Zim army muscles in on rich platinum deal
Zimbabwe’s army has won a bitter struggle with the country’s ministry of mines and mining development for the control of a lucrative $4.8-billion platinum mine.
The project is a joint venture between the military, through the Pen East Mining Company, and Russian investors, including the Russian defence conglomerate Rostec State Corporation, Vi Holding and Vnesheconombank.
There are indications that President Robert Mugabe will sign the lease agreement soon despite concerns raised by the mines ministry.
Government officials told the Mail & Guardian that the mines minister, Walter Chidhakwa, had delayed submitting the lease papers to Mugabe for signature. The lease allows the Russians to operate in the country without paying taxes for five years.
Chidhakwa has reportedly said he would have preferred the Russians to partner with the state-owned Zimbabwe Mining Development Corporation (ZMDC).
The Russians, frustrated by the lack of co-operation from Chidhakwa’s ministry, have allegedly demanded more land for the project, which ministry officials have opposed.
The officials have also rejected an environmental impact assessment submitted by the Russians. They said it was unlikely to have been thorough as it was conducted too quickly – in only three months.
They compare it with a similar study carried out over three years by the Australian company BHP, which was once given the right to mine in the area more than a decade ago.
State to monitor operations
“The belief in the ministry is that ZMDC should have a large stake in the deal so that the state can actively monitor operations,” a mines official said on condition that he was not named as he was not authorised to speak to the media.
“The ministry also wants the benefits of the deal to accrue to Zimbabweans and treasury, rather than the army. We don’t want a repeat of the Chiadzwa scenario where the country is not truly benefiting from its diamonds. The army partnered the Chinese in mining diamonds, but the country has nothing to show for the resource.”
Former finance minister Tendai Biti and the current incumbent, Patrick Chinamasa, have complained about the diamond revenue not being properly accounted for.
Mugabe and Russia’s foreign minister, Sergey Lavrov, oversaw the signing of the deal for the development of the platinum project during Lavrov’s visit to Harare in September last year.
Lavrov was accompanied by Denis Manturov, Russia’s trade and industry minister who is also the chairperson of Rostec’s supervisory board.
Single largest foreign investment
The deal will be the largest single foreign investment in Zimbabwe – equal to nearly a third of its estimated gross domestic product.
When the mine is fully operational in 2024, it is set to produce 800 000 ounces of platinum a year. The project is expected to raise Zimbabwe’s output to more than one million ounces a year and create 8 000 jobs.
Government sources said that, after months of haggling, the president’s office had told Chidhakwa to forward the papers for Mugabe to sign. The army, the sources said, had complained about the delay, forcing the office to act.
“Chidhakwa has finally caved in and the relevant papers are now with the office of the president and Cabinet, awaiting Mugabe’s signing,” the mines official said.
Chidhakwa did not respond to requests for comment. But the deputy mines minister, Fred Moyo, said nothing should delay the start of operations at the mine in Darwendale.
Army spokesperson Overson Mugwisi asked for questions to be sent to him but did not respond despite numerous calls and emails.
Russians concerned about delays
According to sources, the Russians have been concerned that the delays are pushing up costs.
“They have so far ploughed in over $5-million for exploratory work and they have over $600-million to invest over a two-year period, but they are gravely concerned that delaying implementation will continue to escalate the costs of the project further,” a source said.
“The Russians are saying their money ... continues to lose value, as the rouble is falling amid falling commodity prices for oil and platinum, as well as [a result of] Western sanctions slapped on Russia for its role in the crisis in Ukraine. For such reasons they can ill afford the added bureaucratic bungling by Zimbabwean authorities,” the source said.
But government officials said the signing of the lease was just one hurdle, as the Russians were also “pressing for at least 10.5 hectares more land” in addition to the mines’ 6 500 hectares, for the construction of a business centre, 500 residential units, a clinic and social amenities.
The official said they were likely to be granted their request following the military’s intervention.
Previous lucrative financial deals involving the army have been veiled in secrecy, which has raised concerns that the contracts have benefited highly placed military officers and their families, and not the fiscus.