Zambian Day, 30 July 2018 – Zambia is a country remarkable in its ability to forgive and forget, a political weakness too that makes it vulnerable to repeat mistakes and not learn from them.
While other countries learn and profit from their mistakes, Zambia has not only mishandled and pillaged the gains of debt forgiveness but, pontificated against even those who have volunteered well-meaning advice about how to prudently manage its economy purely led by production and not consumption fuelled by unsustainable debt.
Less than a year ago seems like a long time ago as Zambia last month notched an officially declared external debt of just over US$9 billion.
Zambia’s relationships with multilateral lenders and even ‘traditional friends’ has never been as tested as has recently been the case since the Enhanced Heavily Indebted Poor Countries (HIPC) Debt Initiative.
Incoherent and often contradictory statements from the financial and political spin-doctors and managers of the country, and even self-appointed party-politico spokespeople have uncovered the lack of consultation on issues of national importance, even more damaging a breach of trust and confidence of multilateral lenders and potential investors.
Investment pledges alone that have often been preceded by expensive trips abroad and political fanfare have yielded little to cushion President Edgar Lungu’s self-set economic time-bomb.
The panic arising therefrom could not have been better captured by the head of state’s demeanour and contrite tone as he publicly ‘begged’ visiting Turkish President Recep Tayyip Erdoğan last Saturday, to stand in as a guarantor for the Zambian government to a private Turkish Vulture fund for the refinancing of a near maturing US$750 million Eurobond issued in 2012 – a move which may not necessarily be constitutional in Turkey.
To the observant, the President’s posture spoke it all. Finally, it was neither his critics nor even caring supporters who were saying so; it was himself – the debt mountain was beginning to erode and Zambia was knee-deep in quicksand at the bottom of it. Also obvious in his plea was that Turkey is unwilling to extend bilateral financial assistance from which it does not benefit nor can justify.
Three Finance ministers later, poor financial management, wasteful spending and populist theatrics have come home to roost. There is nothing in this to rejoice but recognition of the tough love that this country needs to shed the politics of mere sloganeering and market handouts and grab a hold of our economy before we are a basket case again.
The story of vulture funds is regrettably not new with Zambia. Donegal International Limited a British Virgin Islands Vulture fund in 2005 sued the Republic of Zambia for US$42,305,026.50 together with interest – the total claim being for more than US$55 million. What was educational in this suit was not that Donegal was the original benefactor of the Zambian government, but a long time East European ally, Romania was owed money dating back to 1999 which Donegal International Limited paid off in the sum of US$3.2 million for the right to collect with interest.
The claim emanated from a failed settlement agreement dated 1 April 2003 signed by Michael Sheehan on behalf of Donegal and Mr Emmanuel Kasonde, who was then the Zambian Minister of Finance and asset freezing orders against Zambia. In a credit agreement between Romania and Zambia dated 17 April 1979, Zambia incurred indebtedness to Romania in respect inter alia of acquisitions of agricultural machinery. By an assignment agreement dated 19 January 1999 Romania assigned the debt to Donegal.
In April 2003 Donegal and Mr Kasonde executed the Settlement Agreement which set out an agreement about the discharge of the debt which Donegal later claimed was breached and sued for recovery. The matter sucked in notable Zambians of the day some who are still alive, including Ministry of Finance officials, others were arrested on charges of corruption and abuse of office. All in all, Zambia ended up agreeing to pay over US$15 million over 3 years.
Vulture funds are not child’s play and do not believe in diplomacy but are businesses. Zambia would do well to clean up its home finances and stay away from the vultures.