Calle sets record straight on Chinese loans

WINDHOEK, Minister of Finance Calle Schlettwein on Monday responded with concern to what he called subjective reporting from the local media and certain bodies regarding the financial relationship between Namibia and China.

This was after it was alleged that the Asian economic giant has captured the Namibian state. In this regard, Schlettwein noted that Namibia has benefited from the Chinese government in form of a grant valued at N$1.340 billion, an interest-free loan of N$302 million and concessional loans worth N$1.694 billion.

We would like to inform the public that such statements (of Chinese state capture) are not supported by facts. If at all, they are mere perceptions propagated to hoodwink the public into believing that Namibia is overexposed to Chinese loans or such loan uptakes are assuming unsustainable levels, said Schlettwein during a media briefing at his ministry.

Currently, government's total debt portfolio of N$76.6 billion is comprised of the domestic market (which makes up N$51.3 billion or 67 percent of debt), foreign bonds, Eurobond and JSE (which make up N$17.6 billion or 23 percent), bilateral loans (N$1.1 billion or one percent) and multilateral loans, mostly from foreign development banks (which make up N$6.7 billion or 9 percent).

Schlettwein explained that as per a bilateral arrangement, the Namibian government has benefited from Chinese government whereby the former requested the latter to extend funding for its development projects as set out in national development plans (NDPs).

These loan offers are provided within mutual understanding between the two governments and contain concessional terms and conditions as opposed to market loans or other borrowing like those provided for by development financial institutions and the bonds market. The concessionality is achieved either through interest rates below those available on the market, the grace periods and lower management and commitment fees, said Schlettwein.

He noted that the terms for the concessional loans are 2 percent interest, 0.5 percent commitment fees on undisbursed balance of the loan and a 5-year grace period before repayment of principal amount starts and a 15-year repayment period.

Although a Chinese contractor is required in this arrangement, it is worth stating that projects that benefited from this funding are mainly large for the construction of roads and the procurement method employed is that of the Namibian government. Apart from the machinery and highly specialised skilled labour that Namibia does not have, locally available material consumed in this type of projects are Namibian sourced. This includes bitumen from Okahandja, diesel, sand and stone in addition to 20 percent Namibian company participation, said Schlettwein.

He added that the total loans from the China Export Import Bank, excluding the grants component, amount to N$1.99 billion, or 8 percent of foreign debt and only 2.6 percent of total debt.

The projects that benefited from this borrowing includes the National Youth Centre, the Omakange to Ruacana road (60 km), the Engela to Uutapi road (90km), scanners at all borders, electronic documents recording management system with the Office of the Prime Minister and Transnamib locomotives.

The debt service toward Chinese loans includes capital repayment and interest and, in total, amounts to N$65 million. As a portion of total debt serving obligations, the debt serving for loans from China is around 1 percent of total debt servicing obligations. As indicated, total debt exposure to China is 2.6 percent of total debt portfolio, whereas the total debt servicing obligation is only 1 percent, which is indicative of the concessionality in relation to other debt. This does not include the grants support received from China, said Schlettwein.

We should also objectively and factually address the alleged state capture by China. What is this purported to entail? For the size of our economy, government operations account for about 57 percent and the private sector, mainly mining, wholesale and retail trade, financial intermediation and the tertiary services sector, does not reflect predominance of Chinese ownership.

For certain, the proportion of loans sourced from China does not exhibit such predominance. Indeed China, as the second largest economy, has invested in the mining sector in Namibia and so did other foreign investors, Schlettwein stated.

Source: New Era Newspaper Namibia