‘US$1,5bn mining deal must be fair to Zim’

By The NewsDay | May. 24, 2021 | 5 Min read

CHINESE firm, Afrochine Smelting last week made an emphatic and strategic move into Zimbabwe’s chrome mining sector in Mashonaland East, in the latest signal of an intensifying scramble for Zimbabwe’s minerals.

BY SHAME MAKOSHORI

Zimbabwe has recently played host to scores of foreign investors, sealing deals that span from mining and mining equipment supplies — the highlights of which has been the US$3 billion Darwendale platinum deal by Russian investors and a US$4 billion platinum mining deal being pursued by Karo Resources.

Perhaps the Chinese firm left intricate details of how much it plans to inject at the Chivhu operation to the official opening of the projects in a few months’ time.

But there have already been indications that Beijing could be developing one of its biggest integrated resource operations in southern Africa in Mashonaland East.

On paper, the deals are expected to bolster Zimbabwe’s elusive economic recovery, which has entered its 21st straight year, amplified by the COVID-19 pandemic. But analysts have been questioning why China’s march into Zimbabwe’s resources sector two decade ago has failed to help the country to recover.

Zimbabwe has been in turmoil since 2008, when hyperinflation reached 500 billion percent, according to the IMF.

Analysts are worried that the state of the economy has not responded to several injections from Beijing — the frontrunners in a new race to ship African resources to advanced countries’ booming industries.

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Tapiwa Sibanda, head of research at Trade Winds this week said in the desperation to drive foreign direct investment and bolder economic recovery, Zimbabwe must understand that the bulk of resources sector deals across Africa have rarely benefited countries that own the resources.

“It is good that Zimbabwe and China are firming up their diplomatic and economic ties but like all the big powers, the Chinese are known for doing things that do not benefit us,” he said.

“We have had the Russians in Penhalonga, in Hwange and in many other deals, and the Chinese were well represented in Chiadzwa diamond fields. But these deals have not benefitted us,” Sibanda said.

There have been concerns that under pressure to rebuild its economy, Harare may have negotiated bad deals that have only benefited rich countries and multinational corporations. Under last week’s deal, for swaths of land measuring about 2000 hectares in Chivhu would be opened up to develop a carbon steel plant, which is about one and half kilometres and a ferrochrome plant which will generate 500 000 tonnes of ferrochrome.

It is estimated that the operation would be bigger than Zimasco, and could possibly be one of the region’s largest resources extraction firms turning over US$1,5 billion yearly.

It is part of a broad ambition by the Chinese firm, which already has a huge presence in Zimbabwe, including two furnaces in Selous and a 150 000-tonne coke battery in Hwange.

But while the promise to add value to the resource appears lucrative, the biggest beneficiaries on the deal will be the multinational, when it finally ships the chrome to Chinese industries. This has already been seen in the tobacco sector, where the Chinese have made huge inroads. Authorities were mum on these shortcomings when they unveiled the project last week.

“The idea is to have an area of about 2000 hectares where a number of things will happen,” Winston Chitando, the mines minister, told reporters. “The first is the carbon steel plant, which is about one and half kilometres. Next to it will be a ferrochrome plant which will generate 500 000 tonnes of ferrochrome. Those who know Zimasco, it does around 150 000 tonnes. So, this will be three times the size of Zimasco. Then there is an iron ore mine and iron ore plant. The total turnover of this whole project will be US$1,5 billion, bigger than Zimplats and any other project you can think of. That is really the grant plan,” Chitando added.

Afrochine managing director Benson Xu said discussions were underway to establish a dedicated power line and railway for the project. A dam may also be constructed in the area. The spinoffs are positive but analysts are still concerned that such deals, which are rarely put before public scrutiny, have been bad for Africa, and Zimbabwe.

“The discovery of minerals, oil and gas generates great expectations from citizens,” Claude Kabemba, one of southern Africa’s biggest campaigners against unfair resource exploitation. Kabemba has been one of the biggest critics of mining giants operating in southern Africa.

“The challenge today is how to ensure that African countries escape the resource curse. How to use efficiently the abundant resources for the benefits of citizens. The ‘resource curse’ is one of the most persistent and debilitating clichés about African countries blessed with deposits of oil, gas and valuable minerals. In most developing countries, resource extraction continues to produce enclave economies similar to extraction during the colonial times,” Kabemba said.

In is works, Kabemba said the problem with the region was that it had weak States with weak institutions, regulations,and administrations to take on the rich economies in discussions for natural resources exploitation.

“Deals are not made known before they are signed, contracts are not published. In all the countries, the resource curse has been fundamentally a political problem-corruption. The entire extractive industry must be built on the principle of people before profit. The biggest challenge that resource-rich countries face, is how to ensure that the resource are extracted in a sustainable manner and its proceeds distributed in an equitable manner. The country can consider bringing in external skills (negotiators) to be able to counter the vast expertise and knowledge that EI companies bring to bear,” Kabemba wrote.

Still many analysts contend that transnational deals have benefitted crisis-torn Zimbabwe. However, there has been agreement that the transactions have not materialised into meaningful economic benefits for the country. In any case, they said, China stood to benefit more from the country’s resources, which they were snapping at discounted prices.

Beijing’s capital flowed into Zimbabwe when western countries maintained their embargo on the country.

State-owned Chinese firms have been outpacing investors from other parts of the world in the scramble for Zimbabwe’s minerals. Analysts say for the deals to translate into real economic recovery, Zimbabwe must adopt policies that ensure it benefits from resource exploitation by its allies. For instance, Zimbabwe has to ensure that Chinese firms’ salaries to Zimbabweans compare favourably with those paid to workers by other companies.

As the world’s fastest growing economy evolves, its industries have been rapidly expanding and fund, controlling billions of dollars in their portfolios, believes it is time to join the world’s multi-nationals that are trooping to Zimbabwe. Their target is no less than the mining industry, which has emerged as key to extinguishing China’s huge appetite for raw materials.