Resource deals must be scrutinised

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THE US$4,2 billion platinum investment deal between government and Cyprus-based company Karo Resources, although positive at face value, needs to be scrutinised to ensure transparency and avoid corruption in the natural resources sector, as well as the resource curse.

By Kudzai Kuwaza

The resource curse is a paradoxical situation in which countries with an abundance of non-renewable natural resources experience economic stagnation and lack of development. The platinum deal was signed at Munhumutapa Offices in Harare last week by Mines and Mining Development minister Winston Chitando and Karo Resources chairman Loucas Pouroulis.

The mine will be located in the Mhondoro-Ngezi area, while the deal includes the establishment of a 600-megawatt thermal power station in Matabeleland North and chrome mining.

However, like many other deals before it, the devil is in the detail — which has not been fully revealed.

Zimbabweans have become accustomed to announcements of “mega deals” over the years that never come to fruition.

The opaque nature of the deals has been a breeding ground for corruption and looting.

President Emmerson Mnangagwa’s remarks at the signing ceremony for the platinum deal indicated as such.

“I am happy that this day has come. This has taken more than six years to reach this day. Had we embraced their intention to invest in this country in platinum the year they came and I took them to then President (Robert Mugabe), we should have been on the sixth year of the programme but because of bureaucracy and other unnamed vested interests which are corrupt, this could not happen,” he revealed.

Ironically, Mnangagwa was presiding over a deal which is also opaque.

The dodgy diamond deals in Chiadzwa also exemplify the opaque nature of Zimbabwe’s mining sector. Two of the largest companies which operated in Chiadzwa had controversial and murky structures.

Mbada Diamonds, for instance, was a joint operation between the Zimbabwe Mining Development Corporation (ZMDC), through its subsidiary Marange Resources and Grandwell Holdings, partly owned by South African company New Reclamation Group (Pty) (Reclam) Ltd.

Grandwell is a limited liability company incorporated under the laws of Mauritius in July 2009.

Grandwell was owned 50,1% by Reclam, while a consortium of Chinese investors owned 49,99% of the company.

A mysterious Hong Kong-registered company, Transfrontier Mining, later acquired 49,99% of Grandwell.

The beneficial owners of Transfrontier remain unknown. Mbada Diamonds director, who is also Grandwell chairperson, David Kassel tried to clarify the situation in an interview with the Zimbabwe Independent last year.

“The 49,99% of Grandwell was owned by Transfrontier Mining, which was controlled by a consortium of Chinese investors in Hong Kong. I understand that shareholding is now being housed in a charitable trust controlled by the second largest Chinese accounting firm in Hong Kong on behalf of investors,” he said.

It was a similar case with Anjin Investments, a joint venture between Anhui Foreign Economic Construction (Group) Co Ltd (Afec), a large construction company which sources say is connected to the military-industrial complex in China, and Matt Bronze Enterprises, that was formed by the Defence ministry and the Zimbabwe Defence Forces through Glass Finish Investments (Pvt) Ltd.

In a report, titled An Inside job Zimbabwe: the State, the Security Forces, and a Decade of Disappearing Diamonds, civil society organisation Global Witness confirmed the Independent’s past investigations that the military is the single biggest local beneficiary of Anjin’s diamond mining revenues.

Former president Robert Mugabe has claimed that US$15 billion worth of diamonds were unaccounted for, sparking national outrage. Though he eventually admitted to the Independent that it was a thumbsuck figure, it is generally agreed that there was large-scale looting.

The coming in of the Mnangagwa administration, via the barrel of a gun, created hope that perhaps the government would adopt a new way of handling the mining deals. This is especially so after Mnangagwa’s pronouncement that the country is open for business as well as his declared fight against corruption.

However, the status quo remains so far.

Take the US$4,2 billion Karo investment deal, for example. The full beneficial owners of the deal are not declared beyond half disclosures. There was no explanation and detail of how the investment added up to US$4,2 billion, an amount equivalent to the size of the country’s budget.

Given that these are non-renewable resources, there is need for scrutiny and transparency to avoid robbing the country.

Economist John Robertson says there should be a culture of transparency when penning such deals, adding bureaucratic red tape should be done away with as it encourages corruption.

Robertson said the failure by government to disclose finer details might signal that there is no concrete deal on the ground or something is being hidden from the public.

“Well, I would even question whether the deals really do exist,” Robertson said. “It seems that government is trying to talk people into believing that something is happening.”

Economist Prosper Chitambara said the government needs to adopt the Extractive Industries Transparency Initiative (EITI), a global standard for the good governance of oil, gas and mineral resources. It seeks to address the key governance issues in the extractive sector.

“Transparency, accountability and clarity are important in these deals. Government can actually implement EITI,” Chitambara said. “A number of countries, including neighbouring Zambia, have gone that route and it is really helping in improving revenues and transparency. EITI brings on board government, communities and civil society. It is an inclusive approach and that is the way to go.”

The EITI standard requires information along the extractive industry value chain from the point of extraction, to how the revenue makes its way through the government, to how it contributes to the economy.

Economist Muchesa Chatsama believes Zimbabweans should interrogate the government’s deals to ensure transparency.
“The major challenge is that we do not interrogate government on the deals they announce. We just clap hands and, being politicians, they will always take advantage of that,” Chatsama said.

He said despite government announcing plans for the first 100 days, there has been no substantive feedback on the achievements and failures during the period.

“We need details of the deals that have been agreed, not cosmetics. Politicians are getting away with murder,” he said.

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