Bloomberg/Waldo Swiegers

Economy

Zimbabwe secures $500 million on a mine that doesn’t exist

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The mine, for which Afreximbank is arranging funding, is struggling to attract financiers because of the interest held by the military’s Zimbabwe Defence Industries.

Thursday 23, May 2019

(Bloomberg) --The collateral for African Export-Import Bank’s (Afreximbank) $500 million loan to Zimbabwe is a mine that hasn’t been dug yet.

The loan, which will be paid over four years when production starts, is backed by a mine that Great Dyke Investments, a venture between Russian investors and the Zimbabwean military, plans to build at a cost of $4 billion.

Short of foreign currency, fuel and medicine and battling the highest inflation since 2008, Zimbabwe is mortgaging its mineral wealth in exchange for foreign currency.

Zimbabwe secured the $500 million loan, the origin and terms of which were not disclosed after businesses complained that the interbank currency market instituted in February was not functional because there weren’t enough dollars to meet their needs.

The RTGS$, a quasi-currency that is not traded outside Zimbabwe, is exchanged on the market, the government abandoned its own currency, the Zimbabwe dollar, in 2009 after a bout of hyperinflation.

Afreximbank, which is based in Cairo and is partially owned by African governments, has lent to Zimbabwe before. In addition to the gold-backed loan it extended a $600 million line of credit to the country in 2017.

While the country is mired in an economic crisis, it has the world’s third-biggest platinum group metals deposits and abundant reserves of gold, iron ore, diamonds and lithium. Zimbabwe also has some of the most developed infrastructure in Africa and one of the region’s best-educated work forces.

 

TAGS : Afreximbank, Zimbabwe Defence Industries, RTGS$, mineral wealth, President Emmerson Mnangagwa, Mthuli Ncube

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