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China linked bank imposes stringent conditions for eSwatini R2billion loan

Saturday, 15th February, 2020

MBABANE:Afreximbank, an international financial institution with strong business links to the People’s Republic of China (PRC) allegedly imposed stringent conditions for a proposed eSwatini R2billion loan.

The loan was meant to pay companies owed by the State millions of Emalangeni as per the consistent sentiments of Finance Minister Neal Rijkernberg who subsequently mislead the Nation through the media, alleging that the process to pay government suppliers was at an advanced stage. But now, it has emerged that the payment process for these government suppliers, some whose companies had shut down due to financial constraints, might take longer than anticipated as officials within the Ministry of Finance were busy finalizing paperwork trying to meet the conditions attached to the loan by the bank.

An independent investigation by this Swaziland News uncovered that at an early stage of the loan negotiations, Afreximbank allegedly suggested that the country’s receipts from the South African Customs Union (SACU) be paid directly to the bank as part of surety conditions imposed by the international financial institution. 

Responding to a questionnaire from this Swaziland News, Ms Kungo Mabogo, the SACU Secretariat Communication Manager whose offices are based in Namibia said eSwatini Ministry of Finance was better positioned to respond on this matter. 

“SACU Secretariat does not speak on behalf of a Member State but rather on issues that are collective, and all Member States agree on. The Secretariat does also not control or manage the ruining of any of the Government as they each have a legislation and Constitutions that govern them” said the SACU Secretariat Communication Manager.

Senior political sources within the Finance Ministry disclosed that as demanded by Afrixembank, placing the SACU receipts as surety had been included in the draft agreement as one of the risks mitigation measures to ensure that government does not default when servicing the loan. 

“However, it transpired that this condition was in conflict with the Government Liabilities Act hence it was put on hold” said the source. 

The insiders further disclosed that even though the loan comes with a high interest and tax immunity, government had no alternative as most reputable international banks were now reluctant to provide this facility due to the country’s record of extravagant spending.

Sizakele Dlamini, the Principal Secretary in the Ministry of Finance requested that a questionnaire be sent to her so she can respond accurately on the matter.

“I will give you an email so you can send the questionnaire, I want our response to be accurate as this is an important matter” said the Principal Secretary. 

But the PS subsequently failed to provide answers to our questions at the time of compiling this report.

Reached for comments, Government Spokesperson Percy Simelane maintained that the issue of the loan was an operational matter hence the Finance Ministry should respond to the questions from this publication. He said the leadership of this country had a dream to secure this loan and the relevant Ministries were expected to implement it.

“This is a Finance operational matter. Leadership dreams and Ministries are expected to operationalize the dream through implementation” said the Government Spokesperson.

On or around 14 November 2019, Neal Rijkernburg, the Minister of Finance successfully submitted a Bill to Parliament that gave him a legal instrument to secure this loan, his core justification was that the money would be used to pay government suppliers. 

The Minister of Finance did not respond to questions on the subject matter when asked by this publication to clearly explain the circumstances surrounding the loan process and when exactly government suppliers and or companies owed by the State will be paid their long overdue invoices.

But in a recent press statement dated 05 February 2020, the Finance Minister did not disclose the alleged ‘behind-the scenes’ government challenges in securing the R2billion loan, instead, he said government was currently verifying some of the invoices to ascertain its authenticity.

“The initial stock of arrears was E4.2billion as calculated at the end of March 2019. This figure has declined to E2.2billion after the verification exercise, of which 50 per cent is for the capital programme and the balance is recurrent expenditure” he said.

Herry Tum-Dupont, the President of the Federation of the Swazi Business Community (FESBC) said the misleading statements consistently uttered by the Minister of Finance through the media that government was processing payment for suppliers was causing serious problems for them and their companies as they are also indebted to banks.

“We are owing people and our suppliers as well huge amounts of money and every-time the Minister utters these statements in the media suggesting that government will pay us, they put pressure on us demanding their payment, this is not right at all. Government must just publish all the list of suppliers who were paid, if any, because this whole thing is now causing problems for our companies” said the FESBC President.

An independent investigation by this publication uncovered that even though eSwatini does not have diplomatic ties with the People’s Republic of China(PRC), the proposed loan facility would be an indirect benefit from the bank with strong business links to the world’s super-power. 

On or around 04 September 2018 at Beijing, the African Export-Import Bank(Afreximbank) allegedly signed an agreement and subsequently received $850million(about R13billion) in financing facilities by two Chinese financial institutions being the China Development Bank and the Bank of China. 

A detailed report in possession of this publication quoted Professor Benedict Oramah, the Afreximbank President suggesting that among the finance package, $350million from the Bank of China was targeting at direct bank-to-bank loans, participating in syndicated loans and trade finance among others.

Businessman Johannes Manikela, the FESBC Chairman for the Hhohho region said the mere fact that the bank expected to provide the loan to pay eSwatini government suppliers had business links with the Mainland China might complicate the loan process. Speaking to this publication, the businessman later expressed confidence that government had plans to tackle the matter.

“It’s now complicated if the bank has business links with the Mainland China but I don’t want to comment further on this as I believe government had plans how to address the matter. The problem now is that our businesses are collapsing as government owes us a lot of money, we hope this will be addressed soon” he said

But despite the well-documented business links between Afrixembank and the Mainland China, this investigation did not establish convincing evidence suggesting that the world’s super-power was directly frustrating the loan process. 

Responding to questions from this Swaziland News on the subject matter through the office of the Third Secretary, His Excellency Lin Songtian, the Chinese Ambassador to South Africa did not specifically confirm that the world-super power was directly or indirectly influencing the loan process, however, he said most countries and by extension, their institutions  around the world were China’s friends.

“Most countries in the world are China’s friends and recognize the One China Principle” said the Ambassador.

But senior diplomatic sources told this publication that as the whole African continent was now linked to China, it was slowly becoming difficult for eSwatini to survive while holding on to Taiwan. Chinese Ambassador Songtian, in a recent statement sent to this Swaziland News, warned that eSwatini risked being isolated by the international community for refusing to abide by the United Nations Resolution 2758 of 1971 that confirmed the One China Principle. These sentiments from the Chinese Envoy came shortly after his country imposed a travel ban to all eSwatini citizens, including businesspeople from travelling to China until the Kingdom terminate its diplomatic ties with Taiwan.

Reached for comments, Mlungisi Makhanya, the President of the People’s United Democratic Movement(PUDEMO) said the reality was that China remains an important player in the global economy that cannot be ignored.

“The reality of the matter is that China is an important player in the global economy and can’t be ignored.The time has come for us to abandon this unhelpful diplomatic relations with Taiwan and urge them to work on reunification with the Mainland” said the PUDEMO President. 

But in an earlier interview with this Swaziland News, Jeremy Liang, the Ambassador of the Republic of China on Taiwan said the conduct of the Mainland China amounts to bullying and interfering in the affairs of the Kingdom of eSwatini.

“Eswatini maintains the policy of having no enemy and working with all the countries around the world” said the Taiwan Ambassador.

 

China linked bank imposes stringent conditions for eSwatini R2billion loan
Afrixembank Headquarters