Zimbabwe: Bear versus Dragon

While Western investors continue to shun Zimbabwe, the Brics countries are rushing in to fill the void. China is already the country’s largest investor and Russia is now snapping at its heels with several mega projects. Barnabas Thondhlana reports from Harare.

African Business Magazine

Russian investors are stepping up their presence in Zimbabwe, competing against China for a share of the country’s rich resources — from platinum to diamonds, commodities and a bank.

In its latest report, advocacy group 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 worth billions of dollars.

While relations between Zimbabwe and the West are thawing, trade volumes between the country and China doubled between 2010 and 2013 to US$1,1 billion. In 2010, trade between the two countries stood at US$562 million.

China has invested more in Zimbabwe than any other nation with 35 companies doing business in the country.
“So that means in these three years we have doubled our trade cooperation,” said outgoing Chinese economic and commercial counsellor Han Bing. “And what’s more in these three years? In our bilateral trade, Zimbabwe enjoys trade surplus every year.”

Bing said in 2013 Zimbabwe’s trade surplus with China was US$274m, with the biggest Chinese imports from Zimbabwe being tobacco. China has been dominating tobacco imports from Zimbabwe since 2009.

He said Chinese investment to Zimbabwe has been on the increase since 2010, where it stood at US$33,8m before rising to US$460m in 2011 and over US$600m in 2013.

China top 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$670million from a total of US$930million worth of projects approved last year.
“So in these three years, especially in 2011 and 2013, Zimbabwe ranked number one in the whole of Africa in respect of attracting Chinese investments,” Bing said.

He added that most Chinese investors in Zimbabwe were still at the investing phase and were yet to reach the profit phase. He confirmed that China was working on providing loans to Zimbabwe that would be secured by mineral resources.

He said the Export-Import Bank of China had already granted US$1bn of loans to the country for infrastructure projects such as Victoria Falls Airport enlargement, Kariba South Power Station, Harare water and state-owned mobile cellular telephony company NetOne.

China has also made inroads in Zimbabwe’s agricultural sector, taking up several farms acquired by government during the land reform programme. These grow a variety of crops ranging from tobacco, wheat and 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 (in)security in Zimbabwe. Maize, Zimbabwe’s staple food, is shunned by Chinese farmers,” the Centre for Natural Resource Governance says.

China has become a major player in the country’s economy through its joint venture enterprises such as Anjin Investments, involved in diamond mining ventures with the military at the diamond-rich fields of Chiadzwa, some 210km east of the capital; and Sino-Zimbabwe Holdings, which previously had a concession in the diamond fields as well. Anjin has the largest diamond concession in Marange.

Russian presence expands
The Russians have also quietly established a presence in the country. A recent announcement by a consortium of made up of Russian Vi Holding, Rostec and Vnesheconombank that it will invest US$3bn to build Zimbabwe’s largest platinum mine is one example of how Russia is continuing to broaden its interests in Zimbabwe.
Rostec is a large, state-owned conglomerate that has invested in more than 600 Russian firms.

Among its interests are auto manufacturing firms, which may have convinced the company to seek new investments in platinum group metals, which are used in the manufacture of catalytic converters to reduce vehicle exhaust emissions.

Rostec’s head is Sergei Chemezov, a close ally of President Vladimir Putin. In April, the US placed Chemezov under sanctions following Russia’s role in the Ukraine.
But being an enemy of the West makes for good friends in Zimbabwe – and in a letter to Putin, quoted by Russian media recently, Chemezov details plans for the new mine in Zimbabwe.

Big leap for mining
The company hopes to have completed exploration by the end of this year and then to begin building the mine at Darwendale, some 60km north west of the capital, Harare. Russian media reported that construction of the first phase of the mining and processing plant will begin in 2015, with an initial investment of US$500m for the US$3bn project.

The Darwendale mine is said to have reserves of 19 tonnes of platinum and 755 tonnes of other metals such as palladium, rhodium, gold, nickel and copper. After the mining and processing complex is launched, capacity will reach 600 000 ounces of platinum annually. That level of production would be a huge boost for the country, whose mines produced a record 430 000 ounces last year.

Mines Minister Walter Chidhakwa says a team is being sent to Russia to discuss the Darwendale proposal. If it is successful, the platinum mine will be a big leap for Russian investors, who have been nibbling at the edges of Zimbabwe’s resources for years, but have begun to show more interest in recent months.Horizon Capital, a consortium of Russian investors, has recently completed the takeover of Tetrad, a Zimbabwean financial institution.

The deal is said to be worth US$50m, according to various market sources. Sergey Pokusaev, said to be the head of the consortium, appears interested in using Tetrad as an avenue into making further investments in Zimbabwe. Alexander Chepik, the head of Ruschrome, says Zimbabwe’s rich mineral resources are a major attraction for Russian investors.

“The whole of Mendeleev’s table is there,” he told Russian media, referring to the periodic table of elements invented by the Russian chemist Dmitri Mendeleev.

Russia already has interests in Zimbabwean natural resources through DTZ-Ozgeo, a joint venture between Econendra of Russia and the Development Trust of Zimbabwe.

The company is one of several licensed to mine diamonds in the east of the country. DTZ-Ozgeo has recently signed a technical cooperation agreement with Russia’s state-owned Alrosa, the world’s largest diamond miner by volume, accounting for over a third of global rough diamond production.

As they say, when one door closes, another opens.