HomePoliticsStorm Brews Over China Deal

Storm Brews Over China Deal

FURTHER details have emerged over Zimbabwe’s controversial platinum deals and credit facilities with China which have now provoked a storm in government as the main political leaders fight to claim glory for the funding.

Official sources said this week that Zimbabwe and China recently signed a cautioned Memorandum of Understanding (MoU) with the Eximbank of China over the existing US$200 million deal connected to the anticipated US$5 billion platinum mining deal between the two governments.

The US$5 billion figure came out of complex calculations involved after a meeting between Treasury and Reserve Bank of Zimbabwe (RBZ) officials on June 8.

The meeting was attended by Biti himself, his advisor Conrad Nyamurova, and an official in his ministry, Mary Takavarasha, Reserve Bank governor Gideon Gono, his deputy Edward Mashiringwani and Gono’s advisor Munyaradzi Kereke.

Minutes of the meeting held at Biti’s office on June 8 show that the minister highlighted he had recently signed an MoU with Eximbank as part of efforts to sort out the platinum deal linked to existing credit facilities.

The minutes of the meeting headlined “Zimbabwe-China US$5 billion loan” note the following points:


  • The minister (Biti) lamented the current format of the platinum-backed loan through Eximbank of China which would heavily prejudice Zimbabwe;
  • If the deal goes through, the Chinese would get 50% in a mineral resource (platinum) worth at least US$40 billion without paying anything;
  • Gono agreed with the minister (Biti)’s strong reservations and added that the RBZ had long stood opposed to the deal and;
  • The minister (Biti) highlighted that recently he signed a cautioned MoU with Eximbank on condition of clear legal documentation and declaration of obligations of the Chinese.

Information gleaned from documents to hand show that Biti recently signed a cautioned MoU with China’s Eximbank  to pave way for work to begin on the mining concession that was mortgaged and thus encumbered after the negotiation of a US$200 million credit facility with Eximbank. The initial deal was structured on a wrong valuation  framework of US$10 per ounce.

Although the platinum concession involved is estimated to be worth US$40 billion, government officials say the deal with China should be at least US$5 billion considering the current platinum prices on the world market.

According to Platinum Today, a web-based publication which claims to be world’s leading authority in the platinum group metals, the monthly average price of platinum of late has been between US$1 167 and US$1 168 an ounce. The price was US$1 109 per ounce yesterday.

A senior government official said yesterday Harare currently wants Beijing to contribute at least US$5 billion in the platinum deal.

“If Zimbabwe and China took the lowest possible price of platinum per ounce of say US$1 000 an ounce in view of the fact that there are 30 million ounces of platinum in the concession, the real value of the deal would be US$30 billion,” the official said. “If you take the current market prices it goes up to US$40 billion.

This means that if the Chinese were to get 50% of the equity as initially agreed, they should pay between US$15 billion and US$20 billion. However, we think US$5 billion is a reasonable figure and that is what we are working with.”

Despite Biti’s feverish denials, government is engaged with the Chinese over the massive platinum deal and credit facilities, including the US$950 million deal that is currently on the table. The US$950 million negotiated under China’s buyers credit facility is almost a done deal although there are a few issues which need to be finalised.

Sources said Zimbabwe first needs to clear its US$30 million arrears to the Chinese and pay a deposit of 10% of US$950 million – US$95 million – and thus a total of US$125 million before the money comes. However, the conditions could be waived. The issue is still under negotiation. 

Biti signed an MoU with Eximbank to free the platinum concession which was mortgaged in 2006 when Zimbabwe signed a US$200 million facility with the bank.   

The deal dates back to events starting in 2006. It involved the Zimbabwe Mining Development Corporation (ZMDC) and a Chinese company, Wanbao Mining, for the development of platinum in a concession known as Selous and Northfields reserves covering 110 square kilometres.

ZMDC represented the Zimbabwean government and Wanbao the Chinese.

Zimbabwe has huge platinum deposits. South Africa is currently the leading world platinum producer, followed by Russia.

However, when Zimbabwe in 2006 negotiated a US$200 million facility with Eximbank, the Selous and Northfields reserves were put up as collateral.

This left the concession encumbered and the mining deal was stalled for a while. Biti has now signed the MoU to extricate the concession and allow for the mining upon finalisation of “legal documentation and declaration of the obligations of the Chinese”.

The Chinese development assistance has been in the form of concessional loans, export credit (including buyer’s and seller’s credit) and grants.

Zimbabwe has benefited from a buyer’s credit loan from China. In August 2006, China extended a US$200 million buyer’s credit loan facility to Zimbabwe for the procurement of fertilisers, agrochemicals, agriculture equipment and tools, irrigation and other equipment and animal health products.

The terms of the agreement include: the value of the commercial contract should be more than US$2 million.

The portion of the Chinese content of exported goods should be no less than 50% of the total value.

The cash payment (down payment) made by the importer to the Chinese exporter should not be less than 15% of the total contract value or 20% in the case of ship export contract.

The export buyer’s credit provided by the Eximbank of China for an export project of goods or services shall not exceed 85% of the total contract value, and 80% in the case of a ship export contract.

Biti has been trying to sort this issue out in relation to the platinum deal.


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