09-14-2018, 10:23 PM
*** 15-Sep-18 World View -- Zambia denies defaulting on infrastructure loans from China
This morning's key headlines from GenerationalDynamics.com
****
**** Zambia denies defaulting on infrastructure loans from China
****
![[Image: g180914b.jpg]](http://Media.GenerationalDynamics.com/ww2010/g180914b.jpg)
Zambia's finance minister, Margaret Mwanakatwe (Lusaka Times)
Several days ago, reported that Zambia is negotiating with China
over a possible takeover of the
country's electricity company, ZEWASCO, after defaulting on loan
repayment from a previous loan. That report was based on a news story
from Kenya.
There have actually been numerous news stories in the last couple of
weeks claiming that Zambia has fallen victim a China "debt trap," and
is being required to give not only ZEWASCO, but also Zambia's Kenneth
Kaunda International Airport [KKIA].
In addition, a subscriber-only newsletter called Africa Confidential
has published reports detailing embezzlement by Zambian officials, led
by President Edgar Chagwa Lungu.
Zambia officials are claiming that the news stories, including those
in Africa Confidential, are "fake news," that there is no debt trap,
and Zambia will have no problem making payments to China.
Zambia's finance minister, Margaret Mwanakatwe, issued a statement on
Friday:
The problem with Mwanakatwe's protestations is that she's unable to
provide any evidence to support them, because the entire relationship
between Zambia and China, including all contracts, is completely
secret. So if there's corruption and embezzlement going on, as Africa
Confidential claims, then Mwanakatwe is unable to deny those claims.
In situations like this, there's a test that I always like to apply,
namely to ask what the politician would say if all the accusations are
true. For example, if a politician is charged with murder, and he
says, "I didn't do it," then you could ask what he would say if he
did, and would say "I didn't do it." In other words, the politician
would say the same thing whether he committed murder or not. That
doesn't mean he did it, but it does show that everything that comes
out of the politician's mouth is 100% worthless, because he'd say
exactly the same thing under all circumstands.
So let's apply this test to Margaret Mwanakatwe. Suppose all the
charges of debt trap and embezzlement are true. What would Mwanakatwe
say? The answer is that she would issue a statement exactly like the
one that she did issue. In fact, the statement is filled with
statements that are empty claims because the details are secret,
giving me the (unprovable) feeling that the statement is an act of
desperation.
This has now become a major international scandal -- not in the West,
but in Africa. Many African governments are now facing embarrassing
questions about revealing the terms of their contracts with China, and
about why interest rates are so how, and why default terms are so
harsh. Officials will also be asked a lot more questions about
whether they're skimming China's loan money off the top -- something
they could easily do since all the terms of the contracts are kept
secret. Lusaka Times (Zambia) and Zambia Reports and Lusaka Times and VOA
****
**** Zambia faces long term corruption concerns
****
In June, the Geneva-based NGO, Global Fund to fight Aids, Tuberculosis
and Malaria, suspended $300 million in health funding to Zambia
because of alleged corruption in Zambia's health ministry.
Previously, Sweden and the Netherlands stopped health aid and the EU
halted road-building funds.
Zambia's story is a familiar one. Zambia made huge amounts of money
from copper mining in the 2000s decade, due to high prices for copper,
which makes up 80% of exports. When copper prices fell in 2011,
instead of decreasing government spending to match reduced income, the
new government, led by the Patriotic Front (PF) went on a spending
binge. According to the Economist, the PF funded new roads, hospitals
and airports, doubled civil-service wage expenses in the process, and
also expanded the number of districts from 72 to 115 so as to dole out
more patronage.
Furthermore, the borrowed money was not well spent. In building
roads, for example, the World Bank in 2017 found that Zambia paid
$360,000 per kilometre, which is more than twice the African
average. And since upkeep has been neglected, many new roads are
already potholed.
Today, nearly a quarter of government spending goes to make debt
payments. The government is broke. The government is delaying salary
payments to civil servants, as well as to contractors. Apparently the
government is forced to make debt payments to China, even if it means
not paying its own civil servants.
Furthermore, president Edgar Chagwa Lungu is following the same
corrupt path that occurs in country after country in Africa -- jailing
opposition leaders, shutting down newspapers that criticize him,
packing the courts with his supporters, and demanding that he stay in
power indefinitely, in violation of the constitution.
So even though the country is broke and the government is corrupt,
officials say that reports of debt default are "fake news."
Unfortunately, government officials have little credibility and, as in
the case of the statement by Margaret Mwanakatwe, there is absolutely
no reason to believe anything they say. Economist and BBC
and Economist
Related Articles:
KEYS: Generational Dynamics, China, Zambia, Edgar Chagwa Lungu,
ZEWASCO, Kenneth Kaunda International Airport, KKIA,
Africa Confidential, Margaret Mwanakatwe,
Global Fund to fight Aids, Tuberculosis and Malaria,
Patriotic Front, World Bank
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
This morning's key headlines from GenerationalDynamics.com
- Zambia denies defaulting on infrastructure loans from China
- Zambia faces long term corruption concerns
****
**** Zambia denies defaulting on infrastructure loans from China
****
Zambia's finance minister, Margaret Mwanakatwe (Lusaka Times)
Several days ago, reported that Zambia is negotiating with China
over a possible takeover of the
country's electricity company, ZEWASCO, after defaulting on loan
repayment from a previous loan. That report was based on a news story
from Kenya.
There have actually been numerous news stories in the last couple of
weeks claiming that Zambia has fallen victim a China "debt trap," and
is being required to give not only ZEWASCO, but also Zambia's Kenneth
Kaunda International Airport [KKIA].
In addition, a subscriber-only newsletter called Africa Confidential
has published reports detailing embezzlement by Zambian officials, led
by President Edgar Chagwa Lungu.
Zambia officials are claiming that the news stories, including those
in Africa Confidential, are "fake news," that there is no debt trap,
and Zambia will have no problem making payments to China.
Zambia's finance minister, Margaret Mwanakatwe, issued a statement on
Friday:
- There has been no default on debt obligations to China.
- The KKIA terminal is still under construction, so no payments are
due yet.
- There have been several loans for the electric company, and some
projects are still under constructions, but no loans are in
default.
- "For all other loans that have been contracted from the Chinese
government, the security on the loans is in form of insurance taken
from Sinosure and for state owned enterprises an insurance from
Sinosure and guarantee from the government are in place. Therefore, NO
COLLATERAL IN THE FORM AS ASSETS has been provided for borrowings and
none of the guarantees has been called upon."
The problem with Mwanakatwe's protestations is that she's unable to
provide any evidence to support them, because the entire relationship
between Zambia and China, including all contracts, is completely
secret. So if there's corruption and embezzlement going on, as Africa
Confidential claims, then Mwanakatwe is unable to deny those claims.
In situations like this, there's a test that I always like to apply,
namely to ask what the politician would say if all the accusations are
true. For example, if a politician is charged with murder, and he
says, "I didn't do it," then you could ask what he would say if he
did, and would say "I didn't do it." In other words, the politician
would say the same thing whether he committed murder or not. That
doesn't mean he did it, but it does show that everything that comes
out of the politician's mouth is 100% worthless, because he'd say
exactly the same thing under all circumstands.
So let's apply this test to Margaret Mwanakatwe. Suppose all the
charges of debt trap and embezzlement are true. What would Mwanakatwe
say? The answer is that she would issue a statement exactly like the
one that she did issue. In fact, the statement is filled with
statements that are empty claims because the details are secret,
giving me the (unprovable) feeling that the statement is an act of
desperation.
This has now become a major international scandal -- not in the West,
but in Africa. Many African governments are now facing embarrassing
questions about revealing the terms of their contracts with China, and
about why interest rates are so how, and why default terms are so
harsh. Officials will also be asked a lot more questions about
whether they're skimming China's loan money off the top -- something
they could easily do since all the terms of the contracts are kept
secret. Lusaka Times (Zambia) and Zambia Reports and Lusaka Times and VOA
****
**** Zambia faces long term corruption concerns
****
In June, the Geneva-based NGO, Global Fund to fight Aids, Tuberculosis
and Malaria, suspended $300 million in health funding to Zambia
because of alleged corruption in Zambia's health ministry.
Previously, Sweden and the Netherlands stopped health aid and the EU
halted road-building funds.
Zambia's story is a familiar one. Zambia made huge amounts of money
from copper mining in the 2000s decade, due to high prices for copper,
which makes up 80% of exports. When copper prices fell in 2011,
instead of decreasing government spending to match reduced income, the
new government, led by the Patriotic Front (PF) went on a spending
binge. According to the Economist, the PF funded new roads, hospitals
and airports, doubled civil-service wage expenses in the process, and
also expanded the number of districts from 72 to 115 so as to dole out
more patronage.
Furthermore, the borrowed money was not well spent. In building
roads, for example, the World Bank in 2017 found that Zambia paid
$360,000 per kilometre, which is more than twice the African
average. And since upkeep has been neglected, many new roads are
already potholed.
Today, nearly a quarter of government spending goes to make debt
payments. The government is broke. The government is delaying salary
payments to civil servants, as well as to contractors. Apparently the
government is forced to make debt payments to China, even if it means
not paying its own civil servants.
Furthermore, president Edgar Chagwa Lungu is following the same
corrupt path that occurs in country after country in Africa -- jailing
opposition leaders, shutting down newspapers that criticize him,
packing the courts with his supporters, and demanding that he stay in
power indefinitely, in violation of the constitution.
So even though the country is broke and the government is corrupt,
officials say that reports of debt default are "fake news."
Unfortunately, government officials have little credibility and, as in
the case of the statement by Margaret Mwanakatwe, there is absolutely
no reason to believe anything they say. Economist and BBC
and Economist
Related Articles:
- Zambia becomes the next nation to fall victim to China's 'debt trap' (11-Sep-2018)
- China's railway contractor in Kenya accused of 'neo-colonialism, racism and blatant discrimination' (14-Jul-2018)
- Zambia prays for divine intervention in copper prices (19-Oct-2015)
- Copper's crashing prices cause devastating economic ripples around the world (30-Sep-2015)
KEYS: Generational Dynamics, China, Zambia, Edgar Chagwa Lungu,
ZEWASCO, Kenneth Kaunda International Airport, KKIA,
Africa Confidential, Margaret Mwanakatwe,
Global Fund to fight Aids, Tuberculosis and Malaria,
Patriotic Front, World Bank
Permanent web link to this article
Receive daily World View columns by e-mail
Contribute to Generational Dynamics via PayPal
John J. Xenakis
100 Memorial Drive Apt 8-13A
Cambridge, MA 02142
Phone: 617-864-0010
E-mail: john@GenerationalDynamics.com
Web site: http://www.GenerationalDynamics.com
Forum: http://www.gdxforum.com/forum
Subscribe to World View: http://generationaldynamics.com/subscribe
