Identifier
Created
Classification
Origin
06GABORONE933
2006-07-24 15:33:00
UNCLASSIFIED
Embassy Gaborone
Cable title:  

BOTSWANA HOUSES PROVIDED THROUGH CHINESE LOANS

Tags:  PGOV PREL ECON BEXP BC CH 
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VZCZCXRO9546
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DE RUEHOR #0933 2051533
ZNR UUUUU ZZH
R 241533Z JUL 06
FM AMEMBASSY GABORONE
TO RUEHC/SECSTATE WASHDC 3379
INFO RUCNSAD/SOUTHERN AFRICAN DEVELOPMENT COMMUNITY
RHMFIUU/HQ USEUCOM VAIHINGEN GE
RHEHNSC/WHITE HOUSE NSC WASHINGTON DC
UNCLAS GABORONE 000933 

SIPDIS

SIPDIS

AF/S FOR MUNCY

E.O. 12958: N/A
TAGS: PGOV PREL ECON BEXP BC CH
SUBJECT: BOTSWANA HOUSES PROVIDED THROUGH CHINESE LOANS

UNCLAS GABORONE 000933

SIPDIS

SIPDIS

AF/S FOR MUNCY

E.O. 12958: N/A
TAGS: PGOV PREL ECON BEXP BC CH
SUBJECT: BOTSWANA HOUSES PROVIDED THROUGH CHINESE LOANS


1. SUMMARY: The government of Botswana has again turned to
the China Export-Import Bank to fund a construction project,
despite a loan provision requiring that the work be
performed by Chinese firms. The $9.2 million loan will fund
construction of 293 houses in Gaborone. Parliamentary
support is strong, though a few MPs have voiced concern over
the provision of jobs to Chinese workers and the economic
loss for local companies. END SUMMARY.

BOTSWANA HOUSING CORPORATION (BHC) RECEIVES CHINESE LOAN


2. During the week of July 17 the BHC Loan Ratification Bill
received broad support in Parliament. The bill ratifies a
loan agreement between the GOB and the Export-Import Bank of
China, providing for a 55 million pula (US $9.2 million)
housing construction loan. Similar to earlier Chinese road
project loans, this loan has a grant element of 33 percent,
a 3 percent interest rate, and a ten-year repayment period.
The money is to be used to build 293 housing units in
Gaborone.


3. In 2004 the governments of China and Botswana entered
into a Framework Agreement on a loan of 140 million pula (US
$23.3 million) for the construction of housing units
countrywide. So far, the BHC has received money for 425
housing units, spread throughout the country. While
previous loan conditions were not made public, this new
installment comes with publicized strings attached.

CONDITIONS SET: CHINESE FIRMS MUST BUILD HOUSES


4. Finance and Development Planning Minister Baledzi
Gaolathe announced in Parliament that part of the conditions
for the loan is that a Chinese company will do the home
construction, but will "normally" subcontract to local
companies. During Parliamentary discussion, Gaolathe
explained that because Botswana is classified as a middle-
income country, it has been difficult to source financial
assistance from lending institutions such as the World Bank
or African Development Bank.

VOICES OF OPPOSITION DENOUNCE UNFAVORABLE LOAN CONDITIONS


5. Even though the bill enjoys the support of legislators
from all political parties, a few MPs did voice their
opposition. MP for Gaborone Central Dumelang Saleshando
said the conditions attached to the loan were not favorable
to Botswana, noting that the lending nation was set to
benefit more than the recipient nation: "The arrangement is
akin to providing job opportunities to [China] at the
expense of Batswana who are becoming more desperate for jobs
with each passing day." He posited that Chinese companies
rarely, if ever, subcontract out to Botswana companies,
preferring to bring in their own cheap labor. MP Mmoloki
Raletobana of Kweneng South East said that citizen-owned
companies should be given priority during the tendering
process in order to create necessary jobs, while MP
Khumongwana Maoto of Francistown South stated that Batswana
should be given priority if economic empowerment was to bear
fruit.

COMMENT


6. Minister Gaolathe's comments are not the whole picture.
While Botswana may not qualify for soft-loans, the
government's high credit rating certainly allows access to
low-interest loans. There is a strong interest from OPIC in
ensuring access to appropriate loans for any housing project
in Botswana that includes a minimum-required U.S. business
component. In fact, from May 2-4 Botswana officials
attended the OPIC housing conference in Cape Town and
expressed interest in our efforts at engagement, albeit with
a slow response time. Although the U.S. model might prove
more economical in the long run and provide needed jobs
here, the Chinese deal, including a low loan rate and a
grant portion, looks more appealing up front. China is
using its funding ability to make inroads into the country,
not only politically but also economically, while creating
guaranteed jobs for its own citizens. Although a U.S.-
funded project would include training for local citizens, a
Chinese funded project will not only be absent a training
component but will also bring in Chinese workers for the
construction -- a fait accompli the GOB and Botswana workers
may soon rue down the road. END COMMENT.

DROUIN