Zimbabwe govt elbows out British investor under a cloud




A picture of a big yellow mining truck at worksite

The Zimbabwean government has – under unclear circumstances – frozen a multi-million diamond deal involving a London-listed British company, Vast Resources Plc, as the post-coup administration increasingly prefers non-western investments.

While the current administration headed by President Emmerson Mnangagwa looked eager to re-engage the United Kingdom and other western nations immediately after the 2017 military-assisted takeover from the late Robert Mugabe, relations soured after the general elections in late July 2018.

The UK had warmed up to the change of power from Mugabe, a long-time foe, and even expressed eagerness to have Zimbabwe readmitted into the Commonwealth, a club of mostly former British colonies.

But protests that took place on August 1, 2018 as election results were being announced and the army killed numerous citizens while clamping down on suspected anti-government activists disrupted Harare’s plans for international re-engagement as the administration was accused of gross human rights abuses.

Because of the resurgence in isolation by European governments and the United States, Harare is increasingly preferring investors from China, Russia, Belarus and a several fringe nations that the Mnangagwa government is more comfortable with.

Elbowed out

Investigations carried out  in collaboration with Information for Development Trust-a non-profit outfit supporting the media to probe bad governance-show that the Zimbabwean government has shelved a joint venture agreement between Vast Resources and the state-owned Zimbabwe Consolidated Diamond Company (ZCDC) after frustrating the London-listed entity for nearly three years.

It has been established that the joint venture (JV) was supposed to have been set up through Katanga Mining Pvt Ltd, a partnership between Vast Resources and Chiadzwa Community Company (CCC) that was previously named Chiadzwa Mineral Resources (CMR) and represents the Marange local community in the vast diamond fields in Manicaland province.

Government was being represented by the Mines and Finance ministries, investigations revealed, while Vast Resources was fronted by its chief executive officer, Andrew Prelea, and the Marange community, by Chief Godfrey Marange as well as Chief Solomon Marange.

The traditional leaders were the face of CCC, which is the special purpose vehicle for Royal Chiadzwa Trust.

In its 2021 first quarter report, Vast Resources described the ZCDC partnership as a key development that would enable Katanga Mining to procure a special grant for the exploration and mining of diamonds in Marange, and it remained confident that a deal would be hammered out in due course.

The Zimbabwean government claimed that the deal between Katanga and ZCDC was  sealed as far back as late 2019.

On October 13 2019, Winston Chitando, the Mines minister, said at a media briefing: “There will be an agreement, which will be signed towards the end of next week between Katanga and ZCDC.

“As government, we are obviously pleased.”

Katanga was formed on October 11 2019.

While no progress was registered towards the finalisation of the deal, investigations established, Vast Resources still went ahead and moblised financial resources to kick-start the project.

The company’s annual report for 2020 shows that it drew down its first US$7 million tranche from the Atlas Capital Markets facility on January 31 last year, as it anticipated the deal to sail through.

The real value of the planned investment could not be immediately confirmed.

But our follow-up on this matter established that, instead of the deal being finalised, the government froze the partnership between Katanga and ZCDC in 2020 but no communication was made to the concerned parties.

“We were advised by ZCDC that Katanga partnership is currently shelved,” said CMR chairperson, Newman Chiadzwa, whose community-run company, Royal Chiadzwa Trust, has a 20% stake in ZCDC through a community share ownership arrangement.

“We (Chiadzwa community) are shareholders in ZCDC but we don’t really know what is happening.

“I understand that the instructions (to shelve the deal) came from the ministry.

“That’s where most of the decisions are made,” he said.

Promises and lies

So far, the ministry of Mines has not offered a public explanation on why it made a U-turn on Vast, nor do the concerned suitors who this publication talked to know.

Vast’s Prelea, in a 2019 broadcast interview, indicated that government offered them a diamond concessions different from the one they had agreed.

But, according to him, Vast Resources agree to the unilateral changes as it was still keen on the diamond investment, a hope that it holds up to now, as shown in its first quarter report for 2021.

The sidelining of Vast Resources comes as the government is showing a soft spot for Russian and Chinese investors in the expansive diamonds fields.

In December 2018, through a video posted on the Information ministry Twitter handle, Chitando announced that Cabinet had adopted a new diamond policy that would see two private companies being allowed to explore and mine diamonds in Manicaland.

A month later, government revealed Anjin – a JV between the Zimbabwean army and Chinese company, Anhui – and Alrosa from Russia were those two private companies.

Five months down the line, Chitando announced during a radio interview that government had approved Russia’s Alrosa to partner ZCDC while Anjin had been allowed back into Marange.

It had been evicted by the late Mugabe for allegedly siphoning millions from Chiadzwa and its return, according to Polite Kambamura – who is Chitando’s deputy –  was done to salvage Chinese interests in Zimbabwe.

Anjin went on to grab the most lucrative mining portal from ZCDC, forcing it to the brink of collapse.

Local media reports have already suggested that that Alrosa has since been awarded 40 diamond concessions under unclear circumstances but investigations show that the company has not made any meaningful production to date.

The responsible authorities were not forthcoming with information regarding the Katanga deal.

Chitando did not respond to questions despite acknowledgement of receipt, while Kambamura said “kindly refer to ZCDC for finer details.”

The ZCDC chief executive officer, Mark Mabhudhu, referred enquiries back to the parent ministry.

“As you may know quite well, this issue falls under the purview of our shareholder who is the ministry of Mines and Mining Development.

“You may direct questions to them for credible answers,” said Mabhudhu.

The Office of the President and Cabinet played an active role in a restricted bid for a US$5 million job to fix Zimbabwe’s troubled aviation air communication systems.

The bid was limited to Russian and Chinese suitors, and the China Harbour Engineering Company, landed the contract in May this year even though it is still to commence work, seven months after.

The World Bank blacklisted CHEC at one time over unprofessional conduct and the Chinese multi-national has a history of non-delivery in Africa, the Caribbean and other parts of the world.

A Spanish company, Indira Systems, won the bid for the job in 2017, but like Vast Resources, was mysteriously stopped and the bid subsequently restricted to Russia and China.

Centre for Research and Development executive director, James Mupfumi was concerned that the “decision of who should mine in Marange is based on the whims of the executive and not on issues of transparency and accountability in the mining sector.”

Advocacy groups like CRD have been pushing for the publication of the diamond policy that the government claims to have crafted, but remains a top secret.

“When they got into power they opted for the diamond policy document,” Mupfumi said.

“That policy document is not even a public document.

“If you phone the ministry of mines today, you won’t get that document.

“You are told it’s a paper that guides the minister but we don’t have it.

“So now we have a situation whereby the issue of who comes in to mine is decided on the whims of those in the executive.”

Parties involved in the Katanga/ZCDC partnership questioned why Russia’s Alrosa joint venture and Anjin’s re-admission did not take time to approve while the Katanga partnership involving British investors was put on hold.

Bitter-sweet past

Vast Resources has a bitter-sweet past with the Zimbabwean government.

It changed its name in 2014 from African Consolidated Resources (ACR), according to its 2015 annual report.

The UK based miner took control of a diamond licence in Marange in February 2006 but was kicked out eight months later after the executive drew up a shortlist of other foreign investors of choice.

Still known as ACR, Vast Resources dragged the government to the High Court in 2009 under case No. HC 1390/07 in a bid to regain control of its concession.

The High Court ruled in 2010 that there were irregularities in the acquisition and registration of the claims that ACR obtained.

The company was further dragged before the High Court for alleged fraud and unlawful acquisition of diamond claims.

Court records indicate that in 2018, Vast had to withdraw a pending court case against government, supposedly with the hope of being readmitted back to the Marange fields through a partnership with ZCDC.

Newman Chiadzwa has also had a sour relationship with the government.

In 2010, he was sentenced to five years in jail and fined US$132 764 for illegally possessing 43, 028 carats of diamonds after a long legal battle with the state, according to court records. He was released after serving 16 months.

The following year, though, Newman successfully sued the government to recover diamonds worth US$300 million that the state had forfeited during his arrest.

*This investigative story was produced with support from the US Public Diplomacy Section in Harare

Source – The Standard