Features Editor – Sunday 6 January 2019
ANALYSIS – (Mining Index) – THE discovery of oil and gas in Zimbabwe, coupled with dire need for Foreign Direct Investment (FDI) to resuscitate the ailing economy, puts Zimbabwe in a precarious position to accept funding even at a compromising position.
Mining has become Zimbabwe’s mainstay, overtaking agriculture which has been the economic anchor for decades.
According to Invictus Energy, the 200 square-kilometre Muzarabani project is projected to hold the largest undrilled onshore oil and gas in Africa.
Invictus reports the Muzarabani basin contains potentially the largest, seismically defined, undrilled structure onshore Africa with 3.9 Trillion cubic feet (Tcf) plus 181 million barrels of condensate in primary Upper Angwa target alone.
While it has become the lifeblood for world economies due to industrialisation, being the world’s primary fuel supplying 33 percent of all energy, oil has become the biggest commodity only sold using the greenback.
And because America is a big consumer of oil, it has imposed its currency on the global market too, which has seen oil and gold prices mostly pegged in US$.
Zimbabwe has not been spared either, adopting the greenback as its major trading currency, among a basket of currencies including the Rand and Pula.
Saudi Arabia, which produces the highest oil per day totalling 11.75 million barrels, represents 13.24 percent of all the oil produced daily in the entire world, more than Zimbabwe’s daily consumption of approximately 7 million litres (petrol and diesel).
Zimbabwe is consuming 4 million litres of diesel while 3 million litres of petrol is being pumped up every week.
The world consumes about 24 million barrels per day (bpd) of gasoline and 27 million bpd of diesel fuel every day.
Estimated oil reserves of 181 million barrels in Upper Angwa make Zimbabwe’s fuel supply for 27 days, with a capacity to fuel the world for only three and half days.
One barrel of oil is equivalent to 42 gallons, which is 158.98 litres. The price of oil per litre at US$0.32 cents, translates into US$50.87 per barrel. Using today’s global oil rate, Zimbabwe’s oil prospects in the Angwa are worth US$9,207,470,000.00.
The value of the Angwa oil reserves will turn out to be more in quantity when blended with the local ethanol from Chisumbanje.
In 2010, global crude oil demand rose 86.4 million barrels per day, with latest figures from Opec revealing an expected increase in consumption to 100 million barrels per day by end of 2018, double the consumption rate 50 years ago.
The Society of Petroleum Engineers reported that of the 9 trillion barrels of oil in place globally, only 12%, which is 1.1 trillion barrels has been extracted.
Zimbabwe has vast reserves of the two most sought after minerals in today’s world, gold and oil, making it prone to economic hit men.
With such a trove of minerals, Zimbabwe should have been one of the fast growing economies of the world.
With the ‘Zimbabwe is open for business’ trending mantra, government need not sound desperate when accepting FDI, especially in the mining sector.
Mega mining concessions are being granted to foreigner-owned companies while local Zimbabwean miners are left scratching the surface as small-scale and artisanal miners.
Foreign investors from China, Russia, Australia and South Africa have been awarded multi-billion dollar mining concessions in iron and steel, platinum, lithium, gold, oil among other minerals, in a country where Zimbabweans should have the first right of refusal when such mining tenders and concessions are being awarded.
Although uranium deposits discovered in the Zambezi have been reported to be insignificant, their quantity and value must be known, and will potentially change the lives of a few small scale miners in Zimbabwe.
Zimbabwe suffered brain drain, with most of our kinsman having invested business empires outside Zimbabwe. There are many Zimbabweans, with great potential to come home and invest, if given a chance and favourable investment conditions so that Zimbabwean wealth remain in the hands of its people.
Most Zimbabwean miners are small-scale and artisanal miners, fighting to extract mostly gold and chrome on a small scale, while bigger concessions are being ceded to foreigners.
Government need to be aware of economic hit men targeting countries rich in natural resources, sitting on the edge of the fence waiting to use FDI as bait to devour our natural resources for a dime.
Thorough vetting of such investors must be done to avoid prejudicing our beloved Zimbabwe of billions of dollars’ worth of natural resources.
Such foreign investors purport to inject FDI, when in actual fact, they get the contracts; use our local mineral reserves to generate income, which they pay government as FDI.
Anjin Investment’s, a Chinese firm had a diamond operating licence in Chiadzwa before it was withdrawn following the formation of Zimbabwe Consolidated Diamond Company (ZCDC), with reports that the Chinese firm may have its licence restored in line with the new National Diamond Policy which came into being in December 2018.
The reason why the US$15 billion figure emerged as missing was as a result of improper declaration of diamond output proceeds, in which government felt prejudiced from diamond mining by some of the foreign investors in Marange.
In recent years, a number of international firms have come to inject FDI for conventional mining purposes. There are Zimbabwean business people with capital to invest in such mining projects, but have not been given the chance because government believe only foreign investors have the capacity and knowledge.
Cyprus-based Karo Resources was beneficiary of the 23 903 hectares of land relinquished by Zimplats on the Great Dyke to develop a US$4.2-billion mining complex. Every year, thousands of students are churned out of universities but struggle to find employment or projects to do. The platinum project given to Karo Resources could have benefited and empowered local Zimbabweans to become small-scale platinum miners, instead of giving foreigners.
Economic hit men ensure projects they invest in are contracted to conglomerates and other companies that offer aid, indirectly giving them political influence and access to natural resources.
Over 200 families around the Mhondoro-Ngezi Mine area face relocation, some of whom could have benefited from getting quotas from the platinum project.
Government need to be aware that economic hit men are usually developed nations that identify underdeveloped countries with resources, convince its leaders to accept substantial development loans for large construction and engineering projects. With Zimbabwe being decades behind industrialisation, we are at risk of accepting any form of FDI without thorough vetting.
However, funding from economic hit men does not go into the government coffers but into the coffers of corporations used in implementing these projects, benefiting only the elite with no benefit to the ordinary citizen.
In Zimbabwe, a lot of FDI has come under the mining banner. Although notable infrastructure has been constructed, the ordinary, local Zimbabwean has seen no benefit to such programs, as the original inhabitants of the area are relocated with little compensation.
Such foreign investors often put the benefiting country in debt; failure to repay will be used as scapegoat for the investor to demand favours to sell its natural resources below market rates.
Australian listed, Prospect Resources held a ground breaking ceremony on 23 November 2018 for the Arcadia Lithium Project, considered to be one of the world’s biggest hard rock lithium resources and with a 20-year lifespan.
With abundant lithium deposits in Zimbabwe, coupled with our high literacy rate, Zimbabwe should be one of the countries spearheading the production of electric vehicles for exports. Zimbabwe needs to produce in order to generate foreign currency.
Eddie Cross, an economic analyst said “Lithium is one of the electric products for the future, we have the electric car. Zimbabwe has lithium in abundance. Every lithium project I know in Zimbabwe, about 6 is being held up by corruption.”
Agricultural Rural Development Authority (ARDA) board chairman Basil Nyabadza came up with a Hunter-Skinner-Cook Theory in which Zimbabwe needs to adopt to help come out of the doldrums. Zimbabwe needs to be a hunter (mineral production), a Skinner (process its minerals for value addition) and a cook (consumption and marketing of finished products) to derive maximum value addition from its mineral trove.
Why is our government giving away our richest mineral reserves to foreigners, instead of local Zimbabweans partake a fair share of their home natural resources to develop their country and their professional careers?
According to the central bank governor, Zimbabwe holds the second largest gold reserves per square kilometre in the whole world with 13 million tonnes of proven reserves of which only 580 tonnes having been exploited since 1980.
A kilogram of gold is worth approximately $39,291.32 while a tonne fetches $35,640,908.00. With 13 million tonnes of known reserves still to be extracted, Zimbabwe is sitting on US$ 463 trillion in gold value. ENDS//