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Unveiling the secrecy surrounding resource-backed loans in Zimbabwe

In his latest low-key visit to China, Foreign Affairs and International Trade minister Fredrick Shava said Zimbabwe firmly supports the Belt and Road Initiative. 


TO realize the aspirations of Vision 2030, Zimbabwe needs to invest US$2 billion in infrastructure development in five consecutive years to close the infrastructure asset gap, a huge figure that the current government does not have. 

In his latest low-key visit to China, Foreign Affairs and International Trade minister Fredrick Shava said Zimbabwe firmly supports the Belt and Road Initiative

Through this initiative, China has been a willing but cautious financier of Zimbabwe’s infrastructure goals, committing development finance in the form of loans using natural resources as collateral. However, the ‘unchecked’ and ‘secretive’ lending and borrowing undermines recipient countries' national debt management strategy and leads to corruption. These, in turn, undermine developmental interventions as exemplified by the cases of Zambia, Ghana and Sri Lanka. 

Figures demonstrate that Zimbabwe has contracted approximately US$6.8 billion in resources for infrastructure loans for the last two decades; and US$2.6 billion is owed to China.  However, due to the secrecy of the loans, the figure might be higher. In response to debates and contestations surrounding the resource-for-infrastructure model, based on my research, I argue that the model as a whole should not be disregarded. This viewpoint is supported by the fact that China is financing Zimbabwe's needs rather than its own, hence the question should be how can Zimbabwe benefit from Chinese development finance? The findings of my research indicate that the resource for finance model presents Zimbabwe with an opportunity to access development finance which it previously did not have due to its acrimonious relations with Euro-North countries over bad governance issues.  However, Zimbabwe needs to build budgetary institutions, processes, and systems that enhance transparency and accountability and guard against corrupt practices.

Resource-for-infrastructure financing model

Resource-for-infrastructure loans are those provided to a government or State-owned enterprises where the repayment is either made directly in exchange for natural resources or from a natural-resource-related future income stream. The repayment is guaranteed by a natural-resource-related income stream; or a natural resource asset serves as collateral. Due to its limited ability to access development finance, particularly from Western lenders, Zimbabwe has been pursuing the resource-for-infrastructure loan model.  

In 2004, the China National Aero-Technology Import and Export Corporation provided US$110 million to Zimbabwe for rural electrification equipment. The loan was to be repaid with tobacco sales . In 2006, Zimbabwe contracted a US$200 million loan from China Eximbank for the purchase of agricultural equipment. The platinum deposits in Selous and Northfields reserves were given as collateral.  

In 2011, China Eximbank provided US$98 million to the Zimbabwe government to construct the National Defence College. The Zimbabwean government needed the aforementioned infrastructure for the modernization of its economy, the realization of national development goals, and the improvement of people's living standards in the country. However, the full details of the loans have not been made available to the parliament or the public and the country continues to drown in debt. 

Is it really Chinese debt trap diplomacy or something else?

Pro-Western scholars and policymakers perceive the resource-for-infrastructure financing model as carrying a higher risk and being more expensive than regular loans, as well as being a debt trap for African economies. This thesis has been validated by some of the pitfalls of the model, as it performs spectacularly when commodities do well when public finances are managed competently, and if policymakers keep an eye on the growing debt burden, as seen in the cases of Zambia, Ghana, and Sri Lanka

On the other side of the coin, the pro-Chinese narratives argue that the model has been perceived unfairly, especially when judged solely on the debt burden thesis. 

Rao Hongwei argued that "China’s lending to African countries is not a "debt trap" but an "economic pie" that benefits the local population.” Behind the "debt trap" cliché is an immoral attempt to sabotage the time-tested and dynamic partnership between China and Africa, deny China’s global efforts and contributions, and smear the international image of China".   

This thesis has been supported by the recent publication by the United Kingdom-based Debt Justice Organisation of a report that argues that African governments owe three times as much money to Western financiers as they do to China, and they pay double the interest. Angola, Cameroon, the Republic of Congo, Djibouti, Ethiopia, and Zambia are six of the 24 African countries with the highest debt payments, with Beijing responsible for more than 33%  of external debt payments.  

Resource-for-infrastructure financing in Zimbabwe

China, the world’s second-biggest economy and Zimbabwe’s ally, has for the past few years amassed financial muscle that has made it a major financial contributor in this model. However, the bane of the resource-for-finance model is its secrecy which manifests in insufficient accountability and transparency and often leads to corruption, unchecked debt burden, and bad deals that mortgage the country to the lenders.

This is epitomized by Finance minister Mthuli Ncube's revelation that on October 13, 2006, the government offered 26 million ounces of platinum worth nearly US$28,16 billion to secure a US$200 million farming mechanisation input loan from China. That means the Zimbabwean government offered collateral that is nearly 140 times the actual loan based on international spot prices at the time.

This is just one of many ‘‘unknown’’ loan deals signed between two governments. With the incessant macroeconomic challenges, the country will likely continue entering into resource-backed loans with lenders such as China. Shava has noted that Zimbabwe supports the Belt and Road Initiative, which is seen as a way to alleviate the country's infrastructure challenges.


As the analysis has shown, loans for infrastructure in exchange for resources mode of finance is shrouded in secrecy. While the development of infrastructure has undoubtedly improved the lives of millions of people, with improved roads and other hard infrastructure features, the study has also shown that the long-term shortfalls identified may far outweigh these immediate benefits. If the current problems—particularly those related to governance and debt sustainability—continue, they could lead to a continuation of the alarming inequality indices in the receiving countries. 

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