If the money is repaid, the suspension of the line of credit would be lifted, said Young Chul Baik, honorary consulate of the Republic of Zimbabwe in Seoul.
“I arranged the US$5 million facility. Korea supplied tractors and Reserve Bank of Zimbabwe paid US$2,2 million and the US$2,8 million was not paid, meaning default,” he said, adding that the Korean government has suspended credit lines to Zimbabwe.
“Minister Biti must pay, but he is against what (Reserve Bank of Zimbabwe governor) Gideon Gono had done.
“That is why he didn’t pay, even after the Insurance Corporation of Korea announced that they were promised payment. If you pay the US$2,8 million, they will give you US$50 million immediately,” said Baik, who is also the chairman of Taesung Chemical Co. Ltd.
RBZ embarked on a farm mechanisation programme in 2007 to boost agricultural production as part of its quasi-fiscal activities.
The quasi-fiscal activities were stopped in 2009 when an amended legislation governing the activities of the RBZ directed it to concentrate on its core business.
Some of the equipment bought under the farm mechanisation programme was auctioned to offset debts after those who were owed money by RBZ obtained writs of execution.
According to the Trade Insurance Act, an insurance arm, K-sure, was set up as an official export credit agency to promote Korea’s exports, overseas investment and other businesses by providing credit insurances and guarantees.
Korea’s K-sure operates under the ministry of Knowledge and Economy.
In July RBZ announced that it was disposing of its shareholding in seven companies.
“According to the MoU (Memorandum of Understanding) they must approach me, but they didn’t,” Baik said.
Baik said he had written letters to the RBZ committee on disposal and Gono asking for permission to identify a local partner he can work with.
“Without an agreement with me, that project will not go anywhere because Zimbabwe does not have any technical expertise,” Baik said.
He said the shareholders injected US$12 million at inception. He said the project has been turned into a white elephant since it is not operating.
“Since the end of 2007 there has been no production. It used to produce, but the Reserve Bank took the diesel and didn’t pay,” he said.
“Now, it is four years no payment: where is the working capital?
“If we are not operating, you can imagine the cost of maintenance, huge maintenance costs,” he said.
“One of the bidders came to me because they needed technical support. I asked the buyer, do you have money? He said he does not have and I asked, how are you going to do it and he said once he gets support from me they are going to get financing from the bank,” Baik said.
Baik said he told the prospective investor to look for money to repay the loan since the project is a viable long-term venture, which can only declare a dividend in 10 years.
“It is a good project, the only one in Africa and once we have done well we can export technical expertise.”