While the market is still digesting the meaning and implications of the $4, 2 billion platinum deal that was sealed by Government on Thursday last week, judging by the envisaged scope and scale of the project, the impact will be immense – perhaps bigger than anyone imagined.
Probably, the most notable hint of how this will likely impact on the economy, is the statement that was made by Mines and Mining Development Minister Winston Chitando.
“. . . what has been signed today is the largest investment structure in the history of the mining industry in Zimbabwe. Historic as well from the fact that the landscape of the Zimbabwean mining industry will never be the same as the provisions of the agreement are implemented and as other investment initiatives unfold, a number of which will become public over the next few weeks.
“Based on current production capacity, this will make Karo Resources by 2023, the largest PGM producer in the country,” said Minister Chitando.
This means the new project will dwarf the country’s largest PGM producer — Zimplats whose contribution to the economy so far in terms of taxes and employment, including socio-economic spin-offs to Mhondoro-Ngezi and its environs is beyond measure. To give a much clearer perspective, Zimplats is currently one of the largest employers in the mining sector and its employment footprint reaches Harare and stretches across the country. Conservatively, the country’s biggest platinum producer has contributed more than $1billion in taxes alone. Official statistics indicate that the mining giant’s exports hover around US$500 million annually and has previously been crowned the overall Best Exporter by the Reserve Bank of Zimbabwe (RBZ) at the Zimbabwe National Chamber of Commerce (ZNCC) annual awards. By implication, if the new deal is to tick, it will impact the economic landscape in a similar or better way, which means more taxes for the tax man and more jobs to locals, especially graduates, most of whom were trekking to neighbouring countries for greener pastures. According to Minister Chitando, the new miner will create 15 000 direct and 75 000 indirect jobs and the combined total — 90 000 — is about a fifth of the size of the current civil service.
The investment itself is not a chance occurrence as President Mnangagwa has already indicated that mining will play a critical role in the country’s economic revival quest.
“The fabulous natural resources we have as a country must now be exploited for national good through mutually gainful partnerships with international investors whose presence in our midst must be valued and secured,” said President Mnangagwa in his inaugural speech in November 2017. The bottom line is an economy which is back on its feet, and in which a variety of players make choices and fulfil roles without doubts and in an environment shorn of fickle policy shifts and unpredictability,” he said.
Despite Government retaining reserved status in the PGM the Cyprus based firm’s commitment to come on board is testimony of their willingness to partake in a mutually beneficial arrangement. It is against this backdrop that in his remarks at the signing ceremony that Karo Resources chairman Mr Loucas Pouroulis noted the investment will grow Zimbabwe’s Gross Domestic Product (GDP) by 20 percent. But there remains scepticism in the market and justifiably so. Part of the skepticism stems from the 2014 deal signed by then President Mr Mugabe which he described back then as “landmark” in which China were to avail more than $4 billion to Zimbabwe. But unlike in 2014, the difference with the Karo deal is that what Mr Mugabe signed back then were essentially memorandum of understandings where the Chinese were committing to invest subject to the meeting of conditions between the Chinese financiers and local companies. The agreements were set to provide funding for economic enablers in sectors that included energy, roads, national railway network, telecommunications, agriculture and tourism. In an interview with our sister paper, The Herald, after the signing ceremony in 2014, Finance and Economic Development Minister Patrick Chinamasa explained what they had signed was a framework for funding.
“The agreements with the China Exim Bank puts into place a framework under which we can secure funding for projects in the productive and infrastructural sectors on a case by case basis that also puts into place securitisation framework on the basis of which we can then submit projects for funding. But that funding will only come from China Exim Bank.
“The agreement with the China Export and Credit Insurance Corporation is also providing securitisation framework for infrastructure and productive projects that can be funded by both the State and non-State financial institutions. It’s opening up other sources of funding,” said Minister Chinamasa.
Unlike in 2014 when the success of the deals signed hinged on Zimbabwe meeting set obligations, this time the ball is firmly in the investor’s court and as highlighted by President Mnangagwa, Zimbabwe is actually waiting for the investor to adhere to set timelines.
“Now that this has happened, we have been able to give you the concessions. I have seen the timelines, the ball is not anymore in our court, it’s now in your court,” said the President at the signing ceremony last week.
But can Karo deliver and on time? This is an investor who has been waiting for this opportunity and Mr Pouroulis said they will meet all set timelines. The Cyprus based firm also is not mourning on the country’s challenges, among them unreliable power supply which is key in industry revival. Demand for power in Zimbabwe is about 1 600MW, but current production is just over 1 000MW with the deficit being covered by imports from the region, primarily South Africa and Mozambique.
“The platinum investment – being mining, processing and refining – will require 250 megawatts of power. To augment power supply, Karo Resources will establish a power plant with a capacity of 600 megawatts,” said Mines and Mining Development Minister Winston Chitando.
The power investment deal will guarantee Karo’s core business of a constant supply of power with the excess of 350MW going into the national grid. The thermal power station, Minister Chitando said, will be constructed in Matabeleland North. The need to see full implementation of the investment and adherence to set timelines will see Government setting up by 1st May, a full time secretariat for investment facilitation in the Ministry on Mines and Mining Development.
There is really no need for scepticism. Zimbabwe has played it’s initial part and as guaranteed by the President, the country will keep playing its part. Minister Chitando is putting in place the mechanisms to ensure this is not like any other ordinary deal. Let’s keep the given timelines in mind and ask tough questions when the time comes.