VZCZCXRO9546
RR RUEHDU RUEHJO RUEHMR RUEHRN
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 
 
¶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