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Africa 2012 – When minds meet – debt, diamonds and development in Zimbabwe


Zimbabwe like the majority of African States is well endowed with rich mineral resources to suggest that its current state of development can be meaningfully transformed solely by leveraging on God’s creation and gift.

Addressing a seminar hosted by Sapes last week, Deputy Prime Minister (DPM) Professor Arthur Mutambara added his voice to a possible linkage between Zimbabwe’s mineral resources, its debt and development prospects by asserting one good deal could offset the country’s sovereign debt of $9,1 billion.

After 32 years of independence, we are all compelled to join the battle of ideas in the full knowledge the promise of a better life requires an investment in correct ideas and not criminalising economic behaviour.

Such ideas reside in the minds of citizens and when a correct idea emerges the outcomes are as predictable as they are inevitable.

The idea that Mutambara is credited for advancing is no different from the idea that manufactured the term “externalisation” in the Zimbabwean narrative with disastrous consequences.

He observed that, “Zimbabwe is losing billions of dollars in ‘bad’ mining deals and government will soon revisit these transactions. Big foreign companies are not declaring the value of unmined assets thereby prejudicing the country.”

Implicit in the idea is a notion that the State is capable of owning resources and, therefore, unmined resources truly belong to the State and that it is fair, just and equitable to place the burden of disclosure on non-State actors.

The locus standi of Mutambara in asserting this idea is premised on his role as a State actor who must hold the view that it is the responsibility of State actors and not citizens to shape and define the character of the nation state.

How can Zimbabwe be poor and yet be credited with vast resources that are giving unjust and unfair value to non-State operators?

By invoking the word “bad” the intentions are clear and the outcomes sought are inescapable. What is a bad mining deal?

It would seem that a bad mining deal is one in which a prospective investor in a mineral prospecting endeavour suffers the obligation of disclosing that which they are not capable of knowing at the time the prospecting right is applied for and granted.

If the geology is known and the resources are established and measured then there would be no need to engage in any prospecting activity.

A prospecting order by construction and performance is granted precisely because limited or no knowledge exists on the resource that may be hosted in the target geographical area.

To establish a resource requires risk capital and, therefore, any idea that seeks to criminalise the prospecting process in so far as the investment in prospecting, may reveal a commercially and technically viable resource, will have its unintended consequences ie reducing or even undermining investment that is critically needed to create scarce jobs and deliver a better life.

How can anyone conceal information that is not available?

The factual and legal matrix available would suggest that if an asset equivalent to $20 billion was established and known, the obligation to disclose it would fall on the government rather than Essar.

The status of Zisco prior to the involvement of Essar is common cause. The need for Essar to invest in exploration cannot be understated.

How then could Essar be expected to declare that which was not known by the grantor of the prospecting order in respect of iron ore reserves?

If the argument advanced by Mutambara is to be accepted, then the implications on indigenisation are fairly direct and obvious.

The majority of indigenous persons have limited access to capital to secure prospecting rights let alone to engage in mining. If anything, if the thinking of Mutambara is followed to its logical conclusion, no indigenous person would be eligible to be granted a prospecting right.

If Essar can be accused of defrauding the State to the tune of $20 billion then what will be said about the black beneficiaries of the same rights?

After 32 years of independence, it must be accepted that Zimbabwe has failed to create its own mining role models not least because of the machinations of imperialists, but because of an attitude that is implicit in an ideology that subscribes to the notion that what God has created belongs to the State and the State’s role through its actors is to pass on the resources to the highest bidder.

Some may naïvely conclude based on the assertion that granting prospecting rights to non-State actors in criminal, it is advisable for the State to create a company that will be involved in prospecting minerals and even go further to ban the granting of prospecting rights in the belief that doing so would prejudice the nation state.

The history and background of Zimplats is well established to suggest that at the time of its entry, no reliable knowledge existed about the bankability of the platinum resources.

The reason BHP pulled out must also be interrogated before conclusions are made the company made no mention of $4 billion worth of unmined platinum.

The role of the State in mining that seems to be at issue has to be understood.

Before Implats could acquire shares in Zimplats, there is no doubt that the government was engaged and more significantly no company could engage in prospecting activities without securing the consent of the government.

The starting point for any meaningful and constructive discourse on the subject matter that Mutambara has added his voice to would have to be on the state of knowledge that existed at the time when Implats, for example, entered into the country.

The rights in question were granted by no other authority that the State that Mutambara is now part of and, therefore, the institutional memory must exist in the corridors of the government on the circumstances and information that existed and was available at the material time.

If the resource underground was known to State actors then surely the finger must be pointed at the right parties than to visitors.

Mutambara also mentioned the example of the Diamond Mining Company (DMC) that he alleged had not declared the value of $500 million representing presumably the resource in the area covered by a legitimately obtained prospecting order.

In advancing the idea Zimbabwe must change course, he made the point that DMC had generated a profit of $43 million in two transactions.

Any risky investment brings with it losses or profits as the case may be. Even the lottery has been known to transform an investment of $1 into millions to suggest that the government must concern itself with policies and programmes that increases the pool of taxable entities rather than reduce them.

Should governments be engaged in speculative economic activities?

Based on the idea advanced by Mutambara it would seem the government ought to change the business model that has worked for other successful economies.

If State actors were to be trusted to be the custodians of minerals then it will be difficult for anyone who believes that they have a superior claim on knowledge or even economic nationalism to leave office.

A sovereign wealth fund may simplistically offer a solution, but when sovereignty is stolen and State actors are not accountable then one has to be wary of any dispensation in which more power is vested in State actors.

The absence and harassment of black entrepreneurs in post-colonial Africa and the lack of protection mechanisms would suggest that it is important that a new conversation be opened on the matters that have now been put under the umbrella of indigenisation and economic empowerment when they truly belong to a discredited ideology.

Zimbabwe can lift its prospects not by leveraging God’s gift to mankind, but by investing in correct ideas that help to inspire both indigenous and non-indigenous persons to believe in the future of the country.

Any attempt to link government revenues on gross revenues of non-State actors will be doomed to fail. The fiscal challenges of Zimbabwe will be cured by correct ideas.

This will not be done successfully be pointing fingers, but by thinking creatively and innovatively about the purpose of the State and the role of its actors in the business of creating and sustaining a better life for all.

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