CHINA, slowly but surely invading Zimbabwe’s economic landscape despite viewing it as a disaster zone, has come up with a controversial US$3 billion offer for vast local platinum reserves in a move which has stirred a fresh political storm in government circles.
The offer, likely to be rejected as it mortgages the country’s platinum resources and crucial streams of revenue, could stir political tensions between the two countries which conveniently claim to be close allies whenever it suits their interests.
The deal with China, through the Export-Import bank of China (China Eximbank), gives Zimbabwe US$3 billion to resuscitate its economy wrecked by extended years of bad policies and mismanagement. The US$3 billion offer is described in official documents, seen by the Zimbabwe Independent, as a “master-loan-facility”.
In return China gets platinum deposits in the Selous and Northfields concession covering 110 square kilometers. The concession has 30 million ounces of platinum, meaning it is worth between US$30-US$40 billion. China has been pursuing the coveted reserves since 2006.
The Zimbabwe Mining Development Corporation (ZMDC) and a Chinese company, Wanbao Mining, once entered into an agreement over the deposits but the deal collapsed after it was realised that a concession was used as collateral when Zimbabwe got a US$200 million facility from China Eximbank. The concession was encumbered and therefore the deal could not proceed. Zimbabwe has since 2009 been repaying the US$200 million loan to free the platinum reserves.
Sources said the new deal has been received with scepticism in government circles because it has stringent conditions. The three most critical conditions in the current financial package include mortgaging platinum reserves and ceding Chiadzwa diamond revenues and tollgate fees.
“China Eximbank, an institutional bank in that country, has offered the Zimbabwe government US$3 billion in exchange for platinum deposits in the Chegutu area,” a senior Asian diplomat confirmed this week. “The deal, which is still under discussion, has caused serious political problems because of its flawed structure and strict conditions. To get the money, Zimbabwe has mortgaged platinum reserves worth up to US$40 billion and gives up revenues from Chiadzwa diamond mining activities and tollgate fees.”
Finance minister Tendai Biti yesterday confirmed “talks are on” but refused to shed light. “We are communicating with the
Chinese, but I’m not at liberty to discuss the issue with the media,” Biti said. “The issue is under discussion.”
Efforts to get comment from the Chinese embassy were unsuccessful this week.
Sources said China wants most of the US$3 billion invested in agriculture, fertiliser manufacturing and drugs.
China Eximbank’s main focus is on international loans and export credit, and is the only Chinese bank authorised to distribute concessional loans. The bank has issued
loans to a wide range of African countries. Although Angola, Ethiopia, Nigeria and Sudan have been the traditional major recipients, recent projects announced last year show a more diverse group of countries are benefiting.
Last year China Eximbank agreed to support an airport upgrade in Mozambique and assist in revamping Zimbabwe’s water supply works, among various other projects in the country.
China and Africa have become increasingly linked economically, particularly over the last decade. As a whole, Africa has become China’s fifth largest trade partner — behind only the United States, Japan, South Korea and Germany.
However, China is now zeroing in on Zimbabwe’s huge mineral reserves. Zimbabwe has vast mineral deposits, including platinum. South Africa is currently the leading world platinum producer, followed by Russia.
The Sino-Zimbabwe platinum deal was first mooted in 2006. It was revisited vigorously in 2009 but stalled due to loan repayment issues and valuation of the mineral deposits.
Although the platinum concession the Chinese want is estimated to be worth US$40 billion, sources say Beijing only wants to pay US$3 billion. This riled government officials who think the Chinese want to grab the country’s minerals for a song.