The Herald (Harare)

24 May 2012

Zimbabwe: Council Risks Losing Chinese Loan

HARARE City Council risks losing the US$145 million loan from the Chinese Import and Export Bank over Government's failure to pay interest on a loan advanced to the Zimbabwe Iron and Steel Industries, now NewZim Steel, in 1997. Once released, the loan is expected to boost water production and improve sewer management.

But town clerk Dr Tendai Mahachi insists the loan is not under threat.

"We are taking up the loan. By June we will have accessed the loan," he said.

Asked how the city was going to convince the Chinese to release the loan in the absence of a settlement on the existing debt, Dr Mahachi said council was capable of "taking care of its own issues".

Sources indicated the city has set aside US$7 million towards paying the US$13 million insurance cover demanded by Sinosure -- the Chinese company that provides insurance to such loans.

Dr Mahachi did not want to commit himself on the figures but indicated there were partners willing to pay the insurance fees.

The bank wants the Zisco Steel loan paid before Harare can access the water and sanitation upgrading loan.

Harare Mayor Muchadeyi Masunda said he discussed the loan issue with outgoing Chinese ambassador Xin Shunkang when they met recently at Town House.

He said the bank was insisting on an insurance to be paid by both City of Harare and Government "in order to secure the repayment of the loan of US$145 million".

Mr Masunda said even Zimbabwe's "all weather friends" had become jittery in their business dealings "with us largely because of the perceived risks which are peculiar to Zimbabwe".

He urged political leaders to desist from using language that frightens international lenders "who then end up loading normal loan facilities with onerous insurance cover premiums".

Available information shows that the loan deal was structured in 2009 under the 421 scheme, which provides commercial loans to friendly countries.

The Chinese government approved the loan in October last year with a pre-condition that the loan has to be taken up before September this year.

If it receives the money, Harare will be able to recycle all its wastewater and plug all water loses.

Harare loses up to 40 percent of treated water on its 6000km water reticulation pipeline.

Only 40 percent of Harare residents have access to safe drinking water everyday while 30 percent have access to safe water for three to five days a week.

Twenty percent have water for between one and two days while 10 percent rely on boreholes and unprotected wells.

Harare has over three million residents but supplies water to four and half million people including those in Chitungwiza, Ruwa, Epworth and Norton.

The extent of water problems in Harare were shown in 2008 to 2009 when a cholera outbreak claimed 4000 lives with over 100 000 cases of cholera recorded.

Observers say Finance Minister Tendai Biti should ensure the Zisco Steel loan is paid to unlock release of the Harare loan. Minister Biti and President of the China Exim Bank signed the loan agreement in March.

"If Zimbabwe fails to take up the loan by September, it will lose out," said a source.

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