Negotiations between Zimbabwe and Rand Merchant Bank (RMB) of South Africa for a $1-million loan facility have virtually collapsed after Harare failed to prove it was able to pay back, authoritative sources told independent news source ZimOnline on Thursday.
They said RMB also chickened out of the proposed loan deal because the bank was unhappy with the gold claims that Zimbabwe was offering as security.
“RMB turned down government’s request for a loan because of the security offered by the state,” said a source at the ministry of finance that together with the Reserve Bank of Zimbabwe (RBZ) took part in negotiations with the South African bank.
The source, who requested not to be named, added: “The bank was concerned with land seizures that have continued unabated with sometimes land where mines are located being taken. It was also unsettled by recently proposed mining laws that will see mining firms forced to shed off 51% ownership to the government and local business people.”
President Robert Mugabe’s government has said it will introduce new laws to force foreign-owned firms mining energy, minerals, platinum and diamonds to cede 25% shareholding to the state for free and to sell another 26% stake to the government over five years.
Foreign-owned firms mining gold, emeralds and other minerals will be required to cede 51% shareholding to the government and black-owned companies over a period ranging from two to seven years, according to the draft law that has caused anxiety among investors.
RMB spokesperson Peter Gent confirmed that the bank is not “currently” in loan negotiations with Harare, but would not disclose further details on the matter, citing client confidentiality.
Gent — whose RMB is reported to have also been involved in an advisory capacity in still-to-be-concluded negotiations for a $500-million loan from the South African government to Harare — said: “Rand Merchant Bank is not currently in any loan negotiations with the Zimbabwe government.
“For reasons of client confidentiality we are unable to provide further comment relating to this.”
Zimbabwe Finance Minister Herbert Murerwa said Harare is in discussion with several South African banks and indicated that RMB is among such banks. But Murerwa would not spell out progress on negotiations between the government and RMB, saying he could not do so “at this stage”.
“We are in contact but I cannot divulge more details at this stage,” the minister said.
Zimbabwe’s central bank and officials at RMB confirmed last September that they were in negotiations for a loan facility for Harare, but did not divulge details of their discussions or what the loan was intended to be used for.
However, ZimOnline revealed that Zimbabwe wanted to use the money to buy food and fuel in critical short supply in the country because there is no hard cash to pay foreign suppliers.
Zimbabwe is grappling an acute foreign currency and economic crisis that began in 1999 when the International Monetary Fund withdrew balance-of-payments support following differences with Mugabe over fiscal policy and other governance issues.
The crisis worsened after Mugabe launched his farm-seizure programme in 2000 that destabilised the agricultural sector, the country’s biggest employer and largest foreign currency earner. — ZimOnline