President Robert Mugabe’s trip to China has reportedly resulted in nine deals being signed that will kick start the ailing economy.

The finer details of these deals have remained a closely guarded secret but state media reported that the deals would see China ‘ providing financial support for the much-needed economic enablers in critical sectors that include energy, roads, national railway network, telecommunications, agriculture and tourism as part of the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (ZimAsset).’

It will see the government embarking on numerous public private partnerships with Chinese private investors and state institutions.

Several public private partnerships have been discussed and in some of the deals feasibility studies are expected to start immediately. These include the Gwayi Thermal project to be completed by 2017 and the digitalisation of both Netone and the ZBC, among others.

According to Finance Minister Patrick Chinamasa, the deals are structured around a ‘securitisation framework under which projects in infrastructural and productive sectors can be funded.’

After being spurned by traditional funders such as the IMF and World Bank, the government was forced to consider this model of funding to kick start its ZimAsset programme. This model of funding is still under development and viewed with derision around the world especially after the world financial crisis.

Securitisation allows one to raise finance by selling assets or income streams. It is defined as the ‘process whereby loans, receivables and other financial assets are pooled together with their cash flows or economic value redirected to support payments on related securities’. The concept maybe applied to any asset that has a reasonable ascertainable value or that generates predictable future streams of revenue.

Minister Chinamasa was quick to allay fears by declaring that mineral assets had not been discussed in these agreements. Instead it is envisioned that parastatals such ZINARA, Netone, ZESA and ZINARA will be revived under this arrangement.

The repayment of the Chinese loans will be pegged against the performance and cashflows of these parastatals. Funding will be used to build roads, rehabilitate railway lines and expand communications infrastructure.

While these deals have been presented as the panacea to all the economic problems the country is facing there are hidden costs. Particularly for low income earners in Zimbabwe.

The recent 100% toll gate hike is one hidden cost that is brought about by such arrangements. Confronted with ballooning loan interest that it had accrued, the government decided to pass on the costs to citizens. We have already seen similar developments in the South African e- tolling where the government falling behind in its loan repayment obligations did not hesitate to pass on the costs to citizens.

More of this must be expected unless the government adopts austerity measures and ensure that there is no leakage of the borrowed money in wasteful consumptive expenditure. The ballooning loan interests debt accruing will be passed on to the citizens as increased tariffs of electriricity, telecoms services and toll gates.

We must not have short memories. Money has been received before from Chinese institutions and reports of its abuse have abounded. The $144 million Harare water rehabilitation loan is one such deal which has not yielded results. Instead the money has been abused by unaccountable officials. Meanwhile Harare still has persistent water problems while the rate payer is burdened with paying loan interests for money that has been consumed on cars.

There is no guarantee that the cash strapped government will not use funding to pay civil servants’ salaries and other luxuries for top government officials. The risk of borrowing to consume is too high considering the fiscal squeeze that the government is currently experiencing.

Fundamentally the government is taking back the nation to the ESAP era. It has not changed its economic trajectory but has only changed its borrowing source. The lenders will demand greater control of these parastatals to recover their money.

The Chinese investors are driven purely by economic interest and will demand that the parastatals operate more efficiently with little regard to the social consequences this may have on ordinary Zimbabweans.

Government institutions which traditionally provided goods and services to citizens at heavily subsidised costs will now prioritise optimisation of profits in order to meet the country’s debt obligations to China. One can argue that it goes against the government’s previous policy to keep tight control of all parastatals in order to insulate the poor.

It is in this context that it is most likely the government will completely do away with the welfare state.

Already the cost of basic commodities and services is out of reach for many struggling Zimbabweans who are living under the $570 poverty datum line. These deals may add to the burden of the poor and perpetuate exclusion as the poor are further left behind. Businesses will pass on costs to consumers leading to an increase in the cost of living.

The food donation agreement is likely to see Chinese agriculture products being dumped in Zimbabwe which will undermine government’s efforts to revive the agrarian sector. Zimbabwe’s small scale farmers need support and government protection to compete with other producers.

An agreement on tourism by the two governments which is expected to increase revenue from Chinese tourists is unlikely to succeed unless if the Zimbabwean government addresses the underlying causes of poor tourists visits such as disturbances on conservancies and high costs of living in Zimbabwe.

Although Minister Chinamasa has denied any agreements concerning mineral resources it stands to be seen if this money will materialise without Zimbabwe granting China access to the natural resources it requires to keep its industries running.

It would therefore be prudent for ordinary Zimbabweans to approach these deals with caution. Their costs may far outweigh any perceived benefits to the political economy of the country.

Malvern Mkudu writes in his personal capacity. He is available on Malvern.mkudu@yahoo.com