Home » Industry » Govt Moves to Securitise Minerals

Government has started the securitisation of minerals to secure external loans by directing diamond firms to deposit their gems with the Reserve Bank of Zimbabwe. Mines and Mining Development permanent secretary Professor Francis Gudyanga, wrote to all diamond mining companies in Chiadzwa aising them of the directive in a letter dated April 28, 2014.

“The Zimbabwe Government is engaging financiers to assist with funding. You are therefore requested to prepare parcels of your currently produced diamonds, which must be sorted and evaluated with the involvement of MMCZ in the usual manner by Wednesday April 30 2014,” Prof Gudyanga said.

“These parcels will be deposited with the Reserve Bank of Zimbabwe and used to securitise a Government loan. Payment of these parcels will be done soon after depositing the parcels. The details of the processes will be discussed shortly,” said Prof Gudyanga.

The securitisation of minerals refers to the practice of using expected or future minerals revenue to guarantee a loan facility mainly from financiers.

The letter was copied to Mines and Mining Development Minister Walter Chidhakwa and Minerals Marketing Corporation of Zimbabwe acting general manager Mr Richard Chingodza.

Minister Chidhakwa confirmed the correspondence to diamond mining companies, but declined shedding details, saying the issue was “under the purview” of the Ministry of Finance and Economic Development headed by Minister Patrick Chinamasa.

“I cannot go into issues that are not under my purview, the Minister of Finance and Economic Development knows how much the loan is and where it is coming from,” Minister Chidhakwa said.

Companies mining diamonds at Chiadzwa are Mbada Diamonds, Marange Resources, Anjin Investments, Diamond Mining Company, Jinan, and Kusena.

Gye Nyame had its licence withdrawn.

Minister Chinamasa, however, requested the African Development Bank to assist with drafting of the framework on how the country could leverage on its abundant resources to access lines of credit to support the economy.

This comes as it emerged China wants Zimbabwe to use its minerals to guarantee future loans, a Chinese official said recently. China has reportedly in the past extended US$1,5 billion in loans to Zimbabwe.

Zimbabwe needs US$27 billion to finance projects espoused in the Zimbabwe Agenda for Sustainable Socio-Economic Transformation blueprint, which will guide the Government’s economic programmes over the next five years.

In February, Finance and Economic Development Minister Chinamasa, said that the two countries were negotiating what he termed a comprehensive financial rescue package.

Former Chinese embassy economic and commercial counsellor, Mr Han Bing, told local media that China Import and Export Bank and officials from Treasury were already working on technical details of the arrangement for the loan facility.

“We are discussing whether we can take proceeds of sales for some minerals as collateral for the loans,” he was quoted as saying.

“The bank and the team from the Ministry of Finance are now working at a technical level on how they can set up such a mechanism, how much the collateral would be and how much loans they (Zimbabwe government) can get,” he said.

China, an all-weather friend of Zimbabwe dating back to the time of the liberation struggle, is one of a few countries that could assist the country with funding as other lenders have declined citing the country’s US$6,4 billion debt as a the deterrent factor.

Zimbabwe is battling liquidity challenges and requires over US$8 billion to recapitalise industry and increase its capacity, which fell from an average 44,6 in 2012 to about 39,6 percent in 2013.

Indications are that this could worsen this year.

Source : The Herald