Mthuli Ncube asked why Zimbabwe pledged platinum worth US$52 billion to China for a US$200 million loan

Zimbabwe Finance Minister Mthuli Ncube was on Wednesday questioned why Zimbabwe pledged platinum worth US$52 billion today to secure a loan for only US$200 million from China more than a decade ago.

He was asked by Citizens Coalition for Change deputy president Tendai Biti how it was possible that a government could do so such a thing?

Ncube said the arrangement, where Zimbabwe pledged 26 million ounces of platinum to secure a US$200 million loan for the agricultural mechanisation programme, was reached in 2006 but as Finance Minister he only hoped that China would play fair.

“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,” Ncube said.

“That is what I said at the end that this arrangement is subject to proper resource evaluation and the current prices that he mentioned matter.  We will look into it to ensure that the lender is dealt with fairly for their good gesture while the debtor, who is ourselves, is adequately treated the right way in this regard.”

The average price of platinum in 2006 was US$1 142.40 which means that even then, the platinum pledged was valued at US$29.7 billion.

Even at the lowest price for that year, which was US$982, the deal would have been worth US$25.5 billion.

Q & A:

HON. BITI:  I have got two questions to the esteemed Minister.  You said that the amounts we owe to China are about US$1.7b but your mathematics is not adding up because you said total indebtedness to China was US$2.7b and you have only paid US$152m.  So if you subtract US$152m from US$2.7b, it does not give you US$1.7b but it is about 2.6b.

My substantive question however pertains to the loan you referred to of 2006 which was for US$200m.  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?

HON. PROF. M. NCUBE:  This 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.  That is what I said at the end that this arrangement is subject to proper resource evaluation and the current prices that he mentioned matter.  We will look into it to ensure that the lender is dealt with fairly for their good gesture while the debtor, who is ourselves, is adequately treated the right way in this regard.  I thank you.

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