11 April 2014

Zimbabwe: China Fears Zimbabwe Risk

CHINA is baulking on providing a rescue package through structured deals to President Robert Mugabe's government in the aftermath of last year's controversial general elections, largely because of the country's high political risk profile and the aging Zanu PF leader's succession problems, the Zimbabwe Independent learnt this week.

Although Finance minister Patrick Chinamasa in February -- following his visit to Beijing in January -- said Zimbabwe was on the verge of concluding a "comprehensive financial aid package" with China, informed sources said the Chinese are handling the issue cautiously in line with their risk-averse approach, except where secure energy and natural resources, as well as access to big new markets are concerned.

The sources said although China has been giving Zimbabwe donations and loans for infrastructure projects, it was unwilling to provide a bailout largely because of the country's political risk complications which governments and businesses face as a result of political and policy decisions, including environment changes that affect the economy.

"China will continue to help Zimbabwe in its own way, but it will not provide an economic rescue package or bailout largely because it's worried about the country's political risk associated with Mugabe's age and health complications, as well as his succession issues," a senior government official said.

"Remember Zanu provincial chairpersons were in 2012 told during their visit to Beijing where they received ideological and mass mobilisation training from the Communist Party of China (CPC) before the general elections that the party must embrace change or die."

The same message was given to Zanu PF officials who visited China recently. A top Zanu PF official who was part of the delegation told Zimbabwe Independent this week: "The CPC officials we met were surprisingly very candid with us. They told us in no uncertain terms that due to the political risk of the country there was no way they would give Zimbabwe the billions it urgently requires.

"They said although the country was considered to be generally peaceful, there were worrying issues that concern them which they urged us to deal with as soon as possible.

"The president's age was a major point of anxiety for them and his continued hold on power when he should now be handing it over to a younger and energetic successor probably at the party's congress in December.

"What makes it worse for us is that there is no succession plan on the table and debate on the issue has effectively been banned. If we are to move forward as a country, we need to deal with this succession issue, and the forthcoming congress in December provides an opportunity for that."

The CPC, which has been ruling since the end of the civil war in 1949, renews its leadership once every decade. President Xi Jinping, then 58, replaced Hu Jintao as head of the CPC in November 2012, ushering in the fifth generation of leaders to take control of the world's second-biggest economy.

However, Mugabe only last week said he was not retiring anytime soon, claiming he still had unfinished business before stepping down, without stating what his new mission was.

At 90, he is currently the oldest African leader and the oldest president in the world. Israeli Prime Minister Shimon Perez is the oldest world leader at 91. Mugabe has ruled the country for 34 years and will be 94 if he finishes his current tenure before the 2018 general elections.

China has provided our Zimbabwe with donations such as food, fertilizer, and machinery worth millions of United States dollars, although it has balked on economic and financial bailouts.

It encourages its financial institutions to provide concessionary and commercial loans to Zimbabwe. Since 2009, China's Export-Import Bank (Exim Bank) has funded six projects in Zimbabwe, including the construction of the National Defence College, Harare Water Treatment project, medical equipment for hospitals, Victoria Falls Airport renovation, NetOne upgrading and expansion of the Kariba South Hydro Power Station, to the tune of US$820 million.

Founded in 1994, Exim Bank is a state institution solely owned by the Chinese government.

Efforts to get comment from Chinese ambassador to Zimbabwe Lin Lin yesterday were unsuccessful. However, as a matter of policy China does not provide budgetary support to other nations.

China's economic model in Africa and Latin America follows a mercantilist approach where state resources are used to underpin state-controlled business entities. This differs with the Western multi-national corporations approach.

Chinamasa in January visited Beijing and Shanghai hoping to secure US$10 billion to finance the ambitious ZimAsset blueprint, but came back home empty-handed.

Government sources say the Chinese told him they are only prepared to fund bankable infrastructure projects which have clear and workable business plans as they are worried about repayments. Zimbabwe, which has external debt arrears amounting to nearly US$11 billion, is struggling to repay Chinese and many other countries and financial institutions' loans.

"The Chinese told us that they could easily give us the US$10 billion or more through some structured deals if we want but the political situation and issues around the president's age and succession were worrying them," the Zanu PF official added. "They also said corruption in government and lack of serious action to address the problem is disturbing. Really, the ball is in our court."

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