Economic Focus: Investment deals must be scrutinised

Gabriel Masvora this week writes that – IT is not a secret that Zimbabwe right now needs Foreign Direct Investment as most local investors lack the financial muscle to quench the capital needs for huge projects.

This has seen Government and other local companies trying to entice investors to bring in money to finance some projects in the country.

The Government is in the process of capacitating the Zimbabwe Investment Authority to become a proper One Stop Centre to reduce the red tape which most investors have complained about in the past as a way of making investment in Zimbabwe easy.

The idea also is to ensure that the centre will provide all the necessary information any investor might want in order to invest in the country.

These are all welcome developments and their success will also translate to the growth of the economy.

As much as we might want to attract many investors in all the sectors of the economy, we must not forget that in this capitalist world investors are not humanitarian organisations.

They invest their money in anticipation of a return in investment. Their ultimate goal is to make more profits.

On paper they might want to tell us about employment creation, social corporate responsibility projects among others, but the bottom line is that they want to see their money grow.

This must never escape those who are negotiating some of these deals on behalf of the country.

What has become worrying is that in this desperate situation we are in, we have also fallen prey to cunning investors who sweet talk their way into the country and promise huge capital injections only to plunder our resources and leave.

Last week Mines and Mining Development Minister Walter Chidhakwa revealed disturbing business transactions that could have happened regarding some companies that are mining diamonds in the Chiadzwa area in Manicaland. According to Minister Chidhakwa those companies came as joint ventures with Government.

They knew that Government as the other shareholder did not have money but resources, so they then promised a 50 -50 percent shareholding through the Zimbabwe Mining Development Corporation. The companies that include Anjin, Marange Resources, Mbada Diamonds and Jian also promised to buy most of the heavy machinery that was to be used for mining.

In addition to that they also promised huge amounts of money both as startup capital and top ups that was to be used for exploration and further development of the mining operations.

However, according to Minister Chidhakwa, it has turned out that some of these companies, first somehow dribbled the Government and ensured that not many if any of the staff at the operations would come directly from Government as a shareholder.

They could have just sweet talked the Government and promised that they were going to do all the donkey work while remitting the dividends to ZMDC.

Somehow ZMDC was considered the silent partner although on paper it was said to control 50 percent of the shares in most of these companies. Under such agreements, the diamond mines scooped most of our diamonds, did not even buy most of the promised equipment but hired equipment which they knew could harness the top diamonds.

The equipment was not far from the primitive tools locals in the area were using before the coming in of these companies. The companies also did not inject the money that they promised especially on exploration to determine the future of the diamond mining.

This shows that these companies’ immediate mission was to plunder the alluvial diamonds without giving a hoot.

They even lied about the money they were going to invest. There are doubts even over the amount they remitted to Government as those who have been heading the country’s purse since the diamonds were discovered have never reported of significant inflows from the gems. The whole country too was always looking forward to see some change from the diamonds.
At one time civil servants wanted a salary increase basing on the anticipated increase in Government revenue from the diamonds mines. But as has now emerged, some of these mines could have misrepresented to the Government and looked like they were serious investors who had money beyond just scooping our diamonds and then wake up declaring that they do not have the capacity to explore and mine kimberlites.

What is happening in the diamonds mines could have affected many other deals which the country has engaged in in the name of attracting investments. Another example is the deal to revive Ziscosteel.

The deal was signed more than three years ago but nothing has happened. Countless excuses and dates of opening the company have been announced but the truth is nothing is happening at the Redcliff company.

In fact things are getting even worse and people are wondering what could have been the problem when the country celebrated that deal.

This just shows that something, somewhere was not done properly and probably Government realised it and is now trying to rectify it resulting in the delays. We have so many foreign companies that are operating in Zimbabwe.

They came amid celebrations but today communities and maybe the country at large is still trying to evaluate what they have gained from those investments.

That is why although it is good to welcome foreign investments in Zimbabwe, which we badly need anyway, we also have to be careful and ensure that we sign proper deals which bring benefits to the country. Experts must read through some of these agreements and ensure that these companies meet their end of promises.

From the diamond saga it has come to the fore that some investors maybe come into Zimbabwe without even the capital, and then try to raise the money from operations here.

In the process they are sometimes caught flat footed when the resource runs out before they can show anything for their so called investment.

The Government too must be vigilant and keep an eye on some of these investors and agreements especially on shareholder structures. Depending on the negotiated shareholding structure, Government must demand to know or even second some of its staff at these companies.

If Government holds 50 percent in a company what stops it from demanding the power to contribute 50 percent influence to every decision that is taken even right from the personnel that is employed.

This is what happens in the corporate world and every shareholder especially those with many shares can influence the appointment and firing of key staff. We welcome investors yes, but they must also bring value at the end of the day.