Home » Business » Zim Pays Heavily for Badly Structured Deals [opinion]

WITH the country’s critical need for domestic and foreign direct investment, the signing of investment deals in Zimbabwe is often an occasion for song and dance as government is often quick to trumpet its agreements with local and international investors claiming they signal to economic recovery and growth.

The chorus is now familiar as long-suffering citizens are promised jobs from multi-million dollar investments like the ethanol-making plant Green Fuel in Chisumbanje, diamonds from the Marange area of Manicaland whose revenue was once touted as “sanctions busting”, as well as the resuscitation of the dormant giant steel-making firm Ziscosteel at Redcliff in the Midlands province.

But as shown by the Chisumbanje project where the much-touted employment opportunities, huge fuel savings and electricity generation – enough to power all of Manicaland province – have so far failed to materialise, the script always follows a horribly familiar pattern where optimism quickly gives way to despair, and ultimately recriminations among government officials.

Clearly, in most cases when government and its related agencies such as parastatals negotiate deals, there is usually a bitter after-taste as it later often emerges that government, desperate for investment, has been short-changed in badly structured deals.

Several such cases that have received media coverage have left Zimbabweans to debate if it is simply a case of ignorance and incompetence on the part of those entrusted with the responsibilities of negotiating the deals.

Or could it be that after so many years of socio-economic decline the Zanu PF government is so desperate for investment that it will clutch at any straws to give the impression of making progress, while simultaneously portraying itself as delivering on election promises. Alternatively, is it case of corruption in which kick-backs and bribery take precedence.

In its manifesto for the general elections held on July 31 last year Zanu PF made many lofty promises including the creation of more than two million jobs in five years and economically empowering the indigenous majority.

But with the supposed benefits from the Chisumbanje deal, for instance, still to materialise, Zimbabweans have instead been treated to a sleazy sideshow where fiery Zanu PF Mashonaland West chairperson Temba Mliswa has made sensational revelations of impropriety on the part of Green Fuel owner Billy Rautenbach, accusing him of lying to the country that he pumped in US$600 million to kick-start the Chisumbanje project when in fact his investment amounts to only US$60 million.

The public, most of whom are eking out a living well below the US$550 poverty datum line, is also boggled at the US$165 million Mliswa claims Rautenbach owes him for his part in securing his business interests in Chisumbanje Ethanol Plant, Unki Platinum Mines and Hwange Colliery Company.

Mliswa claimed to have facilitated Rautenbach’s meetings with high-ranking officials who include Presidential Affairs minister Didymus Mutasa Transport and Infrastructure Development minister Dr Obert Mpofu who was then Mines minister, as well as Deputy Minister of Lands and Rural Resettlement Tendai Savanhu, then chairman of Hwange Colliery.

But as observed by prominent academic Ibbo Mandaza while commenting on the equally scandalous issue of obscene salaries that parastatal bosses have been raking in, there is a tendency to look at these issues from a narrow and personalised manner which fails to appreciate the role of the state, or ask the right questions.

Various factors, including corruption, incompetence and the over-riding dominance of politics in what should be essentially economic issues, have been cited as some of the main reasons why Zimbabwe seems to often get it wrong when it comes to structuring investment deals, with analysts calling for government to immediately implement corrective measures to redress these shortcomings if the country is to realise true value from its abundant valuable natural resources.

According to veteran legislator Willias Madzimure (MDC-T, Kambuzuma), those who negotiate on behalf of the government are either laymen with very little understanding of the issues at play or are so incompetent as to fail to pay attention to the finer details. Either way it is disastrous for the country which only discovers the true extent of how much it has been prejudiced of when the projects are being implemented.

Madzimure cited the numerous agreements government has signed with Chinese companies, including the deal to build the Zimbabwe Defence College on the outskirts of Harare.

“How does a serious government agree to a deal where there is no benefit for local companies as the Chinese brought their own materials and even the bricks were made by a Chinese company?” asked Madzimure.

“The government talks about ‘looking east’ towards the Chinese but the Chinese are not messiahs, they are business people looking to exploit opportunities. Last week I was in Mexico at an investment conference and the statement made by a Chinese delegation at the conference was that if you are a weak country and do not know what to do with your minerals or how to negotiate, we will simply exploit you!”

The apparent failure by officials to consider the finer details of agreements is apparently responsible for confusion over the Green Fuel deal which resulted in government not only surrendering huge chunks of land to a private company, but even more creating a monopoly to benefit under legislation for mandatory blending of ethanol with petrol.

Rautenbach promised huge benefits for the country through fuel import savings and electricity generation to power Manicaland among other benefits, but these much-touted benefits remain pie in the sky with Rautenbach the principal beneficiary.

The local community in Chisumbanje continues to cry foul over the loss of land, unfulfilled employment and compensation promises with former Chipinge South legislator, Meki Makuyana saying as many as 187 families were forced to cross the border into Mozambique after losing their land to the company.

Despite government claims that the project is a joint venture, Green Fuel is still to reach an agreement with officials over its ownership structure with Rautenbach reportedly resisting demands for a 40% stake.

Talks at the end of last year between Green Fuel and government were deadlocked with the businessman offering only 10% in a gradual process to take up to four years.

All of this could have been avoided if government carries out due diligence on the companies or individuals it deals with, insists Bulawayo-based analyst Dumisani Nkomo.

“Due diligence must always be carried out and there is need to move away from this culture of secrecy when it comes to negotiating such important deals,” said Nkomo, adding, “the office of the Comptroller and Auditor-General needs to ensure transparency and accountability.”

But more is needed. Political will is crucial as ministers and parastatals have a habit of ignoring recommendations even in cases where due diligence has been carried out. Energy Minister Dzikamai Mavhaire and his deputy Munacho Mutezo are reportedly trying to force through a dodgy US$450 million deal at Zesa to install a costly electricity smart-metering system that will see the already high utility bills sky-rocketing to the detriment of business and individual consumers.

This is despite due diligence carried out in 2010 by Deloitte ampTouche to carry out a study to evaluate the proposal which cost Zesa US$2 million.

In recent meetings with ministry officials, Zesa engineers said the country was not ready for smart meters as the system had technical risks in addition to being expensive.

They recommended that Zesa — saddled with a US$400 million debt — “continues with standard pre-paid metering for now”, warning “it’s too risky to introduce smart-metering at the moment”.

According to documents, Zesa would need an extra US$2 million to make the pre-paid metering system already installed compatible with new smart meters.

Clearly, as long as government officials conduct shady deals shrouded in secrecy without the requisite due diligence and attention to detail, Zimbabwe will continue to lose out on investment and associated benefits due to bad deals.

Source : Zimbabwe Independent

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