Zimbabwe: Should We Celebrate the Govt-Zimplats Deal or Worry?

On Wednesday this week, Zimbabwe Platinum Mines (Zimplats) publicly announced that it has amicably resolved a six-year long dispute with government which was seeking to compulsorily acquire part of its mining claims measuring 27,948 hectares. This dispute was pending in the courts of Zimbabwe.

Consequently, Zimplats agreed to release 23,093 hectares to government "to ensure participation by other investors in the platinum mining industry." Zimplats now owns 24,632 hectares with a new special lease valid for the lifetime of the mine. This is a significant development that warrants public scrutiny into how well the country's mineral wealth is governed for the benefit of all Zimbabweans.

It is a positive development that this dispute was amicably resolved. But it must be noted that the dispute had been going for six long years, and such a lengthy period riddled with uncertainty for the country's largest ever investor certainly raises questions on government's commitment to property rights and Zimbabwe as an unattractive investment destination. Such disregard for investment agreements also provides scant comfort to existing and prospective investors.

Notably, Zimbabwe is one of the least attractive investment destinations according to Fraser Institute's Policy Perception Index. Interestingly, Zimbabwe's mineral potential is ranked among the top under the same organisation's Mineral Potential Index. This partly explains why, despite Zimbabwe's abundant mineral wealth, the country is struggling to attract FDI to realise a sustainable development dividend from its mineral endowment.

One could also spin the agreement between Zimplats and government as positive in that the released land creates space for the entrants of new players in the platinum industry. In all mineral sectors, the entry of new players is largely problematic as most of the land has been taken.

It is noteworthy that the new Minister of Mines, Winston Chitando publicly stated during the Chamber of Mines annual general meeting held last month that from next year, government will enforce the law on renewal of mining titles. Paying ground rental and mining inspection fees will no longer suffice, but evidence to back capital expenditure will be required. He stressed that this is not a new requirement at all. Perhaps Zimplats was concerned by this development and it had no option but to release the ground. In this regard Chitando's leadership is coming to bear, a man with strong private mining sector background.

Worryingly, however, Zimplats got a new mining lease valid for the life span of the mine. Its special mining lease was due to expire in August 2015. Terms and conditions of the new special mining lease has not been disclosed. What we know is that in the previous mining lease, Zimplats had a 2.5 percent royalty stabilisation agreement with government which undermined the country tax code in which platinum royalties were pegged at 10 percent.

In 2015, Zimbabwe Revenue Authority (ZIMRA)'s annual revenue performance report revealed that mineral royalty income was in the red at $19,421,653.62. A factor attributed to refunds of $101.55 million. Although the report did not state Zimplats, the refund came after the miner had won a court dispute with the tax agency on legality of the 2.5 percent royalty stabilisation agreement with Ministry of Mines.

Section 315 (2) (c) of the 2013 Constitution require transparency and accountability in the negotiation and performance monitoring of mining contracts. It remains to be answered if Parliament was involved in this deal? A government that was established against the backdrop of restoring order should be at the forefront of respecting the Constitution.

Now that government is in possession of released ground, what happens next? The privately owned Zimbabwe Independent on Friday reported that Lucas Pouroulis, whose company, Karo Resources, last month signed a $4,2 billion platinum deal with government, has been given the land in the resource-rich Great Dyke.

The local shareholders in the deal also remain shrouded in secrecy despite Chitando's pledge to release the details.

The African Mining Vision, to which Zimbabwe is a signatory, cautions that known mineral reserves should be disposed through public bidding to allow room for government to pick an investor who offers greater development outcomes like infrastructure, skills development, technology transfer and the development of local supply chains in addition to taxes.

The secrecy around the deals being announced currently leaves too much room for corruption. Lessons can be learnt from the acquisition of claims from Anglo American owned Unki Mine by government in 2008 as empowerment credits, which ended up in the hands of speculators. Government got $100 million from CAMEC, which later resold the Bougai and Kironde claims for nearly $1 billion.

Much as Parliament is preoccupied with the issue of allegedly missing $15 billion diamond revenue from Marange, a lot is going on in the mining sector with mega deals being announced frequently. Parliament should keep its eye on the ball.

Mukasiri Sibanda is an economic governance officer for the Zimbabwe Environmental Law Association (ZELA).

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