BY BLESSED MHLANGA/Kuda Chideme
PRESIDENT Emmerson Mnangagwa’s government could be mortgaging the country’s diamond deposits to Botswana, which has offered the struggling economy a US$500 million bailout backed by diamonds and a further one billion pula bailout package for the private sector, months after being spurned by South Africa.
Officially opening the inaugural session of the Zimbabwe-Botswana Bi-National Commission in Harare yesterday, Foreign Affairs and International Trade ministry secretary Joe Manzou confirmed the two major deals, which could throw the already over-indebted Zimbabwe deeper into debt.
Previously, the cash-strapped and investment-hungry country has entered into several similar arrangements with China and Russia, which have doled out arms and millions in loans to Harare in a series of murky deals in return for unrestricted access to the country’s vast platinum and diamond deposits.
“Zimbabwe is also appreciative of the US$500 million diamond-backed facility offered by Botswana. I also urge this meeting of officials to work in earnest to ensure that all outstanding issues relating to this facility are finalised,” he said.
The Botswana US$500 million package, which will be backed by the Chiadzwa diamonds, is still murky and will be finalised during the two-day bi-national commission between the two countries.
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The deal marks an improvement in relations between the two neighbouring countries, which had experienced years of deteriorating diplomatic relations during the tenure of former presidents Robert Mugabe and Ian Khama.
Khama was the only African leader who would stand to challenge Mugabe’s transgressions.
“I wish to extend my gratitude to the support extended to Zimbabwe, by Botswana, as our country embarks on a development trajectory under the new dispensation … Zimbabwe welcomes with much appreciation that Botswana proposed a P1 billion credit line facility in support of the Zimbabwe private sector,” Manzou said.
The loan facility will be extended directly to the private sector for retooling and recapitalisation.
Economist Eddie Cross said Zimbabwe did not need to get the loan facility backed by diamonds, saying it was equal to mortgaging the future of the country and could push the sector into losses.
“We are mortgaging our future and we should not be doing that. I don’t think we are short of foreign currency to the point of wanting to mortgage our future, because we are going to get a return which is less than the market rate and it’s not necessary,” he said.
Cross said Zimbabwe was better off raising the $500 million from direct sales of its diamonds, instead of getting the loan.
“This shows that we have no proper commercial control of the diamond market. They should look at Botswana, they have proper controls and they have an effective market which they sell their diamonds and get fair value, which we could do. In my view, this is retrogressive,” he said.
Botswana’s International Affairs and Co-operation permanent secretary Gaeimelwe Goitsemang confirmed the deal, saying his country had a massive interest in partnering Zimbabwe in enhancing its diamond industry.
“Both our countries are experiencing high levels of unemployment. Zimbabwe has incorporated vocational training in its curriculum, making it easy for your people to be resourceful. This is something we can learn from Zimbabwe,” he said.
“… Botswana has the expertise in the diamond industry. Over the years, we have even started the process of diamond beneficiation to ensure that we develop local skills in the industry. We can share our experiences to help Zimbabwe develop her own industry.”
Former Finance minister Tendai Biti said the money, which is equivalent to $100 million, was a drop in the ocean for a country which needs nearly $2 billion to retool and capacitate its industry.
“That’s a drop in the ocean. That is absolutely nothing. The industry itself needs about $2 billion to retool,” he said, adding money alone would not save the country’s economy because there were a lot of micro-economic fundamentals that government needed to get right.
“In any event, it’s not about the money. Do we have the right micro-economic fundamentals, a decent exchange rate? There is chaos with the situation of the RTGS$ [real time gross settlement dollar]. The statutory instrument shows that it’s a virtual currency and the politics is just not right, so you can pour money, but that won’t change anything,” he said.
Owing to the political uncertainty at home and indebtedness, the country has been struggling to get badly needed lines of credit from international financial institutions and is now turning to its neighbours for help.
The United Kingdom and European Union have demanded political and economic reforms as a prerequisite before they can extend lines of credit to Mnangagwa’s administration.
Confederation of Zimbabwe Industries president Sifelani Jabangwe said the loan could have a significant impact on industry and the economy by boosting the depleted nostro accounts, adding that the money would go a long way to help retool small businesses.
“It will boost the nostro accounts and provide capital for retooling. This will significantly help business that require around US$500 000 and below to retool and ramp up production and productivity,” he said.
Since coming into office, Mnangagwa has been in drive to attract the much-needed foreign direct investment and loans to capacitate the country’s ailing industry.
Zimbabwe’s external debt currently stands in excess of $10 billion, presenting a massive setback on the economy.
Apart from what have been coined mega deals and commitments to invest, the Mnangagwa administration has not been able to record meaningful economic traction.