Cabinet's shock decision this week to cancel the US$400 million National Railways of Zimbabwe (NRZ) recapitalisation deal won by the Diaspora Infrastructure Development Group (DIDG) and South African rail, ports and pipeline utility, Transnet, has sharply divided government and sucked in the military, as the battle to control one of Zimbabwe's largest parastatals intensifies.
Informed multiple sources said the resolution, which follows unrelenting lobbying, cajoling and threats by Transport minister Joel Biggie Matiza has angered a number of ministers, government bureaucrats and security bosses who have been involved in the project since 2017.
The fight over the deal pits rival groups of officials led by Foreign Affairs and International Trade minister Sibusiso Moyo and Matiza. Senior security service chiefs -- from the military and intelligence -- had vetted and endorsed the deal. Zimbabwe Defence Forces' Major-General William
ube has been sucked into the issue as NRZ deputy chair. Advocate Martin Dinha is the chair.Sources said most ministers have joined forces with the NRZ management and board, bureaucrats and security bosses to fight back.
This comes as sources also warned that a massive legal battle could be looming over the project. Matiza and his forces are also digging in, sources said.
Even though some ministers did not speak in cabinet on Tuesday, sources said, they left fuming as they have put sustained efforts to ensure the project -- which is critical for economic recovery -- is implemented.
President Emmerson Mnangagwa had been supporting the deal until cabinet's shock decision on Tuesday. Mnangagwa officially commissioned the project in Bulawayo last year.
However, in a dramatic resolution on Tuesday cabinet terminated the multi-million dollar deal.The cancellation of the deal came after Mnangagwa highlighted during his state-of-the-nation address and the official opening of the 2nd session of the 9th parliament on October 1 that the money required for the project has been secured through DIDG.
Announcing the termination of the deal, recently approved by the NRZ board and now being assessed by Treasury, Information ministry permanent secretary Nick Mangwana said parties to the transaction had failed to conclude ongoing negotiations within the stipulated timeline, prompting government to re-tender the project.
As repeatedly reported by the Zimbabwe Independent in its exclusive series on the protracted transaction, Matiza had been making calculated manoeuvres and a spirited bid to derail the project to bring in via the back door a Dubai-based entity, Feonirich Investments LLC, which had failed to meet the tender process deadline.
After failing to persuade the Dinha-led NRZ board to muscle out DIDG from the deal, Matiza -- following a series of meetings involving Mnangagwa and other parties involved last week -- then turned to cabinet where he presented a damning report focussing on the Transnet-DIDG internal dynamics, technical partner matter, framework agreement issues, timeframes and funding availability.
Sources said Matiza urged cabinet to cancel the deal on the basis of these issues. DIDG and NRZ, among other parties, were not given a chance to respond to Matiza's report.
"In his report, the minister told cabinet that the deal had virtually collapsed mainly because of the fallout between DIDG and Transnet; he also claimed that the consortium had failed to raise the required funds," a source said.
"Matiza also reported that Transnet undertook due diligence on DIDG and found no evidence of it being in a position to raise the required equity capital. Matiza further claimed the local security has passed a negative opinion on Transnet, raising a geo-political dimension.
"He (Matiza) reported that it is not ideal to have a neighbouring country invest in such a strategic state enterprise. He claimed the army's concern was that in case of mutual hostilities, the deal would leave the country extremely vulnerable since South Africa would be having knowledge and control over our systems and signals."
Historically, South Africa has always used its economic leverage to influence politics and events in Zimbabwe.For instance, during the apartheid era, when problems arose between the then South African prime minister John Vorster and Rhodesian prime minister Ian Smith, the South Africans would simply disrupt the rail system and prevent critical goods -- including fuel -- from being transported into the country.
Matiza also tried to pour cold water on DIDG's recent funding deal from African Export-Import Bank (Afreximbank) which was appointed lead arranger to co-ordinate the syndicated loan.
Afrexim has agreed to coordinate funding and provide its own US$100 million funding. The balance will come from South African and regional banks which have provided term sheets for about US$1 billion.
Although cabinet resolved to cancel the deal, government sources said the battle is still far from over."There is a huge mobilisation behind-the-scenes which started soon after the cabinet meeting ended on Tuesday. Since then, there have been endless meetings and caucuses over the deal. Some ministers who did not attend the meeting have also vowed to fight for the deal to survive. It has triggered a messy fight in official circles.
Next week's cabinet meeting will definitely be interesting as sleeves have surely been rolled. We are also likely to witness a series of fightback manoeuvres starting next week. There will be blood on the floor.
DIDG yesterday came out fighting back, pulling no punches against Matiza."We have been inundated by enquiries from media houses to explain if the NRZ recapitalisation US$400m has been cancelled by cabinet. As it stands, legally, the deal has not been cancelled.
We are yet to receive any communication from NRZ as we can't take a media article as the basis of communication of such an important national matter," DIDG said.
"The official position as communicated to us by NRZ is that we are waiting for the Ministry of Finance to review and engage us and Afreximbank on the funding which will lead to formal and procedural recommendations to cabinet.
"Out of respect of the President, his office, government and our adherence to the dictates of professionalism as guiding our restraint, we have to date observed with shock and dejection how single-handedly the honourable minister Matiza has been using his position and office to misrepresent our company's capacity and the progress we have made in closing this deal which is pivotal to the economic recovery of our country Zimbabwe."
DIDG said Matiza has been on a warpath against them and the project for sometime now.
"We are gravely concerned by the conduct of the minister who has been consistently misinforming the populace, the President, cabinet and the entire government by misrepresenting the facts on a number of things relating to DIDG and the recapitalisation project," it said.
"For instance, only a few weeks ago Matiza has been claiming that DIDG has no funding knowingly and sitting on the term sheets reflecting over a US$1 billion that were first given to him on 1 October 2018 which means he has known the truth but denied and distorted if for more than a year.
"Since then, DIDG proved its ability to fund the project with Afreximbank support having been confirmed at the highest levels of both government and the funding institution, in which Zimbabwe is itself a shareholder. Matiza has now found an alternative reason being Transnet's failure to obtain its shareholder's approval from the government of South Africa. His actions fly in the face of government's concerted efforts in various local, regional and international fora to bring investment into Zimbabwe. His actions completely negate the government's re-engagement process and investment drive."
DIDG said Matiza made fundamental misrepresentations and committed a "grave mistakes" in the process of misinforming Mnangagwa and cabinet about the project.
"The minister has, in pursuit of an agenda we will never understand, contradicted the President's state-of-the-nation address position and NRZ board resolution which clearly affirmed that DIDG had made tremendous progress on the transaction... Matiza's move is unilateral and confirms his relentless desire to scuttle the deal for his own unknown interests."