Securitise the country's minerals- Gono

Securitise the country's minerals- Gono
Published: 29 January 2012 (709 Views)
Reserve Bank of Zimbabwe (RBZ) Governor Dr Gideon Gono has called for the securitisation of the country's natural resources as a way of addressing external debt as opposed to adopting the Highly Indebted Poor Country (HIPC) status.

Securitisation is literally defined as the transformation or conversion of an illiquid asset into a liquid asset or marketable securities, typically for the purpose of raising cash.

Local technocrats are at loggerheads over the best method that could be adopted to settle the country's humongous debt to various multilateral financial institutions estimated at US$7,3 billion.

Some market watchers, including Finance Minister Mr Tendau Biti, have called on Government to declare the country a HIPC so that its debt could be rescheduled or cancelled.

However, the initiative has been fiercely shot down by other commentators such as Professor Jonathan Moyo, who feel Zimbabwe is "too rich to be poor" given the over 60 different mineral types available in the country.

Dr Gono waded into the contentious issue last week during the Confederation of Zimbabwe Industries (CZI) seminar in Harare, saying the HIPC status was not in sync with country's potential if the natural resources were to be leveraged as has been done by other African countries such as Angola and the DRC.

"I don't support the view that the country should declare itself a Highly Indebted Poor Country (HIPC) as other people are suggesting," said Dr Gono.

"Zimbabwe is blessed with an abundance of natural resources. But having natural resources is not enough; we need to securitise our assets so that we benefit from them.

"Some people say we can't talk about the country's natural resources because they are underground and no one knows their value; I differ with those people because our banks can valuate the natural resources and we can then use the estimated figures to source for funds and pay off our debt.

"Banks do not only lend on the basis of a vision, but also the potential. I believe it is reasonable and practical for us as a country to receive incredible amounts of money on the basis of what we have underground.

"Angola has leveraged its natural resource — oil — and it (oil) has become a catalyst for reconstruction; Iraq has also done the same with its oil, so has the DRC, which has attracted about US$8 billion by leveraging its resources.

"Why should we go with a begging bowl to others if we can do it alone? If all those countries did it, why can't we?" asked Dr Gono.

He added that the biggest danger associated with declaring a country an HIPC was that in most cases, countries that have had their debts forgiven tend to celebrate "new found freedom" and forget what had plunged them into the problems.

"Countries that went for HIPC ended up getting into a deeper hole than they initially were and that is the kind of thing we want to avoid," said Dr Gono.

CZI president Joseph Kanyekanye recently intimated that the country's huge debt was an impediment to the country's chances of accessing foreign funds, which are badly required at the moment to increase capacity utilisation in the manufacturing sector.

He said there was need to deal "once and for all" with the debt problem so that the country moves forward.

"We strongly believe that our nation needs to deal with its national debt if we can begin to regain international confidence and creditworthiness.

"It is imperative that the issue of debt be resolved (urgently)," said Mr Kanyekanye.

Economic analysts have posited that attracting foreign funding is imperative for the economy as it seeks to boost the manufacturing sector, whose capacity utilisation was pegged at 57,2 percent last year.

The manufacturing sector is locked in a battle against imports to win a "price sensitive market".

The situation has been compounded by hamstrung financial services sector that is fighting for relevance in an illiquid market.

- zimpapers

Tags: Gono, Securitse,
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