Zambia, eight other countries lack proper guidance on resource-backed loans, says report

A paper examining the structure of Resource-Backed Loans (RBLs) has established that Zambia and eight other African countries have failed to clearly ensure that these loans are properly structured and contribute to development.

Other countries under the study dubbed “Tax Regimes in the Age of Resource-Backed Loans and Collateralisation” were Chad, Ghana, Kenya, Mozambique, Nigeria, Senegal, Tanzania and Uganda.

During a presentation on Thursday by researchers from The African Forum and Network on Debt and Development (FRODAD), Cornelius Dube, and Evengelista Mudzonga, at a conference examining the complex financing model, it was made clear that African countries needed to reform legal frameworks to explicitly regulate RBLs.

RBLs are loans secured by leveraging on a country’s natural resources and they served as either a direct source of repayment or as an underlying guarantee of repayment.

On if the legislation allowed for well-structured RBLs to emerge, the paper established inexplicit provision for RBLs in the laws, leaving most countries requiring further guidance on how to optimise natural resources for infrastructure development outside the traditional Consolidated Fund.

The paper identified challenges faced by these countries in terms of RBLs effectiveness.

It cited transparency issues on terms, tenure and contractual process, failure to explicitly mention RBLs, inadequacies to ensure that RBLs were properly structured and absence of guidance on valuation of natural resources, and how to respond to price and output fluctuation as some of the challenges.

The paper indicated that much as RBLs were legal, but only became illegal in terms of practice.

“No provision within the EAC protocols or Treaty makes RBLs illegal or prevents Partner States from negotiating them. However, once signed:

“Their contribution to total debt level should not remain a secret as it needs to be reported to the EAC Council as part of the regular quarterly public debt status update. However, literature shows that they are still shrouded in secrecy,” according to the paper.

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