Mnangagwa govt hunts for $2bn funding

Mnangagwa govt hunts for $2bn funding
Published: 20 July 2018 (183 Views)
PRESIDENT Emmerson Mnangagwa's administration is frantically negotiating a critical US$2 billion bailout package with a top Chinese bank, the Industrial and Commercial Bank of China (ICBC), and other financial institutions in a desperate bid to ease the country's crippling liquidity crisis ahead of make-or-break elections on July 30, the Zimbabwe Independent can report.

Well-placed sources said this week top government officials have been holding talks with senior executives of Chinese banks and government to get a US$2 billion facility since Mnangagwa's visit to Beijing in April.

This followed the stalling on the Lima process to pay US$1,8 billion arrears to international financial institutions before securing US$2 billion in fresh funding.

Chinese President Xi Jinping and Mnangagwa agreed to establish "a comprehensive strategic partnership of cooperation" between the two countries, although Harare failed to secure US$1,5 billion liquidity support at the time due to the problems over Zimbabwe's US$160 million arears to China Exim Bank and China Export Credit Insurance Corporation (Sinosure), a state-funded entity which provides export credit.

"Talks are currently underway between Zimbabwean and Chinese authorities, as well as banks on a liquidity bailout," a senior Zimbabwean financial executive said.

"The negotiations mainly with a big Chinese commercial bank have been going on since Mnangagwa's visit to Beijing in April. Remember Zimbabwe wanted US$1,5 billion during that trip, but it didn't get the money because of Sinosure and arrears issues."

The Chinese have been saying for any new projects which need more loans from their side, they would consider Zimbabwe's ability to repay. Chinese banks and even insurance companies have their own terms for providing or giving guarantees for lines of credit, so this has been delaying issues, a source said.

Zimbabwe's total external debt overhang is officially estimated at close to US$12 billion, with close to US$200 million of the Chinese loans falling due this year alone.

"Zimbabwe has been looking at various options, including at the Bank of China and China Exim Bank, but they are currently focussed on a bailout deal with ICBC," a source said. "A team of officials from the Ministry of Finance and Reserve Bank of Zimbabwe is engaged with Chinese and bank officials on the issue. Afrexim (African Export Import Bank) is also involved in the deal."

Afrexim is expected to provide a guarantee to ICBC for the US$2 billion loan on behalf of Zimbabwe, which is the third largest shareholder in the continental lender after Nigeria and Egypt.

During Mnangagwa's visit, a solution was suggested on arrears through debt cancellation and closure on Sinosure issues, while talks about the bailout were given new impetus because of that.

Mnangagwa, however, managed to get infrastructure funding. He got US$1 billion for the expansion of Hwange Thermal Power Station's units 7 and 8; US$153 million for the Robert Gabriel Mugabe International Airport; US$71 for NetOne and the usual US$20 million given to visiting African leaders to use at their own discretion.
Zimbabwe desperately needs new funding to address the chronic liquidity crunch and cash crisis buffeting the economy. Hard currency shortages have seen the premium for the American dollar scaling close to 100% in recent weeks (US$1=1,80 RTGS at one point) against electronic bank and mobile transfers, particularly fuelled by the worsening foreign currency scarcity.

Inflows of funds from tobacco and gold receipts into the parallel market have also boosted the black market and attendant exchange rate volatility and distortions, as well as arbitrage. Tobacco and gold merchants are paid by government 70% in hard currency and 30% in RTGS (real time gross settlement); an electronic payment system. The Reserve Bank of Zimbabwe has reviewed upwards from 5% to 12,5% the export incentive scheme for tobacco growers for the 2018 marketing season. The 12,5% is paid in bond notes directly into tobacco growers' bank accounts on a monthly basis upon submission of tobacco sales data to the central bank by the Tobacco Industry and Marketing Board.

For the six months up to June, gold receipts were US$715 million, while tobacco exports reached US$184,3 million. Upon receiving the money, tobacco and gold dealers usually go to offload their hard currency on the black market to capitalise on money-spinning arbitrage opportunities. This fuels the underground or shadow economy and its associated currency market. Although government has considered looking for a bailout from financial institutions such as the Bank of China and Exim Bank of China, sources in the market said ICBC — the world's largest bank with total assets amounting to US$3,5 trillion ahead of JP Morgan and Deutsche Bank — has been their main hope.

This comes amid rising fears in government the liquidity crisis could damage Mnangagwa's electoral prospects in the critical elections. Latest opinion polls show Mnangagwa's main rival, MDC Alliance leader Nelson Chamisa's momentum has dramatically surged to within 3% — almost inside the margin of error — closer to him, with 20% of voters undecided; suggesting a neck-and-neck race and potential photo finish. China, an emerging economic powerhouse, has been at the forefront of rescuing Zimbabwe, a country battling to shaking off pariah state image after years of isolation under former president Robert Mugabe's disastrous rule.

Zimbabwe has turned to the Asian giant for political, financial and military support resulting in heightened levels of cooperation between the two countries in recent years after more than a decade of isolation from the West.

Trade between China and Zimbabwe grew to US$1,24 billion last year, double the figure in just four years. China has been Zimbabwe's top foreign investor for several years.

In 2013, Chinese investment to Zimbabwe topped US$600 million, making Zimbabwe one of the top destinations to receive Chinese investment that year.

Beijing has over the years doled out more than US$700 million in loans and grants to Harare and in exchange Harare has guaranteed unbridled access to its minerals resources and infrastructure projects.

Chinese companies have also largely enjoyed unfettered access to undertake lucrative energy and infrastructure projects in the country. This year alone, more than US$2 billion in tenders has been awarded to Chinese.

- the independent


You May Like These Videos


There are no comments.

Latest stories

Fresh bid to nullify Cyril Ramaphosa's ANC election

by City Press | 21 October 2018 | 65 Views

Chiwenga slams fake prophets

by Staff reporter | 21 October 2018 | 73 Views

Fuel shortages persist in Bulawayo

by Staff reporter | 21 October 2018 | 46 Views

Joel Luphahla's TelOne promoted to PSL

by Staff reporter | 21 October 2018 | 50 Views

Dynamos snatch late controversial winner

by Staff reporter | 21 October 2018 | 52 Views

How Mugabe survived assassination in Gutu

by Staff reporter | 21 October 2018 | 127 Views

Zimbabwe fuel crisis a result of leadership kwashiokor, says Chamisa

by Staff reporter | 21 October 2018 | 115 Views

'Mavhaire was a herdboy during liberation struggle'

by Staff reporter | 21 October 2018 | 95 Views

Mnangagwa warns black market currency speculators

by Staff reporter | 21 October 2018 | 96 Views

Zimbabwe bakers plot $4 per loaf

by Staff reporter | 21 October 2018 | 93 Views

Tackling the Zimbabwe black market

by President Emerson D. Mnangagwa | 21 October 2018 | 61 Views

Hefty fines for price hikes

by Staff reporter | 21 October 2018 | 62 Views

Black market dragnet targets bigwigs

by Staff reporter | 21 October 2018 | 56 Views

PHOTO: Zanu-PF buys fuel from black market

by Stephen Jakes | 21 October 2018 | 82 Views

The perils of trade protectionism

by Colls Ndlovu Financial Analyst | 21 October 2018 | 61 Views

Mnangagwa's lieutenants in political storms

by Staff reporter | 21 October 2018 | 93 Views

Tendai Biti always has something to say

by Staff reporter | 21 October 2018 | 76 Views

'Mthuli Ncube using 2% tax to reward Zanu-PF youths'

by Staff reporter | 21 October 2018 | 71 Views

Chiwenga's wife pours heart out

by Staff reporter | 21 October 2018 | 97 Views

Zimbabwe struggling with spike in fuel demand

by Staff reporter | 21 October 2018 | 58 Views

Chamisa mobbed by motorists in fuel queue

by Staff reporter | 21 October 2018 | 76 Views

MDC 'prostitute' battles for dear life at hospital, thigh vending goes south

by Simbarashe Sithole | 21 October 2018 | 163 Views

Godlwayo meets in Avoca for a developmental agenda

by Thulani Nkala | 21 October 2018 | 82 Views

Govt not introducing price controls - Industry Minister

by Staff Reporter | 21 October 2018 | 118 Views

Jonathan Moyo raps Modi for selling goods in US Dollar

by Stephen Jakes | 21 October 2018 | 132 Views

Security companies accused of stealing

by Stephen Jakes | 21 October 2018 | 97 Views

Mnangagwa not introducing price controls

by Staff reporter | 21 October 2018 | 91 Views

Prisoners seek spiritual cleansing

by Staff reporter | 21 October 2018 | 72 Views

Betting shops have sprouted across Zimbabwe

by Staff reporter | 21 October 2018 | 77 Views

When Cupid flew Modi to Zimbabwe

by Staff reporter | 21 October 2018 | 74 Views

RBZ in statutory reserve requirements U-turn

by Staff reporter | 21 October 2018 | 80 Views

WATCH: Bosso face troubled Bulawayo City

by Staff reporter | 21 October 2018 | 83 Views

Bulilima villagers resist relocation

by Staff reporter | 21 October 2018 | 53 Views

Mbonisi Gumbo of MRP gives his 2018 election analysis

by Thulani Nkala | 21 October 2018 | 90 Views

Zesa rules out load-shedding

by Staff reporter | 21 October 2018 | 62 Views

Family watches father's killing on WhatAapp

by Staff reporter | 21 October 2018 | 63 Views

Ex-Bosso player on his war exploits in Gwanda

by Staff reporter | 21 October 2018 | 79 Views