At a time, the country is desperate to revive its economic fortunes, the involvement of the Zimbabwean military in a plan to build the country’s biggest platinum mine at a cost of about $4 billion has deterred potential backers, according to people familiar with the funding discussions.
The planned Darwendale mine has been shown in the media as one of President Emmerson Mnangagwa’s mega deals in his bid to rebuild the economy which was devasted in the 37 years of Mugabe’s rule. The deal dates back to as early as 2012 when the initial prospectus was carried out by the Russian investors. However, there was much silence until Mnangagwa assumed power in 2017 in a military coup.
Zimbabwe has the world’s third-largest reserves of platinum, palladium and related metals such as rhodium - which typically occur together - after South Africa and Russia.
Meetings with investors have failed to bring in any funds into the venture. African Export-Import Bank has the mandate to raise money for the mine, a joint venture between Russian and Zimbabwean investors. While the bank provided $192 million of its own funds, meetings in the past year with investors including South Africa’s Public Investment Corp., the continent’s biggest fund manager, failed to bring additional commitments, one of the people said, asking not to be identified because the talks are private.
Investors have been deterred by the involvement of a Zimbabwe military company that once was subject to U.S. sanctions. Bloomberg reported that Zimbabwe Defence Industries Ltd. and Zimbabwe Mining Development Corp. together hold 30% of the joint venture, known as Great Dyke Investments, through Pen East (Pty) Ltd.
All the parties involved in the arrangement are under U.S. sanctions. This will make it next to impossible for the project to get any funding from traditional Western institutions. Zimbabwe Defence Industries (ZDI) came under U.S Treasury sanctions in 2014 due to its close ties to the political violence in the 2000 and 2002 elections. Their counterparts in the deal, Vi Holding which groups Russian companies including state-controlled Rostec Corp. and development bank VEB, according to the people, also have been sanctioned by the U.S. because of Russia’s 2014 annexation of Crimea.
“If there is any kind of military shareholding it will make western investors very uncomfortable, especially the banks,” said Peter Major, a mining analyst at Mergence Corporate Solutions Ltd. in Cape Town. “Who is going to risk it? I think they will battle to get funding from traditional and western institutions.”.
Global Witness has previously tied ZDI to diamond mining in eastern Zimbabwe through an indirect shareholding in a Chinese company. Mugabe said his government lost large sums to theft from that deposit, and Human Rights Watch in 2009 accused the military of shooting and killing 200 miners there.
This Zimbabwean military has also not been shy to get involved in investments abroad. In 2000, Oryx Diamonds Ltd. scrapped plans to trade in London after its adviser withdrew support under pressure from the U.K. government. Oryx had planned a diamond mine in Democratic Republic of Congo with investors that included another Zimbabwe military company at a time when Mugabe’s forces were fighting in Congo.
The Zimbabwean military wields a lot of power in both its economics and politics. It is military backing that propped Mnangagwa to power hence the leader is likely caught between a rock and hard place.
Sources quoted by Bloomberg stated that Afreximbank, which is based in Egypt, has provided a $1.4 billion guarantee to Zimbabwe in order to bolster investor confidence. Afreximbank is partly owned by African governments. African Finance Corp., whose holders also include African governments, has agreed to invest $75 million, said Hesphina Rukato, Great Dyke’s chairwoman. Afreximbank will complete financing details for the project around June, she said.Header Image Credit: My Zimbabwe News