ZANU failures

Three examples of hopeless failure by the ZANU PF Government in Zimbabwe

Eddie Cross

28 May 2016

Looking back over the past sixteen years since we started this fight with Zanu PF, there are three examples of their total failure to behave as a responsible governing party that standout for me.

The first was Marange. In 2000 a young geologist, working for De Beers Diamond Mining Company, found diamonds in quantity along the banks of the Save River. After extensive sampling and trenching he reported back to his superiors in South Africa that the find was of little value and should not be pursued. In 2006 he packed up his camp and went back to his home base leaving behind a Land Rover shell and some rubbish.

In London a group of white Zimbabweans watched the Ministry of Mines website and waited for the De Beers claims to lapse. When they did they flew out and took up the abandoned claims and resumed exploration. They were assisted by the discovery of a computer disc in the Land Rover shell cubby hole, which contained the results of 6 years of De Beers exploration. In six weeks they found diamonds of gem stone quality.

The discovery was disclosed in a notice to the London Stock market as it was going to influence the value of ACR Shares. The Minister of Mines was informed and immediately took steps to take the claims away from their rightful owners. They protested, went to Court, won their case but it made no difference. A “diamond rush” ensued and over 40 000 small scale miners swarmed over the site extracting diamonds worth many millions of dollars.

When they woke up to the size and value of the diamond field, the Zanu PF Party took steps to take over the discovery – driving the thousands of small scale miners off te site with bullets, dogs and poison spray.

They then formed 8 companies – all with the State owned and controlled Zimbabwe Mining Development Corporation as a 50 per cent or more partner and started mining in earnest. Heavy duty earthmoving equipment was purchased together with large processing plants to extract the diamonds from thousands of tonnes of sand. An airport capable of taking passenger aircraft with a control tower and armed defense was constructed.

In the next 8 years they extracted 140 million carats of raw diamonds with a face value of US$17 billion. A mere US$600 million (0,42 per cent) found its way to the State coffers. The rest vanished. When auditors were finally ordered onto the site, they found 8 companies with run down and broken machinery and equipment. 60 000 hectares of mine dumps and excavations and combined losses before tax of nearly US$100 million.

Had this discovery been made in Botswana, 70 per cent of the gross revenue from sales would have accrued to the State (US$12 billion) and GDP would have grown by US$48 billion over the 8 years - US$6 billion a year or increasing the GDP per capita in 2015 from US$14 000 to US$19 000, confirming the position of Botswana as a middle to upper income State, the wealthiest State per capita in sub Sahara Africa.

Instead, Zimbabwe slid, in the same period to the position of the poorest country in per capita terms in Africa at US$1200, 10 per cent of the average income in Botswana, a small piece of semi desert. In the process we over supplied world markets and drove prices down to the detriment of all other producers. Botswana was forced to draw on its hard earned reserves to make up the decline in the value of sales.

All along Zanu PF leaders understood exactly what should have been done at the start and once all the easy mining was done and they were left with the much harder and more sophisticated task of hard rock mining for diamonds, they announced that they were going to consolidate the 8 mining companies into one and start mining and selling diamonds on the open market. Even then, they have completely messed up the new arrangements, there is still no transparency, the same collection of crooks is in charge and Zimbabweans still derive no benefit at all from what is perhaps the largest discovery of diamonds in the past century.

The second was ZISCO. At Independence in 1980 Zisco Steel was the second largest integrated steel plant in Africa. It employed some 6000 workers in a network of companies that produced rolled steel, long products, reinforcing rods and wire. Half its output was exported. By 2008 it was a broken, almost abandoned shell, producing nothing but scrap metal for dealers. Its associated town, Redcliff was a shadow of its former self, short of water, a bankrupt Town Council and virtually all its residents unemployed.

The GNU changed all that – the new MDC Minister (Ncube) took up the challenge and negotiated with the third largest Indian steel maker to take over the plant, get it back up again and producing double its pre Independence volume of steel and steel products and developing a large iron ore mine to produce and export pig iron pellets for export in bulk to the world market - US$10 billion dollars of new investment. The commodity cycle was at its peak and the project managers viewed the enterprise as a real opportunity.

In October 2010 the deal was signed by the State President watched by the Prime Minister. Then the project ran into Zanu PF. The Minister of Mines allocated the mining rights to the iron ore (40 billion tonnes or reserves) to army officers and Zanu PF heavyweights. They in turn demanded payment of many millions of dollars for access to these mining rights that should have been simply part of the deal. A 4 year wrangle ensued, the commodity super cycle ended and the global markets for iron ore fell from US$140 a tonne to US$35. The deal with ESSAR collapsed.

Today all we have is an abandoned plant, derelict subsidiaries, caretakers on site and thousands of unpaid, workers who sit at home and do nothing. Zimbabwe imports all its needs from the world market in the form of finished products. The US$500 million of accumulated debts and liabilities of the company are being assumed by the Ministry of Finance as yet another addition to our national debt burden.

Then there is the Fuel Pipeline. In 2010 the MDC Minister of Energy, identified the possibility of constructing a new pipeline for petroleum products from Beira to Harare and then on to Francistown and the Congo. Six regional States bought into the project and negotiations were started with a South African Company that specialized in pipeline operations. The project, when full developed, would have been headquartered in Harare, would have employed the 400 000 tonnes of underground storage at Mabvuku and cost US$3,2 billion. The annual turnover of the project would have been US$9 billion a year and it would have improved security of supply, provided for stocks of product and reduced the pump price of fuel across the entire region.

By the middle of 2013 the negotiations were complete; all that was needed was the Ministers signature following Cabinet approval. The 2013 elections intervened and a new Zanu PF Minister was appointed. He immediately accepted a bribe to switch the project to fuel trading companies in violation of the fundamental principles laid down by regional States for the project. It is now 3 years since the project was ready for handover and nothing has been achieved. The  deal is totally gridlocked by inter Party squabbles and fights over who will control the old pipeline that is being used to siphon off hundreds of millions of dollars into private pockets and fears that the new pipeline will put the old one out or business.

The combined loss to Zimbabwe in terms of capital investment from these three projects runs to over US$15 billion – the loss in terms of annual output or turnover is even greater – potential annual turnover is estimated at US$17 billion. With the multiplier effect on GDP, this would have trebled the annual GDP of Zimbabwe from US$14 billion to over US$40 billion. Annual tax revenues of double the present level; all sacrificed on the altar of one man’s ego and his Parties greed.

It is my conviction that Zanu PF is totally beyond redemption and only a change of government can turn things around in Zimbabwe today.

Eddie Cross

Bulawayo, 28th May 2016

Eddie Cross is a Member of Parliament for Bulawayo South, a renowned Zimbabwean economist and founder member of the mainstream Movement for Democratic Change party led by Morgan Tsvangirai. He is currently the Policy Coordinator General and Secretary for Local Government.