Happiness Zengeni and Martin Kadzere—
Landmark deals worth $4 billion signed between Zimbabwe and China on Tuesday will convert provisions of the Government’s economic blueprint, Zim-Asset, into programmes of action. The two nations signed 12 investment agreements covering different sectors of the economy. The deals include financing for the expansion of Hwange Power Station, construction of a new Parliament building and a pharmaceutical warehouse, expansion of a national fibre optic broadband project and provision of wildlife monitoring equipment.
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The signing of the agreements was witnessed by President Mugabe and his Chinese counterpart Xi Jinping, who arrived in Harare on Tuesday on a two-day State visit, leading a powerful delegation of about 200 people including senior Chinese government officials and representatives from the Communist Party of China.
Under the agreements, China will soon begin extending loans to Zimbabwe amounting to over $1,1 billion for the expansion of Hwange Power Station and TelOne’s broadband access project. “The loans will take effect in the first half of 2016,” Finance and Economic Development Minister Patrick Chinamasa said yesterday.
Minister Chinamasa signed two loan agreements for the expansion of Hwange Power Station and TelOne’s fibre optic project with chairperson of the China Eximbank Hu Xiaolian. With respect to Hwange, the Eximbank of China will extend a preferential buyer credit loan of $997 723 244,20 at a concessionary rate of 2 percent per annum over 20 years.
Sino-Hydro was contracted to undertake the project, expected to cost about $1,5 billion. On completion of the project, the plant will add 600 megawatts to the national grid, currently under pressure due to subdued production at the country’s main power stations. Zimbabwe is generating an average 900MW against peak demand of 2 200 megawatts due to low water levels at Kariba Hydro Power Station and recurrent faults at Hwange.
An amount of $98 617 482.19, also at a concessionary rate of 2 percent per annum over 20 years, will be extended to TelOne to finance backbone network and broadband project. Minister Chinamasa also said China had given Zimbabwe a grant of 400 million Chinese renmimbi ($65,5 million) for the construction of the new Parliament building, the NatPharm warehouse and other projects.
The agreements were also signed on Tuesday. Zimbabwe has, for over 15 years, been unable to secure long-term loans to fund infrastructure because it is in arrears with global lenders — the IMF and the World Bank. However, the multi-lateral institutions might resume financial support to Zimbabwe after a deal was struck with international creditors on how the country intends to repay its arrears.
Zimbabwe intends to clear its arrears to the three multinational institutions, the IMF, ($110 million), the World Bank ($1.15 billion) and the AfDB ($601 million) by the end of April 2016.
On the conclusion of an Avoidance of Double Taxation and Prevention of Fiscal Evasion Agreement between Zimbabwe and China, Minister Chinamasa said the pact would bring certainty on taxation of cross border income thereby enhancing investments between the two countries. It also promotes cooperation in tax administration.