HomeNewsOil deal: Is the govt safeguarding Zimbabwe’s interests?

Oil deal: Is the govt safeguarding Zimbabwe’s interests?

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by SHAME MAKOSHORI

IN 2014, The Financial Times (FT) exposed how Chinese middlemen had joined the ranks of African resource plunderers.

A Chinese multinational, with the help of a networked former intelligence chief, were creaming off the region’s vast oil resource and minerals before cleaning dirty money on sprawling waterfront skyscrapers.

In the jurisdictions that the top-end real estate gems were purchased, office and industrial space is gold.

They are not just monumental icons that compete to touch the skies. They generate real wealth for the crooks that manipulate Africa, while for hundreds of millions of her people, it is a real victory to afford a single meal.

Zeroing in on the African interests of Sam Pa, the man it described as “China’s Middleman in Africa”, The FT exposed an elaborate plunder scourge linking not only Chinese firms but the world’s biggest multinationals to serious crimes in Africa.

These had hooked up with senior government officials in countries like oil-rich Angola and Nigeria, together with Zimbabwe and Guinea, which have huge endowments of the most sought-after minerals.

It is a frightening web of underground firms and crafty personalities with the power to sweet talk authorities into appending their signatures on murky deals.

“The Queensway group of companies have made themselves a partner of choice for the repressive regimes that control some of Africa’s most resource-rich States, where corruption traps millions in poverty while their rulers amass extraordinary wealth — from Robert Mugabe’s Zimbabwe and a murderous junta in Guinea to the corrupt petro-States of Angola and Nigeria,” said the FT.

The fact that Zimbabwe was on this list was not mere coincidence.

The looting spree, which has continued till today, had attained catastrophic levels, with traces of Harare’s diamonds being found across the world’s fastest growing and spending regions, together with the traditional advanced economies. This is how more wealth has been leaving Africa every year than what comes through.

In 2018, campaigners at the Global Justice Now placed the difference between the wealth that was leaving Africa, and that which was entering the continent at over US$40 billion. For Zimbabwe, this looting at global scale was confirmed by an International Crisis Group (ICG) paper three weeks ago, which placed the value of diamonds smuggled annually at US$1,5 billion.

This is a huge amount by any measure.

But for a fragile African country that has battled to feed millions of its people for decades, this may be a catastrophe.

The genesis of the looting can squarely be linked to government policies that force small-scale miners to sell their precious metal to a unit of the central bank, which pays for gold 70% in US dollars.

President Emmerson Mnangagwa’s government went quiet when the ICG report came out, probably confirming that it had run out of ideas to end the looting.

“Estimates suggest that more than US$1,5 billion worth of gold leaves Zimbabwe illegally each year, often ending up in Dubai,” said the report ICG.

However, government is under pressure to act.

Before the gold catastrophe, US$15 billion had vanished in Zimbabwe’s diamond fields, with rights campaigners demanding explanation on behalf of a population that has been haunted into silence even at time State transgressions are very visible.

But in the past few months, Harare has demonstrated that it will not keep quiet when its gas fields, where Australia’s Invictus Energy is convinced it may strike the riches soon, begin ejecting the black gold out of the earth’s crust.

On this one, there is no room for error or misjudgements.

Harare wants its pound of the flesh.

Invictus is scouring Zimbabwe’s north eastern front for potentially lucrative oil or gas endowments.

But even before the oil or gas is pumped out, Mnangagwa’s administration wants a concrete agreement that ties the parties to transparency and fairness from the day the first drop shoots to the surface.

This will be achieved through signing a production sharing agreement (PSA).

It is an attempt to make sure that oil, or gas, if found, will not turn into another resource curse.

Production sharing agreements, like concession agreements have been around for as long as there has been oil production.

The agreement provides a concession of exploration, development, and production rights to an investor who in turn would reimburse the resource owner with a stated percentage of the produced resources.

One of the defining characteristics of concession agreements used to be that concessions were thought to confer title of the oil in the ground to the oil company, thus causing debates regarding ownership of the oil.

At the present moment, modern legislation in many countries include provisions that clearly state that the government is the resource owner.

Private subsoil property rights are recognised only in the US and South Africa.

“The essential difference between concession agreements and production sharing agreements is that the latter provides for payment to the resource owner after the recovery of production costs. The payment mechanisms to the resource owner are the sole differences between the three types of agreements,” says the Kazakhstan Business Magazine.

“By permitting the investor to recover his expenses first, production sharing agreements have become popular with the high-risk oil industry, since they carry lowest risks for the investor. As a general rule, production sharing agreements are on the progressive side of the risk continuum, as opposed to the generally regressive concession agreements,” the magazine note.

Around 2008, the late Mugabe’s administration deployed scores of special officers from the Minerals Marketing Corporation of Zimbabwe to guard the places where platinum was prepared for exportation to prevent looting.

But the administration continued to cry foul.

So, in the oilfields, his successor, Mnangagwa wants a deal, soon.

“We have had key milestones,” Chitando told reporters in August. The Zimbabwe Investment Development Agency licence has been given and the area’s special grant has been extended by three years. A production agreement is being negotiated with government. Government will get a certain percentage of the production. The draft agreement is in place and the final agreement is expected in the next few weeks and drilling of the well will be in the third quarter of 2021,” he said.

Invictus says it is ready to play a fair game.

Last week, it said the deal was close.

“The production sharing agreements (PSA) with the Republic of Zimbabwe continue to progress and are now in the approval process. The company will provide updates to the market regarding progress in the finalisation of the PSA and any associated government approvals,” said Invictus.

An update on the PSA was part of a broad range of issues dispatched to the market, including new discoveries of important signals that may point to where exactly the fortune lies.

“The company successfully concluded its recent field operations and reconnaissance programme in the Cabora Basa Basin,” said Invictus.

“Detailed traversing and mapping across the area has been completed and identified the optimal acquisition routes. The company is making significant progress on executing the first seismic acquisition programme in the country for 30 years and is working closely with the seismic contractors on a planned acquisition campaign in 2021 to commence once the rainy season has concluded. This will be followed by a high impact basin opening drilling campaign to test the petroleum potential of the Cabora Bassa Basin,” the statement added.

In Harare Tapiwa Sibanda, an economic analyst and head of research at Trade Wind, said a paper agreement may not do the trick.

“We need specialised people with skills to work in these specialised areas to prevent looting,” he said.

“By writing official agreements on paper, the parties are only agreeing that they want to work together. But, as we have seen on gold and diamonds, the multinationals that mine the resources are specialised. If they choose to loot they can easily do that. We are hoping that with the gas in Zimbabwe, government will make specialised follow ups to make sure the deal is not only fair, but it benefits everyone. We are not in any way suggesting that Invictus will loot gas, but the relations between big business and poor African economies are known. It is not an exaggeration to say when dealing in these specialised areas, government must be careful. This is informed by history. There were reports that another big diamonds firm looted many tonnes while still exploring,” he said.

 This story was first published by the Weekly Digest, an AMH publication.

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