By Correspondent
Zimbabwe and other developing countries now owe China an estimated US$1.1 trillion according to AidData.
“More than 80% of China’s loans are to countries experiencing financial distress”, it says.
Zimbabwe’s own debt nearly totals US$3 billion according to the Ministry of Finance.
Despite this, China rarely agrees to loan forgiveness or principle reduction.
Instead, it prefers to negotiate longer repayment plans on a case-by-case basis.
The Loan That Vanished
That has been the case with Harare’s 2013 US$144 million loan from China Exim Bank to overhaul the city’s water treatment network.
China Machinery Engineering Corporation (CMEC) was the implementing entity.
Two decades after acquiring it Council is struggling to repay it and has since structured a plan for residents to repay it through a monthly US$1 water levy.
Even worse for residents is how the water situation has been getting worse.
A Useless Loan
In 2005, the city produced around 600 megaliters each day.
This translates to 600 million liters of water.
However, by 2008 production had dropped drastically to 400 megaliters.
Currently Harare, which also provides water for Chitungwiza and Norton, produces 350 megaliters per day.
This creates a huge shortfall, around 1350 mega litres.
The end-result is a water rationing system which means some suburbs spend a full week with no water.
It is on top of this scenario that Harare Council has imposed a new water levy.
Working Around The Deal
The China Exim Bank water loan had an 11-year repayment term with a 4-year grace period and variable interest set at roughly 3.5%.
Harare has already defaulted and even abused part of the money.
Of the US$144 million, Council spent US$8 million on 25 luxury vehicles.
It claimed the Amarok vehicles were necessary for service delivery, but the lender disagreed.
By 2017, only half the loan had been released, and disbursements remained frozen through 2020.
An Adamant Mayor
However, Harare Mayor Jacob Mafume is adamant that they did their part.
“By and large, the equipment that was bought is there for anyone to go and see.
“And the good thing is that the new pumps and the old pumps, you can see the difference in performance,” he says.
“Look at the old pumps, they look like they can explode at any time.
“So the work that the Chinese did on the plant speaks for itself.”
However, the abandonment of the project midway through means water remains a challenge.
Zimbabwe now owes China Exim Bank more than US$260 million in arrears spanning numerous sectors, from telecommunications to airports to defense.
Without any new debt payment plan it means that Harare, Norton and Chitungwiza residents will have water problems for a very long time.
