3 March 2010

Zimbabwe: HIPC - Wrong Prescription for Zim Debt Management

Harare — HIGHLY Indebted Poor Country status is not the answer to the Zimbabwe debt problem.

Zimbabwe is not Haiti.

The country does not suffer from inherent incapacity that would require outside management of its resources for it to get out of the debt, which was exogenously induced.

For a start, Zimbabwe has much-valued assets. The modern industrial revolution added more than mere gold to its treasure trove of mineral riches.

Zimbabwe has diamonds, platinum and chrome -- minerals that feature among the creme-de-la-creme of international mineral Olympics. Zimbabwe also has coal, methane, iron ore, limestone, lithium and a bevy of other minerals in abundance.

Add to these mineral resources, the fertile, well-watered soils that can support flourishing agro-industrial activity.

Top this all with one of Africa's most developed human resources base that is a product of post-independence's educational policy.

Be wary of Spartans bearing gift gourds

With all these endowments and capacity, I am at loss as to how any self-respecting Zimbabwean could ever think of surrendering the salvation of his/her country to any foreigner, no matter his/her professed intentions to assist.

In any case, the last time the Zimbabwe Government ostensibly listened to well-meaning advisors from the think tanks of the Bretton Woods institutions saw the country adopt the Economic Structural Adjustment Programme with all its disastrous consequences.

The needless retrenchment of the state surely brought about economic calamity.

For example, the country's agricultural marketing systems that had gainfully supported settler nationalist farming went on to prove itself very successful in nurturing post-independent rural farmers into the cash economy.

The new Government spiced it all by also extending input subsidies to these once marginalised farmers.

Productivity shot up. Hunger at the basic unity of the family was banished. The country won international plaudits for this all-important achievement.

National granaries bulged to bursting levels creating the curse of riches, which is much preferred to the menace of famine.

Europe's Common Agricultural Policy and its mountains of subsidised food stocks know that only too well.

To add to the virtue, commercial banks followed grain and produce marketing centres that were opening depots all over the land.

Is there any better experience of freedom than to hold a bank account for the first time especially in an African rural area?

Alas all this went up in the smoke with Esap, as it financially disenfranchised the new account holders.

How anybody could rate that as progress under expert advice from Washington, London and Paris is a matter of gullible wonderment.

And behold, the same mandarins of the World Bank expertise now hail the Malawi food miracle whose origins are from pre-Esap Zimbabwe.

All I am saying is, don't we ever learn to be wary of expertise proffered by those who hail from afar? Blind faith in them should be avoided like a plague.

They will retreat to the comforts of their foreign think tank habitats, while we remain to grapple with the fall out from their ill advice.

Of course, the World Bank and IMF are changing. They are slowly transforming to the new global political reality of the seismic shift from G7 to G20.

Diversified capital markets and resources and the top dollar

The plight of the Zimbabwe debt comes at the most propitious time for the country. The global capital markets have diversified beyond traditional economic co-operating partners. Shanghai, Hong Kong, Riyadh, Mumbai, Sao Paulo, Seoul are all there to complement or compete with New York, London, Paris, Frankfurt and Rome.

With so much choice, why go for a particular tailor-made solution that suits one set of capital markets?

We have always been taught the virtues of free trade and open markets. Now the student should advise the teacher to abide by his lessons.

I bet there are other lenders who can extend credit without the onerous conditions and the loss of control that comes with HIPC!

The emergent economies of China, India, Brazil, Indonesia etc are all operating full throttle. This translates into an unprecedented resource boom and boon to Africa, the continent of resources.

Ask the Aussies from down under

Australia has shown the way. First with Japan, now with China and India, it has plied its bountiful resources into fabulous wealth for its populace.

Our mandarins are spending a lot of time with untried if pretentious do-gooders for recommendations. My earnest advice is that we can certainly do much better huddling with Australian resource consultants than this other lot for they have proved very adept at wringing every dollar they can from the Chinese resource buyers.

By the same token we can also directly approach the Asian resource buyers with the promise of competitive offers that frees from the price gauging Aussies.

For the billions, that are the underlying asset that is Zimbabwe, which some would like to be a pawn for HIPC debt pittance, we can handsomely pay for such expertise.

It will leave us smiling in riches while we are solidly in control of our economy and firmly in charge of our national destiny.

Also, let it be stated that HIPC is also a resource for debt solution. The rider is that the Paris Club creditors would run the show. And the issue here is that the pyramid is standing on its apex. Zimbabwe and its Zimbabweans is the base of that pyramid. Let's respect the natural order.

Home-grown instances of resource for dollars

The resource-for-dollar route is not novel to Zimbabwe. The investment by the behemoth that is the Chinese tobacco industry as of 2004 that led to burgeoning contract in tobacco production is a result of resource for capital negotiations. As ambassador I initiated that move.

The late Vice President Muzenda embraced and helped push the initiative during his treatment visits to Beijing.

The outcome is that China moved down the value chain of mere buying of the country's leaf tobacco to actual supporting of the new farmers. Western banks in Zimbabwe had to abandon their boycott of the new farmer in the face of new and unexpected competition and also begin to fund contract farmers.

The nation benefited from the revival of this all important export cash sector. Similarly, another initiative from the same quarters saw the Chinese enter the Zimbabwe platinum industry.

The offer to them of the platinum mineral rights at Selous unlocked the $300 million credit line from Beijing. Interestingly, the mineral rights were bought in a non-cash transaction from Australian platinum resource miner Implats.

They were paid US$150 million for only 50 million ounces of platinum reserve. In consideration, they got that sum's worth of affirmative action shares as duly acknowledged by the Sydney Stock Exchange declaration of the Implats shareholders.

The result intended or otherwise was to undermine a much higher Chinese offer for the same mineral rights which was originally calculated on the net present value of the actual reserve of the offer.

In all this, a glaring irony appeared. Implats made the Zimbabwe Government buy its own resources.

You may recall that as of 1933, the mineral belonged to Government. They had got the same asset courtesy of a license from the Mining Affairs Board.

I can assure you that all they paid was a token stamp fee. I take it that it is common understanding that the platinum was put in the ground millions of years ago through geological formation. It was to be enjoyed by the people with the good fortunes of occupying that territory as a nation, namely Zimbabweans.

The only value Implats added to this very rewarding transaction was exploration. For that they sell the asset back to the owner for the princely sum of US$150 million.

David Livingstone was not an astute businessman. He could have claimed similar value for the binoculars that sighted the Victoria Falls in addition to staking corporate ownership to the invaluable tourist asset.

Most revealing is the accounting paradox that arose from the value Implats got from a mere 50 millions ounces of platinum mineral rights.

Can you imagine the bonanza that would accrue to Minister Biti's coffers if Implats and other mineral resource giants would pay for their claimed but unused assets of more than 2 000 million platinum ounces?

How about more proceeds from other mineral rights for gold, diamonds, chrome, etc?

For information, the stating of the Implats mineral rights in their Sydney Stock Exchange declaration is repeated on the London, Toronto, New York and Johannesburg bourses.

If mineral rights can be entered on account books of Implats and Anglo-American plc, it surely can be reflected on Minister Biti's account books.

Before he knows it, he has used resources for debt management and indeed even more pleasing, for development.

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