Govt borrowed US$200m from China using assets worth US$52 billion
Government has failed to explain an outrageous deal it entered with China in which it borrowed US$200 million from the Asian country while collateralising an asset which in gross terms is worth more than US$52 billion.
On Wednesday, Finance Minister Mthuli Ncube told Parliament that there is a US$200 million farm mechanisation equipment facility signed on 13th October, 2006, through China-Exim Bank. The loan was collateralised by 26 million ounces of platinum.
This prompted former Finance Minister Tendai Biti to do a quick breakdown of the transaction. He found it irregular that the government would back such a loan with 26 million ounces of platinum worth, according to him, 52 billion.
“My substantive question however pertains to the loan you referred to of 2006 which was for US$200 million. So, the Government of Zimbabwe borrowed US$200m from China to purchase farm mechanisation equipment but you said this loan was collateralised by 26 million ounces of platinum,” Biti said.
“If you do rough mathematics, assuming the price of platinum for an ounce is US$2000, you are talking of US$52 billion for the 26m ounces.”
The outspoken Harare East legislator then asked: “How is it possible that the Government can borrow US$200 million from China and give an asset which in gross terms is US$52 billion?”
In a shocking admission, the treasury did not deny Biti’s observation, presumably because the deal happened 17 years ago when Herbert Murerwa was the Finance Minister.
Ncube frankly admitted the deal needed to be evaluated to ensure that the lender, in this case the government, is treated fairly.
“This arrangement was struck way back in October 2006, I think before the buoyant prices that you see in the PGM sector were available for us to enjoy. So, I think in a sense, he is requesting that some of these arrangements should be looked into given the high prices that are currently out there.
“Certainly, for me as the Finance Minister is something I would want to look at closely and see how best this can be structured so that a good will loan from China is dealt with and serviced properly on the back of a properly valued asset.
“That is what I said at the end that this arrangement is subject to proper resource evaluation and the current prices that he mentioned matter.
“We will look into it to ensure that the lender is dealt with fairly for their good gesture while the debtor, who is ourselves, is adequately treated the right way in this regard,” Ncube said.