Sunday, February 7, 2010

Zimbabwe in bid to woo investors

Feb 7, 2010 12:00 AM By Jim Jones

Zimbabwe's minister of mines Obert Mpofu kept a straight face at the Mining Indaba in Cape Town this week when he said foreign investors in his country's mining industry are "guaranteed security of tenure". It was not clear who was providing the guarantees.

EMERGING: With the recovery in commodity prices, mining can see the light at the end of the tunnel. Picture: ANTONIO MUCHAVE
Minister tells conference that foreign miners are 'guaranteed security of tenure'
In the same breath, Mpofu told delegates that the allocation of mining rights was a "transparent" process and that his country's regulatory environment was efficient, clear, honest and fair.

But when asked about the grab by President Robert Mugabe's military cohorts of the Marange diamond deposits legally owned by African Consolidated Resources, Mpofu became evasive. "I can't discuss the matter as it is sub judice," he pleaded.

Nonsense. Zimbabwe's High Court has confirmed the mining company's rights to the property and ordered the military (which now occupies it) to restore the property to the company.

Mugabe's henchmen claim that what is essentially a commercial matter should be decided by the country's Supreme Court. And Mpofu, a confidante of Mugabe, told delegates that the "inclusive" government is subordinate to the country's courts.

Believe that if you will. But until the Marange case goes before the Supreme Court, the matter is not sub judice.

As for Mpofu, it was only last November that he was threatening NGOs that wanted to bring the Marange issue into the open. He has appointed close family and friends to positions in state organisations and his reportedly close business links to the companies actually mining the Marange deposits are a scandal, even in Zimbabwe.

It gets worse at Marange. A few weeks ago fresh alluvial deposits were found nearby. Artisanal miners scrambled in, but the military responded by driving workers off the new deposits.

The Kimberley Process (KP), which is supposed to ensure that diamonds reaching world markets are not "blood diamonds", has taken a look at Zimbabwe, but has essentially been shown to be a toothless bulldog.

Its latest proposed appointee to oversee a Zimbabwean investigation - an Englishman with years of experience in the diamond industry in the Democratic Republic of Congo - was rejected by the Mugabe regime. A Namibian second choice was vetoed by UK KP members. Result: stalemate, with the flouting of KP blood-diamond rules continuing.

Some parcels of Marange diamonds were recently offered for sale on open tender in Harare. But they were small stones of low quality. The finer and larger gems had been spirited away by the Zanu-PF military brass.

Another company with first-hand experience of Zimbabwe is Caledonia Mining. Two years ago, Zimbabwe's reserve bank failed to pay Caledonia for the company's Blanket mine's gold. Instead, Caledonian was issued with reserve bank bonds that were to have matured on February 1 this year.

In theory, with interest, the payment should have been $3.2-million. No payment was made and Caledonia has been told it must wait for another six months.

Mpofu explained that the reserve bank cannot pay because it has not received funds from the ministry of finance. "No-one has any money. We have explained the situation to the miners and we must all help," he said. "With the multiple currency situation in Zimbabwe, we have all lost our money, pensions and savings."

Meantime, the Blanket mine is running down and cannot fully afford to lift and maintain gold production.

Security risks are high in Zimbabwe as Mugabe fades from the scene. As James Smither of Control Risks security consultancy sees it, Zimbabwe ranks among several African countries where the risks of wholesale changes to regulatory regimes are greatest, as long-standing regimes enjoying highly concentrated power reach their ends.

He warned conference delegates to beware of considerably increased instability as other groupings battle to succeed despots across the continent.

On Africa as a whole, Smither said: "We have identified the following five key risks to watch for in 2010: elections and leadership changes; red tape and regulation; corruption and fraud; infrastructure deficiencies, and kidnap and piracy."

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