$45m govt cash seized

via $45m govt cash seized – DailyNews Live 15 September 2014 by John Kachembere

HARARE – About $45 million in diamond revenue was on Friday seized by a South African company in Belgium after it had been granted an interim order against President Robert Mugabe’s cash-strapped government over a cancelled platinum concession, the Daily News can reveal.

This comes after Amari Platinum Holdings Limited (Amari) had taken the crisis-ridden administration to the International Court of Arbitration (ICC) with a $500 million suit and Harare risks losing more assets, and cash to global creditors taking advantage of its decision to “transact in hostile jurisdictions”.

Although government officials and other backers were hopeful of overturning the ex-parte ruling on the basis that it had been given against funds belonging to private players, Mines minister Walter Chidhakwa’s decision to sell diamonds in Antwerp had created fertile grounds for a new battle or turf wars in Zanu PF and Cabinet.

“You will recall that when Mike Munn’s company was granted this interim relief, it seized this money on the basis that it belonged to the Zimbabwe Mining Development Corporation (ZMDC),” said a source yesterday.

“But what is peculiar is that these guys took advantage of the decision by government to sell its diamonds in Belgium and, clearly, we have not seen the last of these seizures if they continue to transact in hostile jurisdictions.”

“Out of Zimbabwe’s $10 billion debt, there are several creditors with executable judgments and these include the Zimbabwe Iron and Steel Company funders, former white commercial farmers and European investors whose bilateral agreements were violated,” they added.

Government went ahead to participate in the Antwerp auction despite reported protests from diamond companies who anticipated that their cash in “hostile” European territory where Zimbabwe is under sanctions would be seized.

In March this year, Mbada Diamonds chairman Robert Mhlanga urged government to stop selling diamonds at the centre of global diamond trade in Antwerp, Belgium saying there were risks involved.

Addressing the parliamentary committee on Youth, Indigenisation and Economic Empowerment, Mhlanga said:  “I have strong reservations about Antwerp because they are our yesteryear enemies. We have actually reeled under sanctions, thanks to Brussels and for us now because they have claimed to have lifted sanctions and we run to them. Personally, I have my own reservations,” Mhlanga said.

“I don’t think that is good. I strongly believe that Zimbabwe as a country we have capacity to hold auctions in this country where hundreds of companies can attend. There is a multiplicity of benefits when you invite people to do tenders in your own country. You bolster your own tourism industry… I don’t believe in appeasing a foe.”

Mhlanga’s advice was ignored resulting in the current scenario where government has lost $450 million.

With the cash-strapped government lurching from one crisis to another due to its haphazard management of resources — just as it did when it seized African Consolidated Resources (ACR)’s Chiadzwa gem fields — critics said the latest development was likely to open floodgates for such legal actions.

Apart from Amari and ACR, the Impala Platinum-owned Zimbabwe Platinum Mines has lost nearly 28 000 hectares of land in the Selous-Chegutu area after the Zanu PF leader’s administration seized it.

In the Amari case, the company argues the 2010 move by Chidhakwa’s predecessor Obert Mpofu to unilaterally cancel their memorandum of agreement with the ZMDC was wrongful, especially after it had invested well over $4,5 million in key exploration work.

Although Zimbabwe has managed to escape a higher damages demand, it had also won some relief after a Zambian court had invalidated an earlier ruling by the ICC on the grounds that it was fraught with many inconsistencies.

As it is, government lawyers — through an offshore firm — are preparing for a bruising battle to reverse the ruling on September 19 in Lusaka and “retrieve” the money that has been lost so far.

Highly placed government sources told the Daily News yesterday that government lawyers were preparing for a “showdown” hearing in Lusaka where they will argue that the ZMDC was not in a position to present its case to the tribunal.

However, it is the spectre of losing millions for Mugabe’s government that has serious implications for the bumbling regime that is already failing to pay or provide for many services, including civil service salaries.

Zimbabwe, which was holding its third diamond auction in Antwerp following the lifting of sanctions on the gems by the European Union in 2013, was expecting to fetch over $70 million in proceeds.

Faced with a huge budget deficit due to dwindling revenues emanating from massive company closures, declining foreign direct investment, and low aggregate demand in the economy, government recently introduced a raft of tax measures to boost its coffers.

Amari was the largest foreign investor in the mining exploration sector between 2008 and 2009.

Mining experts and Mines ministry officials say the Serui Platinum Project, which was going to be a world-class venture, would have become one of the biggest platinum producers in the region.