23 March 2014

Zimbabwe: Investment Deals - Zimbabwe Loses Out

EMERGING nations are taking advantage of Zimbabwe's poor relations with Western countries to negotiate economic deals involving billions of dollars, a local advocacy group has said.

In its latest report, the Centre for Natural Resource Governance (CNRG) said the Brics nations -- Brazil, Russia, India and China --were taking advantage of Zimbabwe's standoff with Western nations to negotiate deals that prejudice the country of billions of dollars.

It was noted that four of the five countries that make up Brics have more than doubled their activities in Zimbabwe's extractive sector.

In October last year, government launched its economic blueprint for the next five years, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim Asset), focusing on funding from the Brics.

However, the paper said Brics investments in Zimbabwe over the past decade have often been highly controversial and of little consequence to employment creation and revenue generation.

Brics nations make up Zimbabwe's top three investors, with China leading with investments of US$374,8 million approved by the Zimbabwe Investment Authority in 2013, Russia with approvals worth US$40,1 million and South Africa (US$39 million).

Brazil currently has no publicly known investments in Zimbabwe's mining sector. However, Brazilian mining company Vale has a large coal project in the Tete province of Mozambique.

A number of Russian companies operate in Zimbabwe. One company, DTZ-OZGEO (Private) Limited is jointly owned by the Development Trust of Zimbabwe (DTZ) and a Russian company, Econedra Limited.

This company is involved in gold mining in Penhalonga and diamond mining in Chimanimani besides holding several claims in places such as Shurugwi and Vumba.

CNRG said the world's biggest diamond producer, Alrosa, which produced 26% of the world's diamonds in 2012, is seeking a joint venture partner to carry out geological explorations in Marange.

Russian firms Rostec and Vneshekonombank were part of a consortium that bought a 40% stake in a project to develop one of the world's largest platinum fields in Zimbabwe.

They will invest in Ruschrome Mining, a Russian-African joint venture licensed to mine the field.

The Darwendale platinum deposit holds 19 tonnes in proven reserves and 775 total tonnes of metals including palladium, gold, nickel and copper.

Ruschrome is partly owned by the Zimbabwean government and the Center of Business Cooperation with Foreign Countries, an association of machinery and defence firms that will retain a 10% stake in the project.

Ruschrome is currently setting up a pilot open pit platinum mine in Darwendale.

However, CNRG noted that DTZ- OZGEO has performed poorly in terms of transparency, environmental management and corporate social responsibility.

President Robert Mugabe expressed disappointment with the secretive nature of DTZ-OZGEO operations during the Zanu PF People's Conference held in Mutare in December 2010 and during a meeting with traditional chiefs in Manicaland in 2011.

Turning to India's investments in Zimbabwe's mining sector, CNRG said these have often been equally controversial.

Essar, an Indian global company, emerged as the preferred bidder for Zimbabwe Iron and Steel Company (Zisco) in 2011 after an international tender had been issued by government.

It set up NewZim Steel, to revive the steel-making capacity at the currently non-functional Zisco plant and New Zim Minerals, which would explore beneficiation of iron ore that is owned by Zisco Steel and create value so that the country becomes a world leader in beneficiated iron ore.

Two years on, operations have not started due to a myriad of challenges, chief of which is the dispute over rights to US$60 billion worth of iron ore reserves in Chivhu.

During the negotiations for the Zisco deal, Zimbabwe's Ministry of Industry and Commerce, then under MDC's Welshman Ncube, agreed to a deal that gave Essar 90% of Zimbabwe's iron ore reserves, thought to be the largest in the world, for just US$750 million dollars.

The Ministry of Mines and Mining Development refused to transfer the mining rights to Essar, demanding a revision of the deal first.

"Essar's intention to export iron ore which would earn the company billions of dollars for just US$750 million is exploitative and clearly shows the deal is a bad one for Zimbabwe. There are fears money could have changed hands for Zimbabwe to accept such a terrible deal," CNRG said.

The centre noted that South African investments to the Zimbabwean economy remain questionable. South African companies operating locally export raw chrome to South Africa where it greatly appreciates in value through beneficiation.

'China is the biggest investor in Zimbabwe'

Since 2000, China has been Zimbabwe's biggest investor. The Zimbabwe Investment Authority (ZIA) recently revealed that China emerges as a consistent top investor in Zimbabwe from 2010, with its investments contributing US$670 million from a total of US$930 million worth of projects approved last year.

By end of October, ZIA had approved US$374,8 million worth of investments, mainly in the areas of energy and mining.

China has also made inroads in Zimbabwe's agricultural sector, taking up several farms acquired by government during the land reform programme.

They grow a variety of crops ranging from tobacco, wheat, sorghum to soya beans, the majority of which is exported to China.

"There is no evidence that China's agricultural produce is contributing to food security in Zimbabwe. Maize, Zimbabwe's staple food, is shunned by Chinese farmers," the centre said.

China has become a major player in the country's economy through their joint venture enterprises like Anjin Investments, involved in diamond mining ventures with the military at Chiadzwa, and Sino-Zimbabwe Holdings which previously had a concession in Marange as well.

Although Anjin has the largest diamond concession in Marange, it has been accused of not remitting to treasury.

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