China Eximbank provides $200 million buyer’s credit loan for Agricultural Supply Project (Linked to Record ID#72771)

Project narrative

On October 13, 2006, China Eximbank and the Government of Zimbabwe signed a $200 million buyer's credit loan (BCL) for an Agricultural Supply Project. The purpose of this project was to purchase inputs the country’s agriculture sector — including 387,000 tons of fertilizers, pesticides, agricultural tools and equipment, and irrigation equipment — that the Government of Zimbabwe was unable to purchase due to foreign currency shortages. The BCL carries the following terms: an 11 year maturity (final maturity date: 2017) and a 5 year grace period. China Eximbank allowed the Government of Zimbabwe to repay the loan with the proceeds from platinum mining revenues. The loan was collateralized against 26 million ounces of platinum from a mining concession involving the Zimbabwe Mining Development Corporation and Wanbao Mining (a Chinese company) in a 110 square kilometer area known as the Selous and Northfields Reserves. The loan’s amount outstanding (including principal, interest, and arrears) was $108,816,781.90 as of 2018 and $108,816,781.90 as of 2021. The first shipment of fertilizer (specifically Compound Types D, S, C, and L) from China was expected to arrive in Zimbabwe at the beginning of October 2006 to help farmers deal with crop shortages; however, it did not arrive in Zimbabwe until December 26, 2006. On December 21, 2006, the first batch of fertilizers arrived in Harare. This consignment was 22,000 tons of compound D fertilizers. One day later, on December 22, 2006, another 3.5 tons of urea exported from China to Zimbabwe arrived in Maputo, Mozambique, and 32,000 liters of dimethoate insecticide imported from China was being distributed into small bags to farmers for use. Then, on December 25, 2006, other agricultural chemicals exported from China were expected to also arrive in the Port of Durban, South Africa. On February 1, 2007, Samuel Muvuti, acting chief executive of the state-owned Zimbabwe Grain Marketing Board, announced that a second shipment of 13,000 tonnes of fertilizer procured through the $200 million loan was delivered to Zimbabwe via Mozambique from China- with 8,000 tonnes still in transit and 14,000 tonnes awaiting transportation at port in Mozambique with the goal of delivering the fertilizer from the port by mid-February 2007. A consignment of 1,000 more tractors and an assortment of other related farming implements worth $100 million was expected to arrive from China later in 2007. These agricultural implements included harvesters, irrigation pumps, disc harrows, planters, and electricity generators. The implements were ultimately shipped from China to Zimbabwe in November 2011. It appears that the Government of Zimbabwe may have also purchased 97 trucks with the proceeds from the China Eximbank loan. By July 2012, the Government of Zimbabwe had fallen into arrears and China Eximbank agreed to extend the grace period of the loan from 5 years to 8 years. This debt rescheduling agreement is captured via Record ID#72771. In August 2022, the loan became a source of debate and controversy within Zimbabwe's Parliament. A Member of Parliament (MP), Tendai Biti, posed the following question to Mthuli Ncube, Zimbabwe's Minister of Finance: 'So, Government of Zimbabwe borrowed US$200m from China to purchase farm mechanisation equipment but you said this loan was collateralised by 26m ounces of platinum. If you do rough mathematics, assuming the price of platinum for an ounce is US$2000, you are talking of US$52b for the 26m ounces. How is it possible that the Government can borrow US$200m from China and give an asset which in gross terms is US$52b? Mthuli Ncube responded that "[t]his arrangement was struck way back in October 2006, I think before the buoyant prices that you see in the PGM sector were available for us to enjoy. So, I think in a sense, he is requesting that some of these arrangements should be looked into given the high prices that are currently out there. Certainly, for me as the Finance Minister is something I would want to look at closely and see how best this can be structured so that a good will loan from China is dealt with and serviced properly on the back of a properly valued asset.'