oil assets to Libya in exchange for fuel.The assets included a major oil pipeline, which runs from Zimbabwe’s eastern city of Mutare to Harare, as well as oil storage facilities in Harare, under a deal aimed at settling Zimbabwe’s debt to Libya and securing fresh fuel supplies.An independent valuation of the assets conducted at the time and seconded by an Italian company, Roux Italian, valued the country’s oil assets at about US$150 million then, but Libya’s oil company, Tamoil, valued them at only US$38 million. The assets would have gone for a song.But it now seems that Zimbabwe is willing to reach out for diamonds on the devil’s belt before it learns its lesson.When Zimbabwe failed to pay its US$67 million fuel debt to Libya, government had no choice but to sell its shareholding in CBZ Holdings and Rainbow Tourism Group to the Libyans to save the state’s oil assets.Political commentator Eldred Masunungure said Zimbabwe should not be blind to the country’s future needs by pursuing a short-term and shortsighted policy that would eventually prejudice the nation. Â Masunungure said: “Mortgaging anything, let alone national resources, must be a last resort for any country for the simple reason that it is in the national interest of any country. This is a short-term and shortsighted approach to deal with the unity government’s immediate problems. “I think mortgaging any resource undermines national interest. This plan of mortgaging resources won’t deal with long-term generational inequity because we will be prejudicing future generations. Clearly this exhibits desperation on the part of government. We should not be blind to tomorrow’s needs so that we can satisfy today’s wants and needs.”Government is said to have inked a cautioned Memorandum of Understanding with the Eximbank of China (Eximbank) for the platinum-backed US$5 billion loan on condition of explicit legal documentation and declaration of the obligations of the Chinese.In the latest deal, Zimbabwe would get US$5 billion from Eximbank of China and in return the Chinese will get 50% equity in a US$40 billion platinum concession without paying anything.The US$5 billion would be converted into equity for the Chinese, although it falls US$10 billion short of the total value of their shareholding.Analysts argued that since the platinum concession is worth about US$40 billion, this means the Chinese would collect US$20 billion out of their 50% equity– a whopping US$15 billion profit – at the end of the transaction.Experts fear that Zimbabwe is securing lines of credit from cash-rich nations with national resources to buoy the economy.Biti denies entering into any such deal with the Chinese, but analysts are not buying the official line saying this could be a face-saving denial by the minister, a key opposition official, once opposed to mortgaging of national resources.Zimbabwe has more than 40 different types of precious minerals which make the country potentially one of the richest in Africa.China is making forays in Africa’s resources sector but Zambia’s opposition accuses the Asian powerhouse of a poor safety record and paying workers low wages.
BY CHRIS MURONZI
